The widening vortex of global finance
The recent move to allow the investment of provident fund money in the stock market basically takes the matter out of the individual's hands. So, it is not just the rich and the middle classes, but the poor too who must become investors It is fairly well established that the past three decades have witnessed a worldwide growth in inequality. This phenomenon is often evoked in the same breath as the extraordinary salaries and bonuses that financiers - investment bankers and fund managers - pay themselves.
Clearly, financial institutions such as hedge funds and investment banks are able to generate huge profits, which is why they can afford humongous compensation packages. But what exactly is the source of financial profit? And, what is the link between rising financial profits and growing inequality of wealth/income? Before we can answer these questions, it is necessary to contextualise this phenomenon.
First, rising inequality and sky-rocketing financial profits have paralleled the rise of neo-liberalism - a term used to refer to a cluster of economic policies that includes privatisation, cuts in welfare spending, loosening of labour laws, and deregulation of finance. If there is one common factor that undergirds all these economic policies - it is the rise of global finance, or "financializa- tion", which also denotes the growing penetration of real economic activity (to do with generating surplus value) by finance capital.
In his book, The Everyday Life of Global Finance, the economic geographer, Paul Langley, explains how the common view of global finance as something "out there somewhere" - timeless, spaceless, identified with 24X7 global markets - is fallacious. It is simply not true that finance operates primarily in a rarefied realm of super- specialists far removed from the world of everyday economic activity such as earning, saving and borrowing. On the contrary, Langley argues, global finance has fundamentally reengineered the ordinary ways we think about and manage money.
Till the generation say right up to the 1980s, the future was conceived as a realm of uncertainty, one that held possible harm, for which one provisioned through thrift - specifically, savings and insurance. Financialisation is born when uncertainty is quantified into risk. How we frame risk, calculate it, and manage it, decides what we do with our money.
In Langley's formulation, if risk is calculated and managed as a future harm that requires prudence in the present, it makes for an approach of thrift and savings. But if it is framed as an opportunity that holds the possibility of immense rewards, it mandates an approach where the most rational form of saving becomes investment. Therefore, at the ideological level, financialisation entails two basic manoeuvres: one, the transformation of nebulous uncertainty into quantifiable risk, which is then managed through an array of calculative technologies; two, a shift in the common sense understanding of risk as something potentially harmful, to something potentially rewarding.
Given that risk is essentially a financial category, the current civilisational obsession with data is another testament to the growing supremacy of finance capital (in alliance with technology), which wants every piece of the world's data on anything and everything in order to be able to manage risk optimally for maximum returns.
To be sure, you won't find the average salary-earner poring over price-to-earnings ratios on a daily basis. Yet, we are all financial investors today - either directly or via mutual funds or through insurance or pension funds that have exposure to capital markets.
The recent government move to allow the investment of Employees Provident Fund Organisation (EPFO) money in the stock market basically takes the matter out of the individual's hands. So, it is not just the rich and the middle classes, but the poor too who must become investors, which is why it has become vital to substitute the provision of essential survival goods with cash transfers.