Any heterodox project is compelled to begin by articulating
a problem or set of problems it proposes to address (otherwise why
heterodoxically begin at all?). When studying finance at our present
moment, the particular problem to which we are alerted is a political
economic problem whose particularity Deleuze as a heterodox philosopher alerts us, but which reading Deleuze as a heterodox political economist can help us to address –or at least offer us one way to redefine on new terms.
What is this problem? There is one principal problem, but it has two
parts. The first part concerns a historical and ontological
transformation in and of finance; the second part concerns a theoretical
and methodological problem that results from the first. Reading
Deleuze’s Difference & Repetition as heterodox political economy allows us to address them both.
First part of the problem. New differentiations in finance
The first part of the problem begins with an ontological
transformation of the financial asset. More specifically it concerns the
progressive differentiation of two new classes of financial assets from
out generic finance, but whose ontological composition is radically
different from the kinds of assets which have historically populated
financial markets: namely, there is the synthetic asset, which
actualizes a wholly new class of financial exchange known as synthetic
finance; and there is the securitized asset, which is a product of the
process of securitization (also sometimes called structured finance),
and involves the transmutation of an asset into a security.[1]
These two new differentiated classes of assets are ostensible
repetitions of preexisting generic financial assets, but their
repetition produces a peculiar new kind of asset. Together they have
fundamentally altered the basic relation of finance to capital, the
relation of finance capital to the capitalism writ large, they have and
are changing capitalism.
Let us briefly consider each in turn.
Synthetic finance is usually classed under the general rubric of ‘derivatives’. This is partially accurate, but only partially accurate, and importantly so. While credit derivatives[2]
are indeed a type of synthetic financial asset, any serious
consideration of their ontology quickly reveals their radical difference
from more traditional derivatives like options, futures, or forwards,
the latter of which have existed for centuries (e.g. Aristotle wrote of
Thales buying options contracts on olive oil presses, the Osaka
shogunate organized the Dojima rice futures exchange, and so on), and
whose ontological composition is qualitatively closer to generic
financial assets than to any synthetic financial asset. Only recently,
beginning in the mid-1990s and on into the 21st century, did
this hyperfungible and highly symmetric class of objects develop,
proliferate, and convoke into actuality the new markets, indices, and
institutions accompanying the class of financial exchange of synthetic
finance –and at that, these new objects, e.g. credit derivatives and
other kinds of synthetic financial assets, do include some of the
economic properties common to generic financial assets, but also many
other peculiar and novel economic properties utterly foreign to the
latter, and which in a very real sense transcends the very concept of
the ‘derivative’, as such.
Applying the traditional textbook definition of derivatives –i.e. a
financial asset whose value is derived from some underlying (generic)
financial asset– to synthetic financial assets is no longer accurate. We
now see that the value of a synthetic asset will causally supervene on
the value of the generic asset, or may even act as a quasi-referent for
its so-called ‘underlier’. For example, in the recent financial crisis,
the price behavior of credit default swaps (a synthetic asset) on
mortgage backed securities caused swift and violent depreciations in the
market valuations of such securities, resulting in higher interest
rates on floating-rate mortgages, and subsequent widespread mortgage
defaults: this caused the prices of mortgages (a generic financial
asset) to rise, and the values of houses (a physical asset) to fall.
When the market value of the physical referent is directly affected by
the generic referent, but in turn the value of the generic referent is
directly affected by the value of its synthetic ‘replica’, can we still
apply the aforementioned textbook definition of a ‘derivative’ to this
class of asset? Or to cite another example, anytime an asset-backed
portfolio is synthetically-structured with credit-linked notes –i.e.
wherein the assets are ‘built’ the replication technology of credit
derivatives– it is the case that thevalues of those credit-linked notes (which are generic financial assets) are derived from the value of the synthetic portfolio.
In both of these examples –which are only two of many– far from it
being that this asset is a ‘mere’ gambling instrument, ‘only’ an immoral
image, or some simple copy of a model. Rather, the synthetic announces
itself as a replica of a generic asset, though it is not of the same,
for its economic properties (maturity, notional value, etc.) are often
and almost always different from its so-called referent. The synthetic
asset is thus a production of pure difference, but one which always
announces itself in and as simulation; it is an image of an object that
is without likeness, an immanent copy of a model which quickly overturns
any grounds on which such a distinction would stand.
