Tuesday, 16 August 2011

On Systemic Risk

I think it may be an opportune time to link thematically the rising incidence of "systemic risks" (investment, financial and environmental) with the very "modus operandi" - which is in truth the "raison d'etre" - of capitalist enterprise. This is not the place to expound on a "systematic" theory of systemic risk in capitalist economies; but the review in the NYT as well as the latest FT Editorial touching on this theme (both linked below) exemplify the type of "incomprehension" (due to a variety of "motives" that we cannot canvass here) of this vital connection.
That there are "unforeseeable events" in life as we know it is a fact that cannot be gainsaid (though we ought to avoid Rumsfeld's idiotic oxymoron, "known unknowns", and the doubly absurd "unknown unknowns"). The innovative metonymy of such events to "black swans" serves merely to rationalise - that is, to excuse and justify "ideologically" - human disasters that, though perhaps difficult to predict, are certainly far from "unforesseable".
To exemplify: the Great Financial Crisis was eminently "foreseeable" (some people even predicted it - Minsky, Roubini). And so was the Fukushima catastrophe that threatens the biggest metropolis on earth!
Yet, if one reads the NYT article below, one will not fail to notice that the "theoretical" debate in economics is: - how economists may be able to predict such black swan events. Now, the thing to notice is that the r e a s o n why economists seek to make such predictions is avowedly to enable "the assessment of risk" that leads to "the rational allocation of social resources" - by which is meant "the allocation of c a p i t a l".
But the reason why both the GFT and the Fukushima catastrophe, no less than the BP spill in the Gulf of Mexico, occurred was... occasioned precisely by the need of capital to find what it must always seek to find - namely, "profitable" opportunities for investment! It follows therefore that the very "market forces" that impel (and compel, but that is a larger thesis) the search for profit sources that occasion "systemic risks" are the self-same "market forces" that seek "to a s s e s s" this risk! This is the Agatha Christie equivalent of asking the murderer to explain the plot!
As the FT Editorial linked here makes almost explicit (it would be a miracle - a suspension of the laws of physics - for it to do so "entirely"!), we have reached a point where the "privatisation" of various forms of "social reproduction" (from energy to the allocation of social resources under the cloak of "finance capital") leads to the "catastrophic" situation in which the "agency" that has political power (and only putative "accountability") - the government - does not have "responsibility" over the use and deployment of these extremely "risky" social resources (again, finance, energy, food, health), whilst on the other hand the "agency" that does have "responsibility" over these "reproductive" areas of social activity..., does not have any "political power and accountability" because it represents "private capital", "private enterprise"!
We have therefore a situation in which there is "power without responsibility" for governments and "responsibility without power" for capitalist enterprise! I would love to draw that engrossing argument that brings out the "necessity" of this "situation", but it would be inconsiderate to take so much space on this blog. And I must return to my monographic research on the origins, exegesis and critique of capitalism. Cheers.  PS: I am linking also a Krugman report on the grilling of Elisabeth Warren in the Congress.
http://www.nytimes.com/2011/03/20/business/20risk.html?ref=global-home http://www.ft.com/cms/s/0/92e46f14-532a-11e0-86e6-00144feab49a.html#axzz1DLj9r87B http://blogs.ft.com/gavyndavies/2011/03/20/a-market-correction-or-something-worse/http://www.nytimes.com/2011/03/21/opinion/21krugman.html

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