South Atlantic Quarterly

Dick Bryan, Michael Rafferty, and Chris Jefferis

Risk and Value: Finance, Labor, and Production

In Marxism, money and labor are the two mea-

sures of value. They run in parallel, with complex
connections, but three forms of connection are
immediately conspicuous. A Capital, volume 1,
version frames the connection in terms of money
as a produced commodity (gold) with its own costs
of production measured in socially necessary
labor time; in volume 2 the connection is through
money as a form of capital for the purchase of the
commodity labor power; and a volume 3 connec-
tion is expressed in the transformation process:
the conversion of socially necessary labor time as
a unit of account into money as a unit of account.
Each connection contributes a dimension to
the conception and measurement of surplus
value. Volume 1 gives us a connection of money to
the reproduction of labor powerthat the cost of
production of gold is defined with reference to
subsistence wages in the gold mining industry
and hence the economy at large. Volume 2 gives
us the conception of equivalence in the valuation
of different forms of capital, such that the conver-
sion of M to M in the circuit of industrial capital
reveals the value creation of production. Finally,
volume 3 gives us the connection between sur-
plus value and its realization as the rate of profit
measured in terms of money.

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These connections between money and value all have their own time-
honored debates with ongoing momentum. Here, however, we push away
from these debates, at least as conventionally framed, and look to build toward
a historically newer connectionone that takes both money and labor to
their current frontiers in development and flexibility. That is, we seek to take
money beyond gold and even state money, to its form as a spectrum of highly
liquid financial assets of uncertain value, and to take labor beyond wage work
at the factory to a fluid contract of service engaging direct wage work, home-
work, and the employment of independent contractors and even to the house-
hold labor of managing financial risk. The analysis seeks to tie these fluid
identities of money (or finance) and labor together, to reveal how they are
mutually reinforcing and anchors of value in financially distinct ways. Our
objective is to consider how value might be conceived when its two units of
measure, labor and money, are undergoing such rapid transformation. It is
an agenda clearly at odds with those who wish to treat finance as merely
speculative and unproductive and to focus instead on money as a unit of
account and a means to circulate real capital. This article starts from the
premise that if theories of value cannot incorporate finance in a central role,
then they are disengaged from the frontiers of capital accumulation.
Historical parallels between the coevolution of monetary forms and
labor contracts are significant. The postwar application of Keynesian policies
emphasized the pursuit of full employment and stable currencies as com-
panion agendas, and such parallels can be traced back much further.1 The
recent developments of liquid financial assets and increasingly flexible work
contracts and the financialization of labor outside the workplace are also sig-
nificant. What they have in common, in the domain of measurement, is risk.
Antonio Negri ([1973] 1979) implicitly identified risk as the critical issue of
the change that came with the end of the long boom. While the Keynesian
state had taken on the policy agenda of stability, or, as he termed it, linking
the present to the future (via fixed exchange rates, stable interest rates, mini-
mum wage guarantees, protection of profits), Negri astutely saw this role
now shifting to the market and the pricing of the future in the present. So
while the Keynesian state absorbed the risks (and uncertainties) of the
future by decreeeffectively a collective insurancethe shift of this role to
markets meant a loss of a collective dimension. The risks of the future have
become increasingly individualized and transferable and are thus only social
in some partial, private way by conscious processes of mass hedging.
So just as that postwar monetary stability gave way to more fluid forms
of finance following the floating of exchange rates and the invention of the

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Bryan, Rafferty, and Jefferis Risk and Value 309

Black-Scholes options pricing model (to name two different dimensions of

the rise to prominence of financial risk), at the same time, and for broadly
the same reasons, permanent, full-time employment went into decline to be
replaced increasingly by precarious, casual, and immaterial forms of labor.
The archetypical form of employment is now not full-time work in manufac-
turing but casual, precarious, contingent work contracts for immaterial
forms of labor, where productivity may be hard to measure and the connec-
tion of wage rates to productivity growth and even subsistence provision is
increasingly dismantled.
In short, with growing fluidity and riskiness, contingencies once born
by employers (and the state) are increasingly being shifted to markets in the
case of money and to workers in the case of employment. Hence when we
think of money and labor as units of measure, we also see the mutual rise of
uncertainty of values and the risks of valuation. But beyond the temporal
coincidence noted above, what is the significance of the identification of risk
as a commonality between labor and money?
For many analysts, this parallel is to be understood ideologically: as an
expression of the rise of a risk society (Beck 1992) and more broadly of neo-
liberalism. But that insight gets us only a certain distance, and even then only
along a one-dimensional axis: state regulation versus market forces. Signifi-
cantly, it gives us no way of accessing issues of valuation.2 Fragility, liquidity,
and volatility make valuation difficult, indeed almost impossible, as so many
financial analysts and pundits verify. A robust Marxism needs to take on the
issue of risk and valuation and not focus exclusively on ideological issues,
judgments about speculation being unproductive, or long-term cycles.
For others, we might be seen as setting challenges for Marxian value
categories that are not appropriate. Some would contend that Marxism is
robust as a theory of value in relation to class processes of production and
distribution, but not the precise valuation of commodities in particular, let
alone of capital. Yet this would be a limiting response and serve to inhibit
Marxisms engagement with contemporary changes in how value is pro-
duced and measured in the context of risk.
Underlying our proposition is the desire to recognize how, with the
benefit of time, we can now talk about historical modes of valuation: that
the way Marx could talk about the measurement of value was, and had to be,
imbued with nineteenth-century circumstances, forms of capital, and ana-
lytical capacities. In opening this dimension, we do not diminish the signifi-
cance of the innovations in Marxian value theory, but, in relation to measure-
ment, those innovations have tended to become channeled into taxonomic