In fact, insofar as ownership-of, or exposure-to, the so-called
generic referent is not a requirement for transacting a synthetic
financial exchange –which means that neither the seller nor buyer of the
synthetic asset need be the obliger, creditor, or otherwise related in
any way to the preexisting generic financial exchange acting as its
referent– most synthetic financial transactions are created ex nihilo. However, to the extent that the parties to the synthetic exchange do make a financial transaction, they have created a new asset, and this asset does
have the very real material properties of risk and cash flow. In this
respect, the act of synthetic exchange effectively creates
–synthetically, yes, even virtually, yes, but no less in reality– a risk
and cash flow which did not previously exist.
The synthetic asset, then, is capable of being created ex nihilo and ad infinitum.
There is no transfer of private property, no concrete production by
labor of any classical economic object, and whose intrinsic value is
congealed therein, nor any new generic financial asset or reference
obligation. And yet, through the process of synthetic exchange, because
there occurs a new ex nihilo and potentially ad infinitum
proliferation of the economic properties of risk and cash flow, we
cannot meaningfully deny that a synthetic exchange is any less an
exchange, or lacking in profound material consequences.
In fact, the peculiar materiality of the synthetic financial asset
now raises the important question of whether it is either the case that
we need to liberalize our prior understanding of materiality, or even
that the actualization of synthetic finance already radicalizes the very
concept of materialism itself?
There is also the matter of securitization. Securitization, sometimes
also called structured finance, is the process of creating a security
from a financial asset. There are two ways of creating securities: from
preexisting generic financial assets, or anew by synthetic replication
via credit derivatives. This produces two different types of securities:
cash securities and synthetic securities.
Securitization, whether cash or synthetic, always involves pooling
and tranching: there is the first step of pooling (i.e.
dedifferentiating) the different risks and cash flows of the assets
involved into one risk and one cash flow; and then there is the
subsequent step of tranching (i.e. redifferentiation), which now
redistributes the one risk and its cash flow into new classes of risks
and cash flows in the form of the new securities that result. In this
respect, a truly radical transformation supervenes on the materiality of
the asset in the process of its securitization: a preexisting asset
(e.g. a mortgage, a corporate bond, student debt, etc.) is divided, but
in the process of its division it changes in kind. Moreover, when the
debt notes (securities) whose notional values correspond to the notional
values of the tranches that comprise the securitized portfolio are
collectively held, i.e. owned incrementally and piecemeal, by the
various note holders, who then really may be said to ‘own’ the house,
the corporate bond, the student debt, or any other securitized private
property? In short, all who hold the notes collectively own these things together.
However –as if this were not radical enough– synthetically-securitized
products such as synthetic CDOs signal something even more radical
still. Indeed, to observe that the result of pooling any number of
generic assets into a single portfolio is to homogenize their risks and
cash flows into an asset with a single risk and single cash flow; and
that once we pool these preexisting risks and cash flows together we can
then redifferentiate this new risk and its cash flow differently and
flexibly as we so choose –this is intriguing enough in itself, given
that, first, it conveys a hyperfungibility to the security that is
lacking in the generic financial asset, and secondly, as we alluded to
above, this is already, technically speaking, a method for the abolition
of private property. But when we now see these assets can be synthetically created ex nihilo and ad infinitum, things get both more peculiar and more compelling still.
For example, by pooling any number of credit derivatives into a
single synthetic financial asset, and then ontologically
redifferentiating that new (and now singular) asset through method of
tranching, the synthetic exchange results in the organic creation of
several new economic properties which are specific to a synthetic asset,
and which were not originally ‘in’ or ‘of’ any generic financial assets
acting as the referents for the synthetic portfolio. Anytime we use
tranches to redifferentiate risk, there are ‘levels of subordination’ to
the tranches, which give birth to a series of ‘attachment points’ and
‘detachment points’ that register and distribute respective losses and
gains to the various tranches. This means that the structuring process
itself produces several new economic properties –for example, the
properties of ‘credit enhancement’ and ‘leverage’ (among several
others): this is as unexpected as it is compelling, since once again we
see that that the synthetic asset begins by announcing itself as a mere
replica of its generic referent, just as any synthetic exchange begins
by appearing as an avatar of a generic financial exchange. But there is
always a new difference produced by its repetition, for there are
new and novel economic properties brought into being which are not of
the generic asset, and not present in the generic financial exchange
acting as the reference obligation for the synthetic exchange.
