What is finance?

Julio Huato (SFC, URPE, S&S)

juliohuato@gmail.com
OWS Lunchtime Series Presentation
Liberty Square, New York. March 13/2012

Those who speak for the 1% claim

that...
the financial system is indispensable for the

functioning of the economy

finance, when allowed to operate normally,
helps a monetary economy allocate its
resources efficiently compared to alternatives
it is impossible for a modern society to function
without finance as known
These claims cannot be taken at face value,
especially after the financial system--in close
tandem with the state--has failed and keeps failing
a majority of people in our society.

Material and social reproduction

Any and every society, one way or another, must

produce wealth (goods)[*]

What varies in different societies is how wealth is
produced, not only how it is produced technically, but
also socially
Material reproduction=the recurrent or continuous
making and use of wealth that makes social life flow
Social reproduction: the recurrent production and
dismantling of social structures through which we
interact with the rest of nature
[*] The definition of wealth (goods) in a given society and time is
socially constructed. Wealth=what enhances our well-being. Different
people have different notions, and these notions clash. Some prevail.

Material aspect of reproduction

Production and consumption in

various social settings

Financial securities (bonds)

Security (bond)=legal claim of ownership over-ultimately--the productive and consumptive wealth
of society (i.e. over our humanity, our human
powers, our freedom)
All markets are financial markets: in all of them
people exchange securities; however some
securities are claims over large amounts of wealth,
so they elicit special treatment
Wealth asymmetries warp, distort, divert social
cooperation and seek ways to reinforce themselves
by shaping up ideology, politics, and the law of the
land

Material and social elements

Wrap up points
Cooperation (people helping people) is materially necessary for any
society
One way or another, social structures must enable cooperation
We make society by cooperating with one another and unravel it by
withdrawing or entering into conflict with one another
Trade and political processes are forms of cooperation, but they
tend to erode the basis for cooperation as they pit people against
people
Markets and states work when they enable cooperation and make
reproduction flow; they fail when they disrupt reproduction and lead
to withdrawal and conflict
Markets and states built on gaping inequality in wealth ownership
("capitalism") are GIGO devices: mask abuse of the weak by the
powerful
We must build better ways to manage our material reproduction
placing people at the center and turning other forms of wealth into
instruments to human wealth