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and mathematical activities (e.g., how to classify new forms of labor as

either productive or unproductive or how we solve the global transforma-
tion problem). Our issue here is of a different order, for while it implies
both taxonomy and mathematics, its explicit agenda refers to an evolving
calculative project.
Critically, we follow, at least partially, the work of Michael Hardt and
Antonio Negri on the impossibility of valuation within the search for coher-
ent value, although their reasons center on the rise of immaterial labor and
the disappearance of taxonomic boundaries delineating what is and is not
production. The broader consequence in their framing is to shift analysis
away from the workplace labor process as the sole site of value creation and
to recognize value creation in diverse forms of activity.3
In drawing on that consequence, we are not, however, constrained by
the emphasis on immaterial labor. We concur with the impossibility of
measuring value and of the widening subsumption of labor to capital out-
side of what used to be thought of as production, but we argue also that this
relates to problems of recognizing the contingency of the future and the way
this contingency (risk) enters present valuation. This is a process expressed
through finance and financial valuation.
For capital, this recognition is now basic practice. Financial contingen-
cies of accumulation are incorporated into valuations by the measurement of
capitals rate of return relative to risk, albeit that neither risk nor return, nor
indeed capital, can be measured in a universally agreed or robust way. But
accuracy is of second-order importance; more critical in capitals class project
is not the bottom-line number per se but the way the mode of calculation is
performed with real effects. When risks and returns are being calculated,
decisions are being made on the allocation of assets, with the intention of
enhancing (projected) returns relative to (perceived) risk, including through
systematically relocating risk to labor. Our objective is to open value analysis to
the incorporation of risk and to follow how the changing mode of calculation,
rather than the specific numbers produced, itself opens up a class project.
So the challenge is, how do we think about value in a way that acknowl-
edges the success of capitals risk project and does so in a way that opens up
new frontiers in the class project for labor? We will start with what might be
depicted as conventional Marxian value and see what happens when we add
risk, first via a technical inclusion and then via conceptual abstraction. This
discussion is followed by an exercise in extending the conception of produc-
tion to include the way labor, generally unknowingly, is incorporated by
finance into the production of capital assets.

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Bryan, Rafferty, and Jefferis Risk and Value 311

Marxian ValueAverages and Abstractions

To build this approach, we need to retreat a few steps, to open the space for
thinking about risk within value. While capitals calculative project is articu-
lated through corporate accounting practices, Marxian value theory is not gen-
erally framed so as to provide an alternative accounting: its agenda is instead
to reveal class processes that are specific to capitalist social relations. Indeed,
quantitative Marxian economic analysis rarely invokes Marxian-conceived
value measurements, but relies on taxonomic tweaking of (Keynesian-
conceived) national accounts. 4 Current Marxian debates about long-term
tendencies in the rate of profit, for example, are based on official national sta-
tistics (price measures), often adjusted so as to reclassify workers in unpro-
ductive activities as paid out of surplus value and the profits of being self-
employed as labor income. Some telling empirical results follow (e.g., Mohun
2014), but they are not to be confused with data that compile the rate of profit
in terms of socially necessary labor time as a unit of account.5
The issue of concern here is not to protest that Marxists have prag-
matically worked from the available data sets instead of compiling true
Marxist data. Rather, it is that quantitative agendas occlude Marxs Value
being understood as an impetus, a gravitation, that describes the momen-
tums of capital accumulation and hence the points of contestation of those
momentums as social relations. As soon as we try to conceive of Value as a
measurable, a recordable figureto pin it down spatially and temporallyit
loses that momentum. Politically, it leads to a dissection of class processes
that loses both class and process (see Harvie 2005). This concern is the cen-
tral point of Moishe Postones (1993) and of Diane Elsons (1979) critique of
labor theories of value as opposed to value theories of labor.
The problem we refer to can be seen in parts of Capital, if taken in iso-
lation, as Marx worked through formulaic dimensions of value, and in many
subsequent interpretations thereof. In its general expression, notional aver-
ages and norms are presented as the representational form of abstract pro-
cesses. These norms and averages create the suggestion of an objective of
measurement, with stasis rather than movement and contestation (and
hence risk) implied. This needs some explanation.
The privileging of norms and averages shows up clearly, for example, in
definitions of labor-based units of account. It is encapsulated by Marx at the
beginning of his Contribution to the Critique of Political Economy ([1859] 1977):
The labour embodied in exchange-values could be called human labor in gen-
eral. This abstraction, human labour in general, exists in the form of average

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labour which, in a given society, the average person can perform, productive
expenditure of a certain amount of human muscles, nerves, brain, etc. It is
simple labour [English economists call it unskilled labour] which any aver-
age individual can be trained to do and which in one way or another he has to
perform. The characteristics of this average labour are different in different
countries and different historical epochs, but in any particular society it
appears as something given.6