Second part of the problem. Absence of methodology
This merely scratches the surface of the peculiar materiality of
these two new kinds of financial assets that did not exist for Smith,
Marx, Schumpeter, Keynes, or Friedman. However, if we began by observing
that the first part of our problem concerns an ontological
transformation to the financial asset, in truth this only really matters
because it has and still is effecting a wholesale transformation of the
financial system and its broader relation to the economy. Synthetic
financial assets –both single-named and multi-named credit derivatives,
as well as their synthetically-securitized counterparts– progressively
differentiate simultaneous with a series of recent radical
transformations to the modus operandi of capital markets: from the
ever-increasing usurpation of traditional intermediation by the shadow
banking system (i.e. the death of the so-called ‘Jimmy Stewart model of
banking’[3]),
to ongoing and new-fangled experiments with quantitative easing by the
world’s central banks; from the nascent and incessantly fragile but also
seemingly-necessary intimate comingling of money markets and capital
markets, to perpetual threats of sovereign debt crisis; from the
ostensible breakdown of any meaningful distinction between liquidity
risk and solvency risk, to the rise of all manner of market crises –and
the fiscal and monetary hypervigilance they now require, and so on. The
historical and ontological transformation in and of finance, of the
financial asset, its method of composition, as well as the markets they
populate, stand at the precipice of this wholesale qualitative
alteration of finance’s relation to capital and capital markets more
generally, and now begs serious, sustained, historically-specific
materialist analysis.
And so herein lies our problem. We have few if any available
political economic tools equipped to aid our inaugural attempts to
critically-analyze this profound material development. To what schools
of thought or thinkers do we look –analytically, theoretically,
methodologically– as we descend into and now try to cognitively map the
peculiar ontological domain of synthetic finance? Who among our familiar
economists, political economists, philosophers, or cultural theorists,
can help us navigate through its dark pools, shadow sectors, and
concrete virtuality? What methodological resources do we consult to help
us grasp what becomes of materialism when the value of the
object has not only become its price as an asset (as already occurs with
the advent of generic finance) but when now the (synthetic) copy of the
(referent) model upends the very ground on which any distinction
between a derived versus underlying value is even comprehensible?
Indeed, if we are neither content to worship nor shake our fist at
the sun, it does seem we’re currently forced to select from two bad
options. We can either choose to assume the proto-luddite position:
namely, that the development of the synthetic finance signals a
fundamental perversion from the organic logic of ‘true’ value, a kind of
unreal or bad copy of model –at which point we’re left to
morally-assess, itemize, and then ‘turn back the clock’ of
financialization to better segregate the good copies from the bad.[4] Or if not this position, we’re then compelled to select –albeit by negation– the oddly both overstated and
undertheorized proto-Marxist position that the advent of synthetic
finance betrays that (a) capitalism is still, as always, trying to find
new ways of countermanding the tendency of the falling rate of profit,
or (b) it is yet another illustration of the tendency to
over-accumulation endemic to the falling rate of profit.[5]
Both the proto-luddite and proto-Marxist positions, however, share in
common the same political economic presumption that the progressive
differentiation of synthetic finance is a kind of fate accompli
of capital that is to be disdained, choked-out, or resisted, but not in
any serious way encountered on its own material terms; to be peered-at,
problematized, or historicized, but never probed in any technical or
ontologically-rigorous manner. For the proto-luddite this is because
synthetic finance represents a new kind of maledictory form of value;
while for the proto-Marxist it’s because synthetic finance is yet one
more incarnation of the same old malediction of ‘true’ value, i.e. labor
value, which is a constant or even ahistorical cause of the
ever-spread between relative surplus value and absolute surplus value,
but which at any rate is constantly causing the rate of profit to fall
–until of course it doesn’t fall, when ‘something happens’ to once more
yet interrupt its tendency (whether war, expansion into emerging
markets, or now financialization).
Surely, one wonders, is there not a more theoretically-acute,
methodologically-robust, politically-salient analysis available to us
than this?
Difference & Repetition. A book of heterodox political economy
If this is the particular problem that reading DR as heterodox
political economy can help us to address, how, specifically, can it
help us to address it? While in truth there are many ways, we will
briefly name three.
i. First, DR provides us with an instructive way of
understanding the peculiar materiality of the financial asset today.
Deleuze elaborates a creative but rigorous method by which to think the
process, or becoming, of the financial asset –namely he endows us a
flexible method and set of conceptual tools for thinking the financial
asset as a multiplicity.
