Welcome to the age of “immaterial labor,” in which unwitting proles do the work of nations simply by updating their Facebook pages.
When the big banks began to fail last fall, we began to hear a lot about “toxic assets” that had “infected” balance sheets, threatening to metastasize throughout the entire body economic at any moment. The main problem with these assets — byzantine derivatives and structured financial products that came in a blizzard of acronyms — was that no one, not even the mathematics whiz kids investment firms lured away from MIT, knew how to value them.
These “exotic instruments” could be priced theoretically with mathematical models, like the Black Scholes formula, the Value-at-Risk model and the Gaussian copula function (all of which have since come under fire for being fundamentally, catastrophically wrong), but they were only tenuously connected to underlying tangible assets: homes, corporate debt, insurance against such debt. At the time, as long as the shadow banking system was thriving and there appeared to be a functioning market for collateralized debt obligations (CDOs) and credit-default swaps (not to mention subprime mortgages and oversize real estate properties), one could feel comfortable with pricing them. And though these complicated instruments were diced into tranches and contingent on various credit flows, payment streams, and fees, everyone believed they had reduced the risk (the high level of which was, somewhat contradictorily, the explanation for the lucrative yields that made them so desirable as investments) rather than merely masking it.
But in the fall of 2008, the market in these sorts of securities dried up, and the explanations that once justified being heavily invested in them quickly became unconvincing, as various counterparties began to go bankrupt. Assets that had seemed nebulously but stolidly valuable were suddenly valueless. The financial press was suffused with panicked editorials: Were assets you couldn’t price in fact worthless for all intents and purposes? Had these instruments suddenly become mountains of Monopoly money? Had our economy been suddenly revealed as being based entirely on speculation, that it was as Keynes had feared, nothing more than the “by-product of the activities of a casino.”
Wealth destruction found wide birth for its peculiar creativity; credit all but dried up as banks refused to lend to one another. Trading partners wanted only collateral they could trust — cash on the barrel head — which the Fed’s bailouts eventually had to provide. So banks were clearly in crisis, but what sort of crisis was this? Was it a liquidity crisis, in which assets had “real” value that was merely frozen by market inactivity, or was it a solvency crisis, in which the assets banks were counting on to meet their obligations turned out to be worthless?
But once we start asking what financial assets are “really” worth, it’s hard to know when to stop. When asset values seem to have become completely unmoored from what were assumed to be underlying fundamentals, the whole idea of “fundamentals” starts to be meaningless and ceases to give comfort. Maybe nothing is fundamental, fixed. Given the fluctuation of currencies, is money “really” worth anything? And when buffeted by threats of inflation and deflation and volatile market swings, how can anyone feel secure about their savings? Should we be laying in gold bars beneath our floorboards if we truly want to preserve our precious capital?
Consider the liquidity–solvency question further: the logic behind the competing explanations seems incompatible. Solvency presumes a fixed value that has ontological stability; liquidity presumes assets are valuable only when circulating. This calls to mind Chuck Prince’s immortal statement while CEO of Citibank in June 2007: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” The “music” was the tune of the real estate bubble inflating; the “dance” was reckless participation in the affected markets, and we’re still sorting out the “things” that have indeed become “complicated.”
If financial assets have value only when they are circulating, can we ever really possess value, or is it an abstraction, an illusion we chase?
If financial assets have value only when they are circulating, can we ever really possess value, or is it an abstraction, an illusion we chase? Value itself begins to seem like a metaphor, impossible to pin down. In The Limits to Capital David Harvey extrapolates from Marx to argue that value is not “a fixed metric for describing an unstable world, but an unstable, uncertain and ambivalent measure that reflects the inherent contradictions of capitalism.” Liquidity and solvency is one of those contradictions, pointing to the fundamental insecurity of capital, which must be able to move in order to retain the same value on a balance sheet. That is to say, capital cannot remain idle; it begins to depreciate if it can’t attach itself to a profitable investment opportunity.