Abstractions existing as individual averages and different national aver-

ages provide a blunt device for representing the quantitative form of human
labor. Importantly also, it lacks a conception of risk or contingency.
This same theme occurs in the unitary measure of socially necessary
abstract labor time (SNALT) as a unit of universal labor. In building the con-
cept of SNALT, Marx is clear that he is developing a unit that represents an
abstraction. In contrast with (Ricardian) adding up of actual labor hours,
Marx invokes the abstraction of one homogeneous mass of human labor-
power, although composed though it be of innumerable individual units of
labor-power. He continues:
Each of these units is the same as any other, to the extent that it has the char-
acter of a socially average unit of labour-power and acts as such; i.e. only
needs, in order to produce a commodity, the labour time which is necessary
on average, or in other words is socially necessary. Socially necessary labour-
time is the labour-time required to produce any use-value under the condi-
tions of production normal for a given society and with the average degree of
skill and intensity of labour prevalent in that society. (Marx [1867] 1976: 129)

Marx formulated his discussion of norms and averages in relation to the need
to anchor use value and exchange value to a common denominator. But what
is at stake in the (conceptual) process of measurement? Marx is ambiguous in
his discussion here. Sometimes it is invoked as a norm, with the norm itself
based roughly, if not precisely, on a process of arithmetic averaging, with
elaboration of competitive imperatives that drive the average onward: in effect
a rolling average. A universal unit of labor is one defined by international
averaging of (otherwise) irreconcilable national differences in subsistence lev-
els. This is also what lies behind the notion of industry norms: for example,
that SNALT is determined by the industry normal costs of production (such
that those at the frontier of technology, with lower than socially necessary
labor time, will generate a surplus in excess of the average). Indeed, the aver-
age rate of profit itself is, at base, a norm defined by an average.

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Bryan, Rafferty, and Jefferis Risk and Value 313

What is the concept of risk that lies within the move toward these units
of measure? In relation to norms and averages, risk might be thought of as a
distribution around the average: deviations (albeit not formal standard devi-
ations) of individual performance. This notion is implicit in SNALT, in dis-
cussions in volume 3 of Capital of formation of the average rate of profit and
prices of production (transformed values). For example: Commodities
whose individual value stands below the market-value realize an extra sur-
plus-value or surplus profit, while those whose individual value stands above
the market price are unable to realize a part of the surplus value which they
contain (Marx [1894] 1981: 279).
While this distribution is generally interpreted in terms of efficiency
and costs of production, it should also have a risk dimension. Formally, to be
constituted as a contribution to value, a commodity must meet two condi-
tions. First, it must be valued according to SNALT. Second, the commodity
must be solda proxy for being turned into a use value. There can be no attri-
bution of value at the point of production: value can only be identified retro-
spectively, for it will not be known what the social norm of production is until
the size of the market is known. The commodity may lie unsold and hence
valueless. Value must be produced, but it is in exchange and more expansively
in the process of circulating as (commodity) capital that value is verified.
Here an initial incorporation of risk would mean that any individual
process of production can be understood as producing surplus value, with
risks attached. Conceptually, at least, these risks will be quantifiable: risks
about production costs (technology, labor skill), currency, interest rates, and
the amount of revenue secured (demand, currency). This way of incorporat-
ing of risk would mean that any produced commodity that lies unsold is val-
ued no differently to the one that is sold, for each carries the risk of being the
other. Commodities that have a higher risk of being unsold are thereby each
valued less than those that have a lower risk of being unsold. For any indi-
vidual produced commodity, risk may not be determinate of value, but for
individual capitals producing commodities, the higher-risk ones will in
aggregate have more commodity failures (less of the labor embodied in the
output of that individual capital will be revealed as value-producing, socially
necessary labor time). Simple probability theory says that, in the aggregate,
risk does have an impact on value.
This strategy for incorporating risk into value may be credible, but it
seems to make an already analytically formal and rigid measurement exer-
cise just that much more problematic. It may introduce some fluidity and
contingency of the conjuncture but takes it back into an inherently static

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measurement. But if risk is to be recognized, this is feasibly how a formalistic

Marxism might engage it.
Fortunately, analytical formalism is not the only way to frame risk in
relation to value. But to reframe risk and value we need to explore beyond the
issue that Marx signals with his ambiguous language around averages and
norms. We seek to preserve two key dimensions, starting with an abstraction
(abstract labor, human labor in general) and the gravitation to measurement
as a calculative impulse of capital, but introducing risk into both of these.
In Marx, the importance of the calculative impulse within abstraction
is nowhere more clear than in the way he depicts the shift from absolute to
relative surplus value (critically, framed also as the shift from the formal to
the real subsumption of labor to capital). We can think of this shift as a
change in the mode of valuation of labor as variable capital.
While absolute surplus value is about preexisting modes of work com-
ing under the control of a capitalist, relative surplus value is about the incor-
poration of labor into capital, with all the calculative agendas that incorpora-
tion implies. Marx not infrequently captures this changing mode in terms of
labor losing its distinctiveness within accumulation.
This entire development of the productive forces of socialized labour (in con-
trast to the more or less isolated labor of individuals) and together with it the
use of science (the general product of social development), in the immediate pro-
cess of production, takes the form of a productive power of capital. It does not
appear as a productive power of labor, or even of that part of it that is identical
with capital. And least of all does it appear as the productive power either of
the individual worker or of the workers joined together in the process of pro-
duction. (Marx [1867] 1976: 1024)7

The abstraction has within it the contradiction of an imperative toward mea-

surement and calculation but the inability of quantification to capture the
social tensions depicted in the abstraction. Marx develops categories like
SNALT and a unit of universal labor not so as to create a labor unit of account,
but because abstract labor opens up the contradictions of labor in relation to
capital. Indeed, following Patrick Murray (1989), abstraction is a way of iden-
tifying actual and possible sites of contradiction in that relation.
If we follow the calculative impulse of capitaland capitalismwe
can draw a different connection between risk and value. It is an impulse that
the class of capital has been formalizing for more than sixty years, in its
attempts to measure the value of capital and simultaneously recognize that
rates of return on assets must be evaluated in relation to their implied risk.