The concept of the multiplicity is central to the Deleuzian ontology, albeit one that can get quite technical (in DR
Deleuze is constantly giving philosophical transformation to
mathematical and scientific concepts, and no Deleuzian concept better
illustrates the rigors involving this practice).[6] Deleuze credits Riemann with discovering the concept, which means it is ostensibly mathematical in origin.[7]
However, when we apply its theoretics to finance, we are immediately
thinking the asset as a dynamically-composed, formless mess of different
economic properties (maturities, notional values, risks, cash flows,
etc.), which can be plastically stripped and injected elsewhere, or
exogenously created or destroyed ex nihilo, ad infinitum, and
nonlinearly.
Therefore, if, following Marx’s classic introduction to the commodity in Volume I of Capital,
we understand ‘exchange’ as the simple repetition of the object for its
image of value as money, then Deleuze is simply reminding us that new
and different economic properties constantly ‘swarm in the fracture’ of
this repetition: and if such properties are ‘constantly emerging on its
edges, ceaselessly coming and going, being composed in a thousand
different manners’[8],
then to speak of any given economic object as having an ‘essence’ is
symptomatic of a bad ontology, a kind of ‘asset-fetishism’. To avoid
such reification, the first thing we must do is to cease believing the
asset must have some kind of fixed, inherent, or internalized
essence. The essence of any asset, as Deleuze puts it, ‘is nothing but
an empty generality’, which means the asset is nothing apart from its
many different economic properties, but which pledge no final allegiance
to it.[9]
For this reason, DR instructs us that we are more justified to
think the asset as a multiplicity. The concept of a multiplicity lends
us a ready-made technical term to denote the constitutive processes of
an economic object. Multiplicities are the n-dimensional site for the
process of the assembly of the economic object, which is always in
perpetual becoming. Multiplicity is the concept we can use to denote the
reality of the asset; in truth, an abundance of reality that is not
always or only actual, not always or only virtual, not always or only potential;
but rather a confluence of all three (Deleuzian) registers of reality,
and which is predicated on the rhythms, rates, amounts, and kinds of
amounts of processes –whether intensive or extensive– that define the
asset.
ii. However –and following Riemann– Deleuze also points out that
there are not one but two kinds of multiplicities: there are ‘numerical
multiplicities’, and there are ‘qualitative multiplicities’. This brings
us to Deleuze’s second contribution.
If the synthetic asset appears different in kind from the generic
assets it proposes to repeat –but whose materiality it ultimately
transcends, or even remakes in the course of its repetition– this is
because, for Deleuze, the generic asset and the synthetic asset are
ontologically different in kind. Therefore, the second way that reading DR
as heterodox political economy can help us to address our problem is to
give us a technical but not overly-abstract manner of thinking and
articulating the key ontological differences marking generic and
synthetic finance. Insofar as there are two different types of
multiplicities that actualize their respective assets, we can examine
how these assets materially differ in kind.
Let us first consider a numerical multiplicity. Deleuze itemizes the
distinguishing ontological trait of the numerical multiplicity as that
which is thoroughly ‘objective’: in that it is fully actualized, it has
little or no virtuality; and Deleuze says we know this because it is
capable of being divided, but in the process of its division it does not
change in kind:
‘In short, ‘object’ and ‘objective’ denote not only what is divided,
but what, in dividing, does not change in kind. It is thus what divides
by differences in degrees. The object is characterized by a perfect
equivalence of the divided and divisions, of number and unit. In this
sense, the object will be called a “numerical multiplicity.” For number,
and primarily the arithmetical unit itself, is the model of that which
divides without changing in kind.’[10]
If classical economic objects (e.g. coffee, cars, corn, and clothe)
and generic financial assets (e.g. traditional debt and equity objects)
immediately appear to us as ‘more objective’ than synthetic assets, this
distinction made by Deleuze helps to explain why. Such ‘flat objects’
realized by numerical multiplicities are chocked-full, phenomenally,
with extensive economic properties –properties that divide, and in the
course of their division, simply divide without changing in kind. Its
properties are points on a line, and these points and lines are uniform,
which means their division produces only changes by degrees, but never a
change in kind. They are, in other words, Euclidean.
Consider a generic financial asset –for example stock shares. If
tomorrow I receive a letter informing me that my 1 round lot of Walt
Disney Co. (DIS) stock has been divided, or ‘split’ as a 2-for-1, I will
now own 200 shares at $25.00 per share, rather than 100 shares at
$50.00 per share. Here there will have been the division of a generic
financial asset, of 1 share of stock now into 2; and yet there will have
been no change in kind; the share of stock has simply been
numerically-divided ‘in half’, or ‘split’ into two.