In Capital Marx linked this to the capitalists’ compulsion, under the pressures of competition, to accumulate! accumulate!
The development of capitalist production makes it constantly necessary to keep increasing the amount of capital laid out in a given industrial undertaking, and competition makes the immanent laws of capitalist production to be felt by individual capitalists as external coercive laws. It compels him to keep constantly extending his capital in order to preserve it, but extend it he cannot except by means of progressive accumulation.
As Harvey points out, Marx believed this would lead to “production for production’s sake,” as investment opportunities began to address more and more specious social needs. Eventually there is more capital than profitable places to invest it, prompting the dilemma of, as Marx puts it in the third volume of Capital, “unemployed capital at one pole and unemployed worker population at the other.” This evokes our current situation: unemployment continues to grow despite interest rates set at the zero bound.
Harvey argues that this failure betokens a crisis in the concept of value: “An analysis of the internal contradictions of capitalism shows a perpetual tendency to produce ‘nonvalues,’ to waste labor power by either not employing it or by using it to embody labor in commodities that cannot fulfill social wants and needs as these are structured under the social relations of capitalism.” The economy produces unwanted goods or capacity begins to go idle as entrepreneurs struggle to identify profitable pursuits. Capital must channeled elsewhere to keep moving.
Thus it begins to collect in the financial sector, where it can chase after itself in the form of fictitious capital — the credit system and its paper claims to profits from future investments. The ideological justification for financial intermediaries like banks is that they assist in the allocation of scarce resources to where they are most needed, presumably serves a socially beneficial purpose. But banks are prone to take tautological refuge in the idea that escalating asset values proves that socially beneficial purposes are being served. The values are mistaken for fundamentals instead of flows.
As Harvey notes, credit serves a stopgap, seeming to buy time as the crisis of overaccumulation approaches:
The money capitalist is indifferent (presumably) to the ultimate source of revenue and invests in government debt, mortgages, stocks, and shares, commodity futures or whatever, according to the rate of return, the security of the investment, its liquidity and so on.
He goes on to cite Marx: “All connection with the actual expansion process of capital is thus completely lost, and the conception of capital as something with automatic self-expansion properties is thereby strengthened.” In the past decade, we’ve seen this process play out. After the tech boom fizzled, capital languished, with nowhere to valorize itself until financial “innovations” spurred a massive expansion of available credit, which poured into housing, whose boom in value was made plausible by the pretense that “they’re not making any more land.” (This despite a steady climbing vacancy rate in the U. S.) Traders — routinely lauded as “wizards” — would deploy their black-box strategies and money would simply make itself. Thus the American economy seemingly continued to grow, but an unprecedented portion of the profits were being realized by the financial sector, as more and more capital was going into the “insane forms” of fictitious capital. In an article for the Atlantic, former IMF economist Simon Johnson pointed this out:
From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.
The crisis of value had been under way long before the housing bubble came, the current recession an overdue reckoning. Our experience has reminded us that credit expansion ultimately leads to unsustainable asset-value bubbles, which magnify the crisis in value when it comes but amplifying the destruction into unfathomable figures — billions, perhaps trillions lost. As Adam Arvidsson argues in “After Capitalism Ethics?” once value gets detached from “real needs,” the conditions are ripe for a structural transformation of the economy:
The prevailing techno-political paradigm is unable to open up the markets by means of which capital could be productively deployed in meeting such needs. Although there are a number of attempts in this direction, like venture capital investing in alternative energy systems, or companies cultivating the ‘bottom of the pyramid’, the market of the global poor, these are the isolated results of mostly private enterprise, and not the coordinated outcome of systemic initiatives. Such a co-existence of unmet needs and excess capital, and the financial expansion that results from this combination is a classic symptom of the immanent transition form one system to another.