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Bryan, Rafferty, and Jefferis Risk and Value 315

Innovations dating from the 1950s in portfolio theory through to the Black-
Scholes model of options pricing and techniques of the capital asset pricing
model (CAPM) and value at risk (VaR) are all about linking abstract capital
(that which generates an expected rate of return) to the market performance
of individual capitals. These are capitals version of Value calculation. No
one would argue that the class of capital has been technically successful in
its endeavor, as regular financial crashes, some of them major, attest. Yet
despite their flaws, these measures are performed constantly: there are real-
time portfolio measures of the value of capital adjusted for risk, and invest-
ment decisions are actively based on these valuations.
Critically for our analysis, these calculative techniques of capital per-
form the process by which discrete investments are made mutually commen-
surable, and hence capital itself is made homogeneous (capital in general)
via the concept of return relative to calculable risk. This commensurating
capital is what labor confronts, and this is why for labor it is the calculative
imperative that is critical, more than the numbers calculated at any particular
place or point in time.
Yet in relation to labor, by contrast, many contemporary Marxists
undertake a process of differentiation and decompositiona concern with
the question of which acts of labor are productive and those which are cir-
culatory or supervisory; with which sectors of the economy are unproduc-
tive (and here finance is so readily located); and with different sectoral profit
rates. Too often these differentiations are used to depict divisions in capital
accumulation but without confronting how accumulation itself might be
rethought as a result of these shifting divisions.
Perhaps, some will argue, this agenda serves Marxism well, if empiri-
cal verification of long-term falls in the rate of profit is seen to constitute an
analytical victory. But we believe that it is in danger of occluding an abstracted
analytical agenda that seeks to identify how issues of production, work, and
surplus are changing rapidly, along with the fluidity of more recent changes
in accumulation, especially in relation to finance.8

Rethinking Value Production by Extending Production

An important response to the above observation has been to defocus concep-
tions of class and Value away from a discrete sphere called production. The
exploration is not new, and we should briefly note some prevalent strands.
Hardt and Negri (2004) have been central in developing an analytical
loosening of value creation from formally conceived workplaces and instead

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imagining the social factory (Gill and Pratt 2008). Their critical point is
that there is increasingly no discrete labor of production, which is sepa-
rate from what is conventionally called circulation, either in abstraction or
concretely. The popular focus in their work is often through the process of
immaterial labor, sometimes reduced to the production of service commod-
ities, without material form, but more significantly seen as a new domain of
production of social relationships, knowledge, and affect. Maurizio Lazzarato
(1996: 133), for instance, defines immaterial labor as the labor that produces
the informational and cultural content of the commodity. A central focus in
the immaterial labor literature is on social processes of marketing and
consumption: things like advertising, fashion, marketing, television, and
public opinion. How a commodity is presented is part of what it is. In this
conception, value production thereby has new benchmarks. As Lazzarato
(1996: 138) again puts it: Immaterial labor produces rst and foremost a
social relationship (a relationship of innovation, production, and consump-
tion). Only if it succeeds in this production does its activity have an economic
value. This activity makes immediately apparent something that material
production had hidden, namely, that labor produces not only commodities,
but rst and foremost it produces the capital relation. For Hardt and Negri
there are two further consequences of the hegemony of immaterial labor in
that it establishes a clear break with manufacturing as an ideal type and site
of value production and that it throws open just what is involved in the pro-
cess of production. In their proposition of value creation beyond the fac-
tory, Hardt and Negri also make a decisive call on the possibilities of quanti-
tative value theory, at least a value theory with the microfoundations in
SNALT. We are here in the realm of value beyond measure (Hardt and
Negri 2000: 355).
In some ways, the notion of production beyond the factory builds on
the work of cultural studies scholars like Fredric Jameson (1983: 113), who
long ago identified the changing forms of subjectivity of labor, such that in
an era of consumer capitalism, social relations of consumption were seen to
have heralded a new type of social life and a new economic order [of] . . .
postindustrial or consumer capitalism. Significantly, the social life of con-
sumer capitalism is understood as an extension and intensification of labors
engagement with capital rather than an escape from it. In particular, Jame-
son recognizes in Gary Beckers notion of human capital that it not only
reconceptualizes labor as a form of capital but reconceptualizes consump-
tion as a form of production, akin to that of a firm. Jameson contends that
in [human capital theory] consumption is explicitly described as the pro-

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Bryan, Rafferty, and Jefferis Risk and Value 317

duction of a commodity or a specific utility. He then goes on to quote Becker

(1976: 141) at length:
The household production function framework emphasizes the parallel ser-
vices performed by firms and households as organizational units. Similar to
the typical firm analyzed in standard production theory, the household invests
in capital assets (savings), capital equipment (durable goods), and capital
embodied in its labor force (human capital of family members). As an orga-
nizational entity, the household, like the firm, engages in production using
this labor and capital. Each is viewed as maximizing its objective function
subject to resource and technological constraints. The production model not
only emphasizes that the household is the appropriate basic unit of analysis in
consumption theory, it also brings out the interdependence of several house-
hold decisions: decisions about family labor supply and time and goods expen-
ditures in a single time-period analysis, and decisions about marriage, family
size, labor force attachment, and expenditures on goods and human capital
investments in a life cycle analysis.