The same can be said of money. As a numerical multiplicity, money is
the quintessential financial asset that divides without changing in
kind. This is why Deleuze observes that ‘number has only differences in
degree, or that its differences, whether realized or not, are always
actual in it.’[11]
In this respect, we can draw on any number of examples of the division
of a generic financial asset, and see that they are all numerical
multiplicities. Whether a debt-note, a loan, a bond, or money itself: we
divide, and in the process of dividing there is no change in kind. Is a
debt-note available in an increment of hundred dollars or fifty? Does
it matter? No –its yield will be the same. Is a loan syndicated? The
answer to this question is a mere arithmetical formality. Do I ‘break’ a
hundred dollar bill in order to get back 5 $20s, 10 $10s, or 100 $1s?
Does it matter? No –the amount is unchanged by its denomination.
However, by contrast, when a qualitative multiplicity is divided it changes in kind:
‘[A qualitative multiplicity] does not divide up without changing in
kind, it changes in kind in the process of dividing up: This is why it
is a nonnumerical multiplicity, where we can speak of “indivisibles” at
each stage of the division.’[12]
If synthetic assets appear less ‘objective’ to us, once more this
distinction made by Deleuze helps to explain why, but now also provides
us some additional illumination. In the process of pooling and tranching
a synthetically-replicated portfolio of generic assets, synthetic
securitization divides a risk and cash flow –but in the process
of its division, there is a change to the risk and cash flow in kind. Or
to cite another example, we can now also see that already in a
single-name CDS, we were observing a process that strips, i.e.
‘divides’, the credit event (e.g. default) risk and associated cash flow
from the generic referent –but in the process of its division, the
synthetic asset is more than a simple replicated copy of its model, for
it truly does bring about a new change in kind. Moreover, any
credit derivative involves the process of ‘splitting-off’ or ‘dividing’
from its referent its risk and cash flow –but again, in this process
there is always produced a change in kind.
iii. This bring us to DR’s third contribution. In the course
of his exposition of the multiplicity, Deleuze has alerted his reader to
the importance of understanding that a crucial ontological difference
adheres between its two different types –numerical multiplicities and
qualitative multiplicities– as we discussed above. The dispositive
ontological property rendering these two multiplicities different in
kind turns on the different functional relation each multiplicity
maintains between their specific material properties and the register of
reality of their definition.
Of the three Deleuzian registers of reality –the actual, the
potential, and the virtual– numerical multiplicities are chocked-full
with extensive properties, and therefore principally inhabit the first
two registers of the actual and the potential; while qualitative
multiplicities are chocked-full with intensive properties, and thus
principally, though not exclusively, inhabit the virtual. This is
crucial for Deleuze, insofar as he defines ‘the actual’ as simply that which ‘is’ (what we often mistakenly label ‘reality’); and ‘the potential’ also is that which ‘is’, albeit it only ‘is’ as a possibility
(Deleuze identifies the potential as that which is subject to a
probability distribution, but whose possible outcomes are therefore
predetermined by the actual); but ‘the virtual’ is neither actual nor
potential, and yet it exists ‘in reality’ nonetheless. In fact, in DR
Deleuze makes technical recourse to mathematics and the sciences of
morphogenesis to illustrate that while neither actual nor potential, the
virtual comprises another register of reality altogether. In short, the virtual is that register which structures the space of what is possible to become actual.
For this reason, the third way DR helps us to address our
problem is that by invoking and developing the register of the virtual,
it provides us with a technically-sound but not overly-theoretical
method for thinking about how we, as operators, can trace the logic of
the actual back to where it sets up camp, i.e. up through the extensive,
from there through the intensive, and back into the virtual, wherein we
can begin to tinker with that which structures the space of the
possible of our economic institutions themselves. And importantly, this
activity is increasingly available to us only with the recent and now
progressive population of financial markets with qualitative
multiplicities. And why?
