I found this year’s Left Forum to be a very exciting event. With all due credit to the organizers, the success of the forum is largely the result of the ideological climate created and fostered by the protests we’ve come to call “Occupy.” I cannot think of a panel I attended that wasn’t interesting, thought-provoking, and just plain fun. I met a host of people and had wonderful conversations with them on all sorts of topics. (I myself chaired a Science & Society-sponsored panel on Saturday on the revolutions in North Africa that got a seizable audience and an extremely informative discussion.)
Yesterday’s panel on “Finance as a public utility”—chaired by Leo Panitch, with Doug Henwood, Ellen Russell, Bob Pollin, and Chris Rude—led me to a discussion with a fellow sitting next to me. Here’s (slightly edited) what I just emailed to him regarding “risk” and other issues.
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I think of “risk” as the economic effect of our relative ignorance (“uncertainty”). By “economic effect” I mean social costs or benefits, ultimately in social labor time (flow) or, alternatively but equivalently, in productive force or power of labor (stock).
It may help to disentangle risk. The risk that we as individuals face can only come from either of these two sources: (1) nature or (2) society. By fragmenting us, splitting our experiences into narrow compartments, capitalist society, in and by the way it is structured, fosters ignorance, e.g. uncertainty about the way the social structures we reproduce evolve, from “money” to “finance” to “policy making,” etc. (cf. what Chris Rude said about the opacity of capitalist relations).
We see the trees around us, but fail to see the forest. We then go about optimizing the wrong “objective functions” (to use Bob Pollin’s formulation), and as a computer scientist I imagine you know well that “the root of all evil is premature optimization” (Donald Knuth). 🙂 If our social structures are screwed up, individual optimization leads straight to social misery. This socially induced blindness carries along large—and socially asymmetric—economic consequences. It tends to concentrate wealth, power, “opportunities” in one pole, and poverty, vulnerability, and danger in the other pole. Paul Samuelson himself, the famous Nobel laureate, acknowledged that, at least in the few decades predating the latest crisis, the mechanisms of finance (and the state, which is closely tied to it) contributed grandly to social polarization.
The first source of risk results from the fact that we, as humans, always have a limited or finite productive power. This is the fact of life that economists call “scarcity,” “nonnegative price of goods,” etc. and Marxists may call the “finite productive force of labor,” “the realm of necessity” (as opposed to the “realm of freedom”), etc. Any society, regardless of how it’s structured, must manage this type of risk. We may reduce it, but only the hard way, i.e. by cooperating more, better, smarter; in a phrase, by building socialism and developing our collective productive powers.
The second source of risk is the way our society is structured. We make society (or social institutions, e.g. markets, states, families, etc.) by helping others and being helped by others (“cooperation”). If/when these social structures or institutions enable and foster our mutual cooperation, societies function well. If/when these social structures lead to disengagement and conflict, then our social life gets disrupted and unravels. This type of risk we must dismantle by means of conscious social organization, by reorganizing our social life in such a way that our natural differences are resolved peacefully, in humane ways, etc.; again, by building socialism.
As I said, the economists make this distinction between idiosyncratic (or individual risk) and systematic (or collective risk), but they view collective risk as necessarily identical to “market” or “macroeconomic” risk. That’s because they cannot see beyond capitalism. In fact, if one pauses to think about it, a lot of the risk that the financial markets deem systematic is perfectly diversifiable. To see this, remember what Leo Panitch alluded to in the previous panel, when he mentioned the collapse of Bretton Woods and its aftermath.
This event led to the emergence and boom in the forex derivative market, the largest and truly global segment of the financial market. (I’ve written somewhere that this and the 1970s oil eurodollar boom may have created the original pools of money that then pushed hard through the political systems to deregulate finance, usher “neoliberalism,” etc.) It is absolutely clear that the type of risk that the collapse of Bretton Woods created, risk that the Jamaica and Plaza (“agree-to-disagree”) accords only made official, forcing people to insure themselves privately or else, was not systematic in the true sense of the term, as it resulted from a change in social structures. Another Bretton Woods-type of arrangement in replacement, let alone a single global capitalist currency, which is perfectly conceivable even if not politically viable under existing circumstances, would eliminate that “systematic” risk ipso facto, which proves that it is not true systematic risk.
We should note that we can only manage the first source of risk through our social structures. E.g. if one is hit by an earthquake, we must have in place adequate well-funded social institutions so that he’s helped according to need, not abandoned to his own devices. We must insure one another. So, instead of using his privately held wealth to insure himself privately, which proves to be ultimately illusory, he does his part to build society while society gets his back as need be. Private wealth ownership, its legal appearance as insurance contracts, bonds, etc., gives us the illusion that we are “insured against risk,” we have “something to fall back on,” etc. but whether that bond or insurance obligation is honored or not depends on whether, when disaster strikes, the other party in the contract (and, ultimately, society at large) has the resources and disposition to honor the obligation, and that is a function of how our society is structured.
On the other issue: politics. One can always raise the objection that this or that policy initiative to reign in on the banks so they better serve the public interest is limited and self-contradictory to the extent it doesn’t uproot the sources of all evil at once. E.g. Doug Henwood mentioned that switching money to credit unions or taking over the banks while industrial and other capitalist interests are left intact would prove insufficient, if not illusory and reinforcing of the same old crap. Indeed. At some point. And, as I said, it is the role of radical intellectuals to highlight these limitations. But the point of these agendas is to excite political mobilization, to showcase for people that there are different conceivable and (temporarily) feasible ways in which society can re-organize its economic affairs. The reply to, say, Doug’s objection is: Well, let’s try and change the banking system first, as people seem particularly fired up to go in that direction, and once the contradictions of holding banks without socializing other areas of the economy reveal themselves more clearly to people, then we can switch to tackling the next problem, and so on. (Cf. Chris Rude on Lenin’s focus on the next step.)
UPDATE: One last thing I’d like to add to this post is that the Left Forum makes it clear, at least to those of us who take part in it, that the U.S. left has the resources to lead in reorganizing the United States of America so that it becomes a force for human good. It helps that the formerly called “Masters of the Universe” have proved without a doubt to be absolutely unqualified to lead the rest of us. This is only beginning. Ellen Russell made this point. I’m just endorsing it.
UPDATE 2: Chris Rude said “debt forgiveness” should be a central demand of the Occupy movement. Everything he argued in support of this I agree with. My only suggestion is to call it “debt repudiation.” That is up to us. “Debt forgiveness” is up to them, to their charitable souls.