Arvidsson locates the emerging system in what Yochai Benkler in The Wealth of Networks (pdf) calls the networked information economy, or what Maurizio Lazzarato calls immaterial labor — the everyday acts of identity-building consumption and friendship that the increasing mediatization of society now make available for capture. This seems a good candidate because this sort of labor has precipitated a value crisis of its own, in the form of work that can’t be valued in wages, as capitalism has always required. What is that work really worth? Why are we even bothering? What price tag can we put on the effort it takes to make life livable, to make ourselves known to ourselves, to secure social recognition?
From the point of view of capital, our acts of everyday self-realization are perceived as knowledge production for the information economy.
If capital has run out of productive investments for making goods and services, and the cycle of expanding fictitious capital has played itself out for the time being, it may retrench by financing a manufacturing project that never ends — the production of the self, as carried out in the “social factory.” The postwar transition to consumerism initiated this transvaluation of value in the realm of consumption. Rather than imagining ourselves valuable for the traditional role we assume in our community, we instead try to discover and enlarge our subjectivity through publicized acts of consumption — be they conspicuous luxuries or altruistic acts or clever, innovative re-uses of goods, or what have you. We consume to create cool, which in turn reflects the glories of its creator. But from the point of view of capital, our acts of everyday self-realization are perceived as knowledge production for the information economy, elaborating the intricately woven code (as Jean Baudrillard calls it) that constitutes the symbolic value of brands and goods.
The recent bubble affords an example of how these different ideas of value were in flux: Investment bankers may have enriched themselves in nominal terms, but efforts to substantiate their gains with luxury items draws them into a spending arms race for positional goods. Playing the scoreboard game over ultimately intangible, arbitrary status does little to preserve capital; instead it fuels value’s elusiveness, with the tokens that best represent it changing at the pace of fashion. If the basis for what serves as value is always in the process of being negotiated socially, value is nothing more than the assertion of control over flows, conceived in the broadest sense as any sort of traceable social change. The most important flow may not be a financial one but an ideological one — the ebbs and swells of trends and memes, the shifting language of the symbols of status.
Arvidsson argues that the socialization of value means “ethical” pursuits can be embedded in the concept, with a new kind of measurable value indicating the density of ethically binding relations — the kind of tribal bonds that mediated exchange before capitalist markets brought on anonymity, and the enabling pretense of trust between strangers. But the era when everyone’s money was equally green is ending; technology has made it increasingly possible to guarantee that no consumer transaction go unrecorded. The terms of consumption, the contexts, trump sheer possession; and those terms and contexts are controlled by meaning makers. The positional spenders find themselves at the mercy of those who manage the procedures of luxury trend evolution — the art auctioneers, couturiers, galleristas, critics, and even hipsters in their midst.
Status production and symbol elaboration are theoretically limitless — the desire for distinction can always function as a “real” need toward which economic resources can be directed, provided certain ethical battles and debates are lost in the sociopolitical sphere. This is increasingly the dimension in which firms compete: as goods become more easily copied, they can no longer compete on tangible product quality. Instead, they must compete on the symbolic level of the brand, fostering the illusion of exclusive experiences that our immaterial labor helps elaborate. Because this new level embraces the subjectivity of individual consumers, it can productively absorb untold amounts of surplus capital.
In “The Crisis of Value and the Ethical Economy,” Arvidsson lists a few examples of how this free labor factors into existing capitalist schemes:
the pharmaceutical company that constructs an online forum for health practitioners in order to siphon off their knowledge and innovations; the market research company that mines the data consumers freely supply in their online movement for marketable patterns; the advertising agency that lives off its ability to read new trends and forms of cool, or even the struggling ‘creative’ that acquires market value by capitalizing on her personality and network in an effort to ‘self-brand’.
Arvidsson optimistically argues that since immaterial labor is often voluntary, the companies that rely upon it will have to win our support and woo us, convince us to love them, to friend them. His notion of “ethical capital” amounts to a firm’s ability to compel emotion and encourage immaterial labor without controlling it hierarchically.