Deleuze says that on the one hand:
‘Everything is actual in a numerical multiplicity; everything is not
“realized”, but everything there is actual. There are no relationships
other than those between actuals, and no differences other than those in
degrees.’[13]
But on the other hand:
‘[The properties by which] a nonnumerical multiplicity…is defined,
plunges into another dimension….It moves from the virtual to its
actualization, it actualizes itself by creating lines of differences
that correspond to its differences in kind.’[14]
What are these ‘lines of difference’ that the qualitative
multiplicity ‘actualizes’ by virtue of partially ‘plunging’ its object
into another dimension? What does this ‘plunging’ mean for the
definition of the material properties of the synthetic asset to which
the qualitative multiplicity corresponds?
Today, we commonly hear the synthetic asset disparaged on behalf of its alleged ‘virtuality’. However, DR avant la letter
takes this accusation seriously, and proceeds to illustrate that the
radical potential of the synthetic asset resides in its still partial
virtuality, i.e. that its true historical-materialist radicality lies in
the paradoxical, hybridized-dimensionality of its reality: it
simultaneously inhabits two dimensions of reality, it has both one foot
in the virtual, and one foot in the actual; it comprises a reality that
paradoxically houses an object that is a mere shred of an actual generic
referent, while yet also still possessing some of the non-substantive
structure of the virtual.
The answer to these questions, then –of what are these ‘lines of
difference that correspond to its difference in kind?’, and ‘how does
such hybridized reality affect the order of the asset’s properties?’–
according to Deleuze, is precisely what marks the peculiar but radical
ontology of the qualitative multiplicity, and therefore the peculiar but
radical materiality of synthetic finance, as such.
The radical materiality of the synthetic is best articulated by Deleuze, when in DR he outlines the three principal ontological features of qualitative multiplicities. They are as follows:
First, ‘the elements [viz. economic properties] of the multiplicity
have neither sensible form nor conceptual signification…they imply no
prior identity, no positing of something that could be called one or the
same. On the contrary, their indetermination renders possible the
manifestation of difference freed from all subordination.’[15]
This already begins to explain what we find so puzzling about credit
derivatives –namely, that the economic properties both actualized by the
synthetic exchange and actualizing the synthetic asset imply no prior
identity, but are free from the material requirements placed on the
actualized ‘whole objects’ of classical exchange and generic finance.
Such ‘indetermination’ to its objectivity means that the synthetic asset
is lacking any predetermined economic ‘form’, its potentiality is in a
very real sense free from any predefinition in the actual. It is pure
difference in itself.
Secondly, then, the various properties and differential relations
between the properties of the multiplicity are determined, reciprocally
determined –as they are in all multiplicities, both numerical and
qualitative. But now their determination occurs ‘without external
reference or recourse to a uniform space in which it would be
submerged.’[16] The qualitative multiplicity is, as Deleuze puts it, ‘intrinsically-defined’.[17]
If the material requirements that predefine the conditions of
possibility for the behavior of ‘whole’ economic objects are not present
in a synthetic exchange, this is because the structure to the space of
the qualitative multiplicity is not fixed, flat, uniform or homogeneous,
i.e. it is not Euclidean. Rather, it is topological, which means that
its surface is a space unto itself, and that space is not restricted by
all of the demands placed on objects in actuality. Such an economic
object is an intrinsically-defined and fungible space, capable of
warping, bending, twisting, folding-over into or out of itself, or
vanishing and suddenly reappearing.
What, then, is the difference between the structures to the space of
the markets populated by numerical and qualitative multiplicities,
respectively? We said that the structure to the space populated by
numerical multiplicities is Euclidean. This means that it is like a
corrugated plane of sheet-metal, lain flat upon a zero-curvatured floor:
its rigid objects move to and fro on its surface, symmetrically
translating back and forth along its parallel ridges. And yet, really,
what more can the non-fungible objects populating this homogeneous flat
space do than ex-change their position, or orientation, on this flat
sheet now for an image of this or that position a little bit further
ahead along the ridge? The exchange of such objects is change
indeed, and technically-speaking. But it is an empty change, an
invariable form of variation, a transformation that involves no real
change at all.
Contrarily, the structure to the space populated by qualitative
multiplicities is topological. This means that it is like an unbounded,
elastic, soft cotton bed-sheet flipped up into the air, falling slowly
through the air, and now down, down, down, towards an indefinite ground
of indeterminate shape below. The surface of the bed-sheet and the
ground below have yet to de-differentiate themselves, or become one,
which they will and do at the moment when the bed-sheet touches ground.
