Larvatus Prodeo

Karl Marx’ concept of ‘fictitious capital’ has enjoyed something of a revival recently – in the context of explaining the Global Financial Crisis. It’s interesting to observe [h/t Richard Metzger at Boing Boing] that Marx doesn’t appear to have invented the term – the phrase was used by Thomas Jefferson and the concept goes back to Ricardo and Adam Smith, and beyond them to earlier writers in the Eighteenth Century. There’s a bit of a message in that. Observers such as David Harvey argued quite some time ago – contrary to all the hype that was around in the 90s about the ‘new economy’ – that the increased and increasingly ubiquitous role of financial capital was what was distinctive about globalisation. More broadly, following the French historian Fernand Braudel and some of his epigones in world systems theory, we can conclude that markets predate capitalism. In tracing the history of capitalism, Giovanni Arrighi argues that particular accumulation regimes tend to emphasise financialisation as an accumulation strategy towards the end of their life cycle, as the limits of ‘material expansion’ are reached. There’s a recombination effect where the production of tangibles is eclipsed by the circulation of intangibles – each time opening up a new cycle of innovation across an ever larger geographical space and constructing a new ’spirit of capitalism’ which brings in its wake newly reassembled subjectivities, new political divisions and new forms of inequality.

The ‘age of neo-liberalism’, then, saw a shift of power towards finance capital and a harnessing of immaterial labour to the creation of intangible value. It saw a new logic of personality where constant change and the ability to network trumped security and the old bourgeois virtues. What’s also new about the era of globalisation is the world wide scope and reach of one economic system, and the geographical dispersion of networks of value creation – where, for instance, value can be added by design in the metropoles to products manufactured in the developing world. Within the developed world, we’ve had a bifurcated services economy – with Robert Reich’s “symbolic analysts” at the top of the tree forming a highly mobile elite and personal services provided by low skilled and often immigrant labour (mobile in a somewhat different way) or younger workers whose mobility into high end occupations is temporal. It’s been the less skilled and relatively immobile workforce in the declining ‘productive’ sectors who’ve largely been the losers in this conjuncture – a fact which explains a lot about the politics of the last couple of decades.

One way of looking at the current financial crisis is that it’s the first major recession to hit the developed world since the value creation switch was flicked from the production of things to the creation of intangibles. If one takes a Schumpeterian view, the “creative destruction” now occurring should lead to the emergence of a new frontier of value creation. Continue reading ‘Fictitious capital and the first recession of the services economy’