Monday, 9 February 2009

A Change in the Order

Since early January, I have been working on Vols. 4 and 5 of Speculative Capital, putting hundreds of pages of disjointed writings into a recognizable manuscript form. This is the most time-consuming part of writing a book for me, where the broad outline of the book, the title and order of the chapters, takes shape. The process involves incorporating hundreds of “notes to myself”, references to books and newspaper articles and random thoughts jotted down over the years into a coherent ensemble with well-defined chapters. The last part is especially challenging because many thoughts, at times expressed in tens of consecutive pages, could be placed under different headings with equal justification. It requires long, concentrated hours to determine the chapter headings and the text that should come under it.(It is said of Andrew Lloyd Webber’s music that the scores in all his musicals are interchangeable. I would take no offense at similar charge pertaining to the text in Speculative Capital and would in fact welcome it as a sign of the coherence of the theory; the entire Speculative Capital series is logically but one book.) Dialectics precludes arbitrariness. Each chapter of Speculative Capital must logically lead to the next. It is the progression of these “means” in the dialectical method that is precisely the end. (It was the enforcing of this logical progression a decade ago in a book supposed to be on derivatives that led to the Theory of Speculative Capital.)

I bring up this background because in streamlining the manuscript of Vols. 4 and 5 I realized that their order was wrong. Systemic Risk, planned as the final Vol. 5, must come before Dialectics of Finance, currently slated to be Vol. 4. Therefore, the next book in the Speculative Capital series will be Systemic Risk. It will be followed by the 5th and final Vol., Dialectics of Finance.

Before settling on the decision, I had to convince myself that it was not influenced by the “opportunism” of rushing a book on systemic risk to market in the midst of a systemic crisis, however unconscious and subliminal that influence might be. This was especially pertinent because Systemic Risk could be completed and published sooner than Dialectics of Finance. But I think that my decision was independent of these considerations.

Systemic collapse is an historical event created from the self-destructive movements of speculative capital, the latest and most developed form of finance capital. The development of finance capital is the subject of Dialectics of Finance, which subject “contains” the systemic risk.

The Theory of Speculative Capital helps us see and understand the mechanical aspects of the current crisis. In the 10-part Credit Woes series and several other entries in this blog I have broadly described the various dimensions of the collapse. Vol. 4 will provide further details.

But what explains the price fall – collapse is really the word – across all markets? Why did the prices collapse?

Those with monopoly on high quality thoughts who monopolize the Op-Ed pages and the TV air time inform us that the reason is Bubble. Bubble explains everything. The economy has bubbles as the water has, they tell us. And economic Bubble has popped. That is the answer.

In reality, the price collapse we are witnessing is due to the transformation of values to prices. You do not hear about this topic because it is difficult!

Say, you pay $200k for land, spend $200k on the material and pay $200k for workers to build you a house. The value of the house is $600k. The offer you get, in line with the market price, is $420. The “whereabouts” of the $180k loss is the subject of this transformation, which takes us to realm of value – the exchange value, to be exact. The value is a social concept. Like other social concepts such as honor or morality, it has no meaning to man on a desert island. To understand value, then, we have to go beyond the technical description of the financial events and study the social relations as well. That is precisely the realm of Dialectics of Finance, where the movement of finance capital is investigated in the entirety of its social interconnections. The works of writers of our time, the philosophers of our time and the justices of our time are thus relevant to our investigation.

When I began the Speculative Capital series more than a decade ago, the collapse of the financial markets seemed its logical end, the terminal point for the self-destructive movements of speculative capital. What else could there be after the system-wide collapse of the financial institutions?

But that view is mechanical because it sets an arbitrary ending point for the investigation. A systemic collapse, of however unprecedented scope and intensity, does not spell the end of finance capital. It merely begins a new phase for it. Speculative capital is self destructive, but it is also self reinvigorating and self reconstructing. (Such is the nature of dialectical attributes!) After each crisis, it rises again in a new form to declare: En ma fin est mon commencement. No serious student of finance could ignore these developments.
Truth, the cognition of which is the business of philosophy, became in the hands of Hegel no longer an aggregate of finished dogmatic statements which, once discovered, had merely to be learned by heart. Truth lay now in the process of cognition itself, in the long historical development of science, which mounts from lower to even higher levels of knowledge without ever reaching, by discovering so-called absolute Truth, a point at which it can proceed no further, and where it would have nothing more to do but to fold its hands and admire the absolute Truth to which it had attained.
I would not be finished after the delivery of Systemic Risk. I have barely begun to write.