Feminists and Marxist scholars of development have also been expressing

this approach for some time in relation to the household and household labor.
They observe in many different contexts that labors separation from means
of production through the capitalist factory is only one form of formal sub-
sumption to capital (so that household production of commodities for national
and international markets like coffee can also represent formal and, in par-
ticular circumstances, even real subsumption). They show also that work
inside the household makes possible the wage-labor relationship at the fac-
tory and thus has been an active part of global industrial capitalism (Cowen
1976; Banaji 2011; Gibson-Graham 1996).
In none of the above is finance a conspicuous conceptual element.
Finance can readily be added to these observations of a broader conception of
production. Finance-as-industry is itself a domain of immaterial produc-
tion, creating new knowledge and affect, and credit (debt) is well recognized
as integral to consumption (particularly in periods of declining real wages,
leading to an extraction of interest payments from households [Costas
Lapavitsas (2013) calls it financial expropriation]).
But these conceptions of finance provide a limited mode of access to an
extended conception of production, for they are framed only as formal sub-
sumption of the household to capital: a process that extracts a surplus (sav-
ings, investments, output, interest payments) but without transforming the
household into capital. Our analytical agenda is to frame an emergent and

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distinctly capitalist finance: the real subsumption of labor to finance, in

which households become directly subject to calculative imperatives of capi-
tal. In the process we will see the framing of consumption and of house-
holds as involving processes of production-beyond-the-workplace.
Hardt and Negri (2000) are significant in opening this path, through
the way they frame real subsumption (and thereby, we would add, the calcu-
lative imperative). They extend Marxs concept of real subsumption beyond
the workplacea subsumption to capital rather than just to the employer
or even to production in capitalism. Laboring becomes an extension of capi-
tal, in which capital, labor, and social life are no longer clearly distinguish-
able. Labor can now be constituted as any value-creating activity (anything
that enables accumulation and builds capital). Framed this way, we contend
that there is emerging a real subsumption of labor to finance and labors
incorporation into financial calculation. Labor becomes (unintentional) capi-
tal and hence productive in new ways.9

Rethinking Value Production in Finance

At the center of the process of labors real subsumption to finance is the
transformation of individuals and households by new financialized modes
of calculation by capital. (We will refer to households as the representative
units of individual finance, albeit that it is ambiguous as to what specifically
constitutes a household. The reason for this shift will become apparent.)
To build this proposition we return to capitals calculative agenda and the
measurement of risk as they are now being applied to households.
The transformation was highlighted, if not conceived, in crisis. Calcu-
lative devices like CAPM and VaR, used to measure portfolio returns in rela-
tion to risk, were revealed in 2007 and 2008 to have two now well-recog-
nized flaws. The first was that the techniques of risk diversification failed,
for when market liquidity dried up, it was found that supposedly separate
and diverse risks converged and crashed together. The second, closely
related, flaw was that risk calculation on the performance of individual asset
classes was inadequately formulated by investment banks and credit rating
agencies alike (Tett 2010; Bryan et al. 2012).
In the buildup to the global financial crisis, it was household mortgage
defaults that were the least credibly measured, as AAA-rated subprime loans
verified. Yet all the signs were that households were not well managed by
capital. Critically, the condition for subprime lending was that there had
been no effective risk management of household default. Indeed, as is now

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Bryan, Rafferty, and Jefferis Risk and Value 319

well known, subprime loans were based on incentive structures in lending

in which risks of default were willfully ignored by mortgage brokers. In
effect, households were engaged by finance, but not as capital.10 Subprime
lending was about the formal subsumption of labor to (financial) capital.
One style of response to these flaws has been around modes of calcula-
tion and/or state regulatory reform to enable more reliable data to be pro-
duced.11 Another, and the critical one for our analysis, has been to design
new financial products where the chance of risk convergence in the context
of crisis is minimized (albeit that it can never be removed). Households are
a primary focus in both agendas and, most significantly, the second. Since
2008, reforms have been directed to the real subsumption of labor to (finan-
cial) capital: strategies to build household financial capacities and place
financial contracts on a sustainable footing.
To identify this transformation, we need to go back and identify what
makes households financially distinct and hence the terms and objective of
their real subsumption as a financial asset class. While most of the standard
spectrum of conventional financial assets is directly responsive to the eco-
nomic cycle, households are different. Most of their assets are illiquid (labor
skills, perhaps home and vehicle equity) (Campbell 2006; Bryan, Martin,
and Rafferty 2009). In conditions of financial crisis, holders of liquid assets
will head to cash, causing all asset movements to converge downward; how-
ever, households with illiquid assets aspire to stay solvent: to continue living
in their house, work, pay the bills, and consume. In this fixity of households
lies potential for a new class of financial assets, so long as they are incorpo-
rated into their own form of capitalist calculation. If households could be so
incorporated, and default risk could be managed, the potential for capital is
enormous. Robert Shiller (2003: 9), 2013 Nobel laureate, stated the agenda
starkly: Far more important to the worlds economies than the stock mar-
kets are wage and salary incomes and other nonfinancial sources of liveli-
hood such as the economic value of our houses and apartments. This is
where the bulk of our wealth is found.
If finance means trading exposures to wealth, then the signal here is
that finance increasingly involves trading exposures to household wealth. In
this process, there are two related critical issues: the design of financial
assets that give exposure to households and the credible measurement of
those risks.
For the first, the design of financial assets, the derivative form is
important, for the key to new household-based financial assets is that they
involve exposure to the performance of (fixed) household assets, without