Value is primarily produced by the ability to construct affectively significant ties: ties that bind a brand or a company to its consumers, employees or other stake-holders in ways that go beyond contractual obligations. You cannot order an employee to be creative or a consumer to share his or her ideas about product improvements. Such offers need to be voluntary; they need to be motivated by some form of affective affiliation. Such relations are not free, they require time and energy to build…. Ethical capital stands precisely for investments in such relation building.
But “ethical capital” seems a misnomer. There’s nothing particularly “ethical” about corporations’ effort to flatter and seduce us; it seems more an ideologically oriented abuse of power. The existing capitalist institutions use their heft to legitimate certain modes of subjectivity that favor the survival of the inherited underlying power structure, and discourage other forms that might otherwise emerge from technological changes in production. Consumerism has always functioned to circumscribe the concept of freedom to buying power, to a subjectivity that realizes itself only through consumption — it has always been ethical in Arvidsson’s sense, in that it produces affect in the consumer that appears to be voluntaristic. It encourages the idea that the goods and services we purchase make emotionality available to us and shapes social relations to reinforce that condition, denying avenues to unmediated emotional expression. Firms thus encourage immaterial production for their benefit by working to control the outlets for individuals’ “creative expression” — now by seizing the social networks that have become the forum for self-development. The ongoing effort to corral social being into prefabricated pens online is most salient part of this campaign currently.
Only our self-regard may prove to be a bubble that is unburstable.
Immaterial labor appears to the laborer as self-fashioning, but the self produced by it is the consumerist self required by existing social relations — only such a self can harvest the “benefits” of identity in the social sphere circa 2009: The superficial recognition in social networks; the reified, measurable influence it allows us to track and measure our personal brand’s impact, the mastery of cultural trivia as a status marker, “reputational capital,” and so on. Arvidsson thinks the quantification can somehow work to the consumer’s benefit — reorienting the balance of power between capital and labor by investing consumers with capital and making us all entrepreneurs of the self. But this doesn’t change the corrosive psychology of capital; it merely extends its reach deeper into society. “Insofar as individuals adopt the role of the capitalist, “Harvey writes, “they are forced to internalize the profit-seeking motive as part of their subjective being. Avarice and greed, and the predilections of the miser, find scope for expression in such a context, but capitalism is not founded on such character traits — competition imposes them willy-nilly on the unfortunate participants.” This is what happens to us when Web 2.0 applications draw us into a competition for social influence, and offers a scoreboard for who can develop the richest personal identity according to “ethical capital” metrics.
The production of the self now occurs in a globalized media setting with a much richer set of culture-industry products to serve as resources for it. The use of that product for self-fashioning enhances its value for its owners to the rest of the selves in the process of making themselves. Piracy and intellectual property devaluation hits at capital here; the real problem, though, is the self-fashioning out of that stuff (what Arvidsson unironically equates with Marx’s “General Intellect” — a debasement, as it limits intellect mostly to the facility to embrace and manipulate popular culture). That reproduces the consumerist self, not a possibly better alternative.
Immaterial labor seems to promise a new paradigm of value, but it’s limited in our current set of relations to self-fashioning, the reproduction of the consumerist self, not the smashing of capitalist relations. We produce ourselves as consumers, earn our recognition in terms set by consumerism on platforms controlled by capitalist firms, with every move we make under surveillance and every gesture we enact recorded and processed for its possible marketing usefulness, and then we declare ourselves free.
Lazzarato had predicted that capital would begin to “involve even the worker’s personality and subjectivity within the production of value.” And so it has come to pass, with Web 2.0 applications becoming the new nexus of investment, fueled by boundless optimism about the limitless potential of our own creativity. Only our self-regard may prove to be a bubble that is unburstable.
Rob would love to hear from you. Drop him a line at horninggenbub [at] gmail [dot] com.
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