For now, though, the surface of the bed-sheet floats, suspended above
the ground; it is a moving horizon populated by fungible objects, and
subject to an invisible force. Indistinct yet very real streams of
air-flows move beneath and above and beside and between the
ever-changing curvatured surface of the sheet, with its thousand
plateaus of n-dimensional folds and subfolds. It yet remains an uneven
surface. Its fungible objects move to and fro on its surface, but it is
highly improbable such objects rigidly translate back and forth, as if
running along parallel lines. Rather, they are more likely to warp and
bend the space around them as they move along the open terrain, or
perhaps they will warp and bend themselves; perhaps their hard motion
will be impeded, or redirected by another object on top of the surface,
or now even an object beneath the sheet itself; perhaps their motion is
soft. Perhaps the object is acutely sharp, or has a sharp edge that will
insert a ‘cut’ in the folds of sheet as it rolls along its surface.
Does this object now fall through the sheet? Does this hole now act as a
new basin of attraction for the other objects circulating around on the
sheet? Will the sheet further tear, with its basin of attraction
evolving in mid-flight? Given that the sheet is unbounded, how can we
know?
We see that to ask the question about the objects populating this
kind of surface ‘what more can they do than this?’ is perhaps even now
premature –for do we even yet know ‘anything’ they can do, to which
there is yet ‘more’? Can we say we know everything they can do when we
really don’t know anything about the objects populating this domain of
action?
We do know, at least –and only by reading DR as heterodox
political economy– that the structure to this space is plastic and
ambiguously pliable, which now avails both its fungible objects and
their space, whose flexible structure is capable of being remade by the
motions of such objects, with any final, flat, or uniform structure. We
at least know that this space and the objects populating it are
ontologically-marked by a profoundly-augmented capacity for change.
Thirdly, then, Deleuze observes that these two aforementioned
features mark the ontology of the qualitative multiplicity simply
because the qualitative multiplicity ‘is a structure’, albeit a highly
fungible, profoundly indeterminate, truly paradoxical kind of structure.
It is, in Deleuze’s words, ‘a system of multiple, non-localizable
connections between differential elements which is incarnated in real
relations and actual terms.’[18]
To think the asset as a multiplicity is to posit that that the
genesis of any economic object occurs ‘between the virtual and its
actualization’ –or as Deleuze puts it, it goes from the structure of the
virtual to its incarnation in the actual, ‘from the conditions of a
problem to the cases of a solution.’[19] However, DR
also allows us to observe that the synthetic asset is singularly unique
from the other two classes of economic objects, in that it still has
one foot fully-plunged into the virtual. Indeed, this is why Deleuze
argues that synthetic objects are the objects ontologically closest to
the virtual –they are that which, as he says, ‘enjoys the double
property of transcendence and immanence in relation to [the actual].’[20]
If synthetic assets are indeed qualitative multiplicities, let us
follow the logic to its result: that the historico-ontological
progressive differentiation of synthetic finance signals the
coming-into-being of a series of qualitative multiplicities, such as
credit derivatives and other synthetically-structured assets, which now
enjoy ‘this double property’ of both transcendence and immanence in
relation to the preexisting, actualized set of numerical multiplicities,
which in turn increasingly populate the markets comprising the system
of exchange we call finance capitalism, what does this mean? It can only
mean that now, namely, the determinative or defining structure to the
genesis of economic form is more open and available to us as operators,
and increasingly so, than ever before.
How so? If the virtual is indeed, as Deleuze says, pure structure
without content, both the condition for and conditioning of a problem
whose solution is always found in the actual; and if synthetic financial
assets and synthetically-securitized assets have now differentiated to
the peculiar hybridized status we outlined above, we must understand
synthetic finance as the still partially-virtual domain –or at least the
domain closest, ontologically, to the virtual – where actual economic solutions acquire the conditional structure to their problems.
For this and other reasons, reading DR as political economy is
a radical wager indeed. Deleuze urges us to consider that perhaps we
were always proceeding ontologically-backwards by looking for good
solutions to badly-posed questions. The correct course of proceeding,
rather, was to pose the virtual questions whose actual solution will
always be pre-determinatively commensurate with the quality of its
problem. We don’t need new solutions to pre-existing problems. We need
to formulate new problems to pre-existing solutions –for DR allows us to see that the solutions have already repeated themselves, and have now produced a new difference in kind.
[1] By generic finance
we mean traditional debt (bonds, loans, mortgages, etc.), equity (real
estate, stocks, etc.), and vanilla derivatives (options, futures,
forwards). By synthetic finance we mean credit derivatives
(credit default swaps, etc.) and varieties of synthetically-structured
products (synthetic CDOs, etc.)