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trading the assets themselves. The financial vision is to imagine the multi-
ple dimensions of household wealth and expenditure that could be made
profitable: to create a spectrum of liquid financial market assets built on the
performance of (illiquid) household assets.
Central to this process has been the securitization of household pay-
ments: a process of bundling up payments on loans (for housing, education,
and vehicle, personal, and other credit), on insurance (for house, vehicle, and
health), on rent, and on utilities (for energy, water, and telephone) and selling
the income streams (the monthly payments) into global markets, but without
selling the underlying asset.12 These are called asset-backed securities (ABS);
those related specifically to mortgages are called mortgage-backed securities
(MBSs). They involve selling the liquid dimension of households exposures:
not the fixity (the house) but the mortgage payments, not the health care but
the health insurance payments, and not the student learning experience but
payments from post-student earnings. To paraphrase Hardt and Negri (2004),
capital is finding in labors households a veritable multitude of financial-
ized attributes around which securitized assets can be built.
Of these securitized household payments, MBSs are the best known.13
Their value crashed in the financial crisis due essentially to subprime lend-
ing, but since the financial crisis MBSs have returned as a central way of
funding housing loans and as a key financial asset in global markets. Indeed,
MBS purchases are now central to US Federal Reserve policies of quantita-
tive easing, raising the possibility that these liquid assets can be considered
integral to US and global monetary stability.14 Private ABS issuance is also
growing steadily after slumping in the context of the subprime crisis and
high household default risk (SIFMA 2013; Standard and Poors 2013, 2014).15
The precrisis process of securitization was not accidental, but it was
akin to a process of primitive accumulation: of finding extant contractual
household payments and opportunistically shaping them into securities no
matter the risk of default on those payments. Postcrisis, securitization is
being managed differently. The calculative project of finance as capital
involves the intentional management of household finance, akin to the
supervision of labor in the traditional workplace (a parallel we will return to).
The project involves the movement of more and more household payments
into fixed-period contractual relations, to ensure locked-in future payments
on which securities can be built and penalties for non- or even prepayment
that disturbs the valuation of securities.
The household creation and ongoing viability of the assets that go into
ABS can be understood as a process of coproduction. This, we suggest, is

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Bryan, Rafferty, and Jefferis Risk and Value 321

labors production within finance, albeit it involves people merely paying

household bills, unaware that they are building critical asset classes for secu-
rities.16 As Andrew Leyshon and Nigel Thrift (2007: 98) have termed it,
households provide the mundane sources of income [that] act as anchors to
which the rest of the financial system is attached. But production of Value
does not need to be conscious, especially under real subsumption. We earlier
quoted Marx in relation to the distinctive development of relative surplus
value and real subsumption, and it warrants reiteration in relation to finan-
cial asset production: This entire development of the productive forces of
socialized labor . . . takes the form of a productive power of capital. It does not
appear as a productive power of labor, or even of that part of it that is identi-
cal with capital. And least of all does it appear as the productive power either
of the individual worker or of the workers joined together in the process of
production (Marx [1867] 1976: 1024).
The second dimension of trading financial exposures to households is
the issue of risk management of these household-derived assets. While there
is a metaphor of households becoming entrepreneurs of themselves (Fou-
cault 1984), or even investors in themselves (Feher 2009), capitals require-
ment of households is that they continue to make ever-more expenditures
that are securitizable and that capital can know precisely the risks of each
households default on any of these payments. For each type of security,
financialized capital needs households to be tranched (grouped together in
terms of their risk characteristics) for the risk of a payment default, so that
the securities built on household payments can be properly graded and
priced. In effect, households are being subject to the same risk/return calcu-
lations that apply to capitals evaluation of itself. This, rather than workers
becoming rational accumulators as an individual capital might or expropri-
ated as in a form of financial enclosure, is the inherent momentum of labors
real subsumption to finance.

A Deleuzean Turn
This framing of labors real subsumption to finance resonates with the
insights of Gilles Deleuze. While Deleuze develops his analysis in relation to
consumption, he provides a means to understand new forms of production
in finance and processes outside the discourse of SNALT.17 Specifically,
Deleuze gives us access to the way capital imagines new, distinctive securi-
ties and the way particular bundles of household payments can be evaluated
for default risk.

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The Deleuzean focus on dividuation (the dividual, or disaggregated

attributes of the individual, rather than the aggregate individual) is central,
for it is often used to identify the way consumption patterns (and potentially
financial patterns) are managed (controlled) by capital.18 The most common
reference is to dividuation as a device of strategic marketing.19 Deleuze
(1992: 6) says that we are no longer [in] a capitalism for production but for
the product, which is to say, for being sold or marketed. Thus it is essentially
dispersive, and the factory has given way to the corporation.20
Information and data are central to new forms of social control. In
describing societies of control (as opposed to discipline), Deleuze addresses
data collection about aspects or attributes of individuals. It is, ironically,
framed in the language of money and banking.
In the societies of control . . . what is important is no longer either a signature
or a number, but a code: the code is a password, while on the other hand disci-
plinary societies are regulated by watchwords (as much from the point of view
of integration as from that of resistance). The numerical language of control is
made of codes that mark access to information, or reject it. We no longer find
ourselves dealing with the mass/individual pair. Individuals have become
dividuals, and masses, samples, data, markets, or banks. Perhaps it is
money that expresses the distinction between the two societies best, since dis-
cipline always referred back to minted money that locks gold in as numerical
standard, while control relates to floating rates of exchange, modulated accord-
ing to a rate established by a set of standard currencies. (Deleuze 1992: 5)

