Deriving Capital’s (and Labour’s) Future

Financial derivatives have been identified as the prime suspect in recent financial crises. In the subprime financial crisis of 2007-8, ‘securitization’, a derivative-based process, came to prominence as the global distributor associated with the predatory practice of subprime lending. Credit default swaps betting on corporate insolvency followed. Derivatives seemed to ensure that betting on the misery of others soon became the misery of all. It is hardly surprising that derivatives are widely seen as crisis-laden: financial weapons of mass destruction, as Warren Buffet is so often quoted as describing them. The label and the reputation may be justified. But presented as explanations they make us jump too quickly to judgment and they miss much. The propensity to depict the global financial crisis in terms of distortion and speculation, with financial derivatives their principal instrument, is, we argue, not fruitful. Indeed, we conjecture that derivatives are not a pathological growth on capitalism – a distortion of some ‘true’ capitalism. They are integral to capitalism and the expression of its essential property relations and its inventiveness. The contradictions of derivatives are the contradictions of capitalism. Rather than Marx’s theories of crisis, this paper is motivated by Marx’s ‘other’ invocation to identify the frontiers of capitalist development and the momentums which drive them. Accordingly, we seek to develop an analysis of how financial and other derivative markets have become integral to contemporary capitalism: a role in which the recent financial crisis, while socially severe, may prove to be analytically more incidental. In developing this case, we first explore the nature and role of derivatives in a way that identifies how they have become integral to capital accumulation. Specifically, derivatives present new forms of commodities and commodification, opening new frontiers for accumulation in what has conventionally been seen simply as sites of ‘circulation’. We then turn to their evolution and the role they played in the global financial crisis. In explaining this role we build the argument that the crisis can be interpreted as a result of the immaturity of derivative markets, rather than, as is popularly held, their over-development. We conclude that the crisis of 2007-08 may well come to be seen a crisis within that momentum, rather than a crisis of that momentum. The difference is important not only analytically, but politically too, for it projects a different agenda onto regulatory reform, and a different politics for labour.