[2]
Since credit derivatives are the most noteworthy kind of synthetic
financial assets, and the most (in)famous among these (especially after
the 2008 financial crisis) is the credit default swap (CDS), a brief
exposition is warranted herein: A CDS is a bilateral exchange between
two parties, one of whom is called the protection buyer, the other is
called the protection seller. The terms of exchange of the CDS make
reference to a certain notional value, which is the payment obligation
of a reference entity. The protection buyer agrees to pay the protection
seller a cash premium on a quarterly, annual, daily, or any other
agreed-to periodic basis. And in return the seller agrees to make a
protection payment to the buyer upon occurrence of a credit event in the
reference entity [fig.2.1][2]. The object of this exchange is therefore
called a credit default swap because the parties to the exchange are swapping the risk of a default or some like credit event on a credit/debt obligation.
Someone or something somewhere owes someone or something else money.
This debt obligation comprises the reference obligation of the reference
entity: there has been a preceding generic financial exchange of some
generic financial asset (i.e. a mortgage, a bond, or some other debt or
equity object), whose event risk and cash flow the CDS replicates.
However, while the CDS makes reference to this generic financial asset,
its value, and the single name of the obliger in the generic financial
exchange, the parties to the CDS may be, and now increasingly usually
are, otherwise independent of and unrelated to the generic financial
exchange. For this reason the exchange is ‘synthetic’. We call the
exchange of credit derivatives –in this case the exchange of a CDS– a
‘synthetic financial exchange’ because the exchange involves a synthetic
swapping of the risk and cash flow of a reference entity, derived from a
generic financial exchange, but to which neither party to the synthetic
exchange need be party to begin with.
[3] Perry Mehrling, The New Lombard St: How the Fed Became Dealer of Last Resort, Princeton Univ. Press, 2010
[4]
This position is perfectly illustrated by proponents of Dodd-Frank: by
attempting to re-segregate investment banking and commercial banking
(though the legislative repeal of Glass-Steagall only formally conceded
what had already institutionally transpired), by forcing OTC derivatives
onto swaps exchanges (when such prior attempts at regulation gave birth
to credit derivatives themselves), among other misguided attempts at
federal regulation, Dodd-Frank performs the proto-luddite intention to
turn back the clock on the progressive differentiation of finance.
[5] For example, see Alan Freeman, “The Profit Rate in the Presence of Financial Markets: A Necessary Correction, Journal of Australian Political Economy, no. 70.
[6] In this author’s opinion Difference and Repetition
is the greatest of all books of philosophy. However, it is also
probably the least read of Deleuze’s books, in large part because it is
quite difficult to fully grasp without a working understanding of many
mathematical and several scientific fields of study (e.g. group theory,
non-Euclidean geometry, calculus, topology, a little biology and
physics, and dynamical systems theory). It is also quite dense, because
Deleuze ‘zips-up’ these various discourses into a compressed, cohesive
whole. But it is ultimately very rich because it draws out the deep
ontological significance –as only a great book of philosophy can– of
their combined mathematical and scientific insights, i.e. of Galois,
Riemann, Leibniz, Curie, Einstein, and so on: as if they were able to
sit in a room, discussing a pure ontology amongst themselves, but now
equipped with a (Deleuzian) language to streamline their collective
discourse.
[7] Riemann, our reader may or may not know, was the mathematician Einstein was reading during his annus mirabulis
–when, closing-up the patent office for the night, he walked home to
smoke his cheap tobacco and re-envision the structure of the universe.
Riemann, as a non-Euclidean geometer, immediately applied its concept to
study geometric spaces, or more broadly mathematical spaces. Physicists
apply its concept to study physical spaces. Dynamical systems theorists
apply it to study dynamical systems, or objects as systems. Because
markets are dynamical systems, and assets are dynamical objects, we can
apply the concept to study assets and the markets they populate.
[8] DR. pg. 169
[9] DR pg. 182
[10] Gilles Deleuze, Bergsonism, Zone Books (1988) pg. 41
[11] Ibid pg. 41
[12] Ibid pg. 42
[13] Ibid pg. 43
[14] Ibid pg. 43
[15] DR pg. 183
[16] Ibid pg. 183
[17] Ibid pg. 183
[18] Ibid pg. 183
[19] Ibid pg. 183
[20] Ibid pg. 18
taken from here
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