In financial terms, dividuation is analogous to a derivative on an individual

(who may be considered a household or a person)it defines and measures
attributes of an individual, and these attributes exist discretely from the
underlying individual from which they are derived.21 It describes the pro-
cess in which the assets and liabilities, incomes and expenditures of house-
holds are decomposed so as to identify household attributes that might be
discretely risk-evaluated, securitized, and tranched by credit rating agencies.
The process of tranching households for their financial risks might be seen
in terms of class dividuation with respect to risk and where a process of com-
mensuration created by tranching is the condition for describing class itself
with respect to risk.
Drawing on Deleuze and Guattari, Kevin D. Haggerty and Richard V.
Ericson (2000: 606) emphasize the potential for data to be gathered from
diverse sources and assembled in flexible, intentional ways: We are witness-
ing a convergence of what were once discrete surveillance systems to the

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Bryan, Rafferty, and Jefferis Risk and Value 323

point that we can now speak of an emerging surveillant assemblage. This

assemblage operates by abstracting human bodies from their territorial set-
tings and separating them into a series of discrete flows. These flows are
then reassembled into distinct data doubles which can be scrutinized and
targeted for intervention.
Haggerty and Ericsons focus is on surveillance, in the tradition of Jer-
emy Bentham, George Orwell, and Michel Foucault, and on consumption,
but it applies no less to finance, where a critical task is both to imagine new
assets to be built on households and to build aggregate profiles of the behav-
ior of these household-based assets for risk assessment. Big data, as they are
popularly called, become critical to finance, for herein lies the dividuated
information by which default risks of household types and different sorts of
contracts can be compiled. This might be thought of as capitals financial
version of Hardt and Negris (2004) multitude. Louise Amoore (2011)
refers in this context to data derivatives.
The collection and formulation of data to predict individual, house-
hold, and class financial stress and default is the management of workers-as-
(financialized)-capital: it is a decisive form of real subsumption.

Conclusion
In its 2005 Global Financial Stability Report, the International Monetary Fund
(IMF 2005: 5) famously declared that the household sector has increasingly
and more directly become the shock absorber of last resort in the financial
system. The neglected statement that immediately followed was, Given the
growing relevance of the household sector in assessing financial stability
and the incomplete and fragmented data on household balance sheets that is
currently available, national authorities and the financial services industry
should try to improve the collection and dissemination of such data. Accord-
ingly, we are seeing a link between labor (in the form of households), pro-
duction of financial assets, and risk in a financial depiction of value cre-
ation. It involves the calculation of averages and norms of household
performance, which are used by capital to construct calculations of risk-
adjusted rates of return. Labor is being incorporated into this process of pro-
duction of liquid financial assets, and similarly risk is incorporated into
labors creation of Value.
For households, this absorption of financial system risk is increasingly
just part of daily lifeincidental to consuming and paying billsin the way
that producing surplus value is thought incidental to wage labor. Further,

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324 The South Atlantic Quarterly April 2015

just as wage labor is an exchange of equivalents (labor power for a wage), so

household production of financial products is formally an exchange of
equivalents (payments for services). As wage labor generates capitals appro-
priation of surplus value, which converts to profits of commodity produc-
tion, so household contracts generate capitals transfer of financial risk,
which converts to profits of security production.
In wage labor, real subsumption means that workers become increas-
ingly part of capital. But they are not merely capital: they must work or starve,
and by this separation they also have both a social asymmetry with capital
and political agency to confront that asymmetry. There is a direct parallel in
relation to financial production. To the extent that households are not merely
capital, households can also be managed in ways that could not be applied to
capital. In a society of financialized control, household default risk is not a
pregiven, to be quantified for credit rating purposes. It can also be strategi-
cally minimized by and on behalf of capital, by legal and cultural means.
Keeping households on payment is therefore integral to real subsumption:
we see the growing emphasis in state policies of the responsibilization of
households to their fixed payment commitments, via changes in bankruptcy
laws and programs of financial literacy (Shamir 2008; Beggs, Bryan, and
Rafferty 2014) and the invocation of the imperative of a morality of contrac-
tual compliance (that people should keep paying the mortgage, even when
they have negative equity).22 Here, too, is both a social asymmetry and the
space of political agency in resisting this form of subsumption.
In identifying these new domains of subsumption, we are trying to
imagine a Marxism that can identify and give transcendent potency to what
Randy Martin (2008: 9) has called those spaces and affects [of labor] that
capital lives off of but remains indifferent to . . . [and that] allows us to pose
the question of value, including that of our own theoretical labors, when
these would be denied both a history and a futurity. We are here proposing
a new connection between labor, money, and value, one not found in Capital,
but surely consistent with its method, purpose, and intent.

Notes
This research was supported by funding from the Australian Research Council under grants
DP120101473 and FF110100043. We would like to recognize Duke University Press for its thor-
ough editorial work on this essay.
1 Indeed, in many postwar central banks, full employment was a specified goal of post-
war monetary policy. The parallels can be traced back much further, for example, to the
British Bank Charter Act of 1844 that coincided with the Factory Acts, seen by Marx to
be central to labors real subsumption to capital, in the form of relative surplus value,
and the associated rise of the joint stock company.

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Bryan, Rafferty, and Jefferis Risk and Value 325

2 Although neoclassical economic advocates of neoliberalism might suggest that valua-

tion is facilitated by markets being made transparent and freed from distortions, the
evidence is to the contrary.
3 Here, also, we affirm Randy Martins (2008) acknowledgment of the achievements of
cultural studies in identifying and valorizing the spaces that capital had not reached
especially in the creativities of community that could not be subsumed to a deadening
position in the workplace. Consumption, leisure, achieved their relative autonomy under
these circumstances as both emergent and residual forms with their attendant intellec-
tual, cultural and symbolic currencies. But as Martin (2008) so persuasively argues, in
identifying these spaces cultural studies anticipated conditions when consumption is
no longer outside of work, when production and reproduction commingle, and when cir-
culation and realization of value cannot await the arrival of their own future.
4 Anwar M. Shaikh and E. Ahmet Tonaks (1994) work to transform national accounts
into Marxian categories is a notable exception, albeit not one with lasting impact.
5 One of our concerns with the current debates about long-term tendencies in the rate of
profit is whether the profit being measured in 2015 is really the same category as the
one measured in 1955 or 1975. Indeed, with the development of derivative contracts that
can shift revenues temporally, spatially, and across asset classes, and the world of off-
shore finance, it is hard to discern profit, at a particular time and place, that is not
significantly a product of corporate strategy, including but not limited to tax minimiza-
tion strategies.
6 Marx identified that the value of labor power, as a socially defined subsistence measure,
is going to be different in different countries. An abstract unit of universal labor
required that differences need to be reconciled for a global measure of value:

In every country there is a certain average intensity of labor below which the labor for the
production of a commodity requires more than the socially necessary time, and there-
fore does not reckon as labor of normal quality. . . . The average intensity of labor changes
from country to country; here it is greater, there less. These national averages form a
scale, whose unit of measure is the average unit of universal labor. The more intense
national labor, therefore, as compared with the less intense, produces in the same time
more value, which expresses itself in more money. (Marx ([1867] 1976: 7012)

7 While Marx developed the concept of relative surplus value in the context of technologi-
cal change in the factory, and the process of making labor more productive as distinct
from extending its working hours, the wider meaning is clear: With the real subsump-
tion of labor under capital a complete revolution takes place in the mode of production
itself, in the productivity of labor, and in the relationwithin productionbetween the
capitalist and the worker, as also in the social relation between them ([1863] 1993: 107
8). We will develop the case shortly that this insight can now be extended such that a sub-
sumption within circulation has been occurring in relations between finance and labor.
8 See note 5.
9 This proposition is close to that of Andrew Leyshon and Nigel Thrift (2007), who talk
about the capitalization of almost everything in addressing finances growing reach
into the mundane expenditures of households.
10 While loans were issued in a calculative way (with risks shifted from mortgage origina-
tors to holders of mortgage-backed securities, or MBSs), borrowers were not anticipated
to comply with capitalist calculation: they were expected to default.

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11 Notably occurring with the emergence of attempts to conceptualize asset prices con-
ditioned or augmented by liquidity risk, this approach has become variously known
as the liquidity asset pricing model (Holmstrm and Tirole 2001; Acharya and Peder-
sen 2005; Jarrow, Protter, and Roch 2012). The initiative predates the financial crisis
but points to one technical path toward a calculative fix in a world of variable liquid-
ity. See, for example, FSB (Financial Stability Board) 2013 in relation to bringing over-
the-counter derivatives on exchange, Basel III in relation to banking practices, and
US proposals for arms-length credit ratings by the Securities and Exchange Com-
mission (SEC 2012).
12 To give just one example of the securitization of rent, hedge funds and private equity
firms have entered the real estate market, buying cheap, usually foreclosed houses and
selling securities backed by the rental income stream (Gottesdiener 2014).
13 MBSs date back to the 1930s and began to reemerge in the 1980s and then expand rap-
idly (Green and Wachter 2005; Pryke and Lee 1995).
14 As a central component of the US policy of quantitative easing, the Federal Reserve
continues to invest heavily in MBSs as a key to economic recovery. The Federal Reserve
now holds 40 percent of its $4 trillion asset portfolio in MBSs despite, at various stages
over the past five years, announcing an intention to sell off its exposure (Bernanke
2013). The Federal Reserve kept up large monthly purchases of MBSs as part of QE3
until the policy was terminated in October 2014. Since then, the policy has been to
keep purchasing new MBSs as those on the books expire. So MBS purchases remain
critical to ongoing economic growth.
15 In the United States, issuance of ABS increased from S140 billion in 2008 to $200
billion in 2012, albeit this figure is well short of the $750 billion in 2005 and 2006
(SIFMA 2013).
16 Being aware is not a condition of production. After all, the objective of conventional
production is the creation not of commodities but of surplus value, the process of which
most workers are unaware.
17 In Empire, Hardt and Negri (2000: 28) focus on biopower rather than dividuation in
their interpretation of societies of control.
18 At the base of dividuation is multiplicity replacing substance (Deleuze [1968] 1994). In
Marxian Value terms, the substance of value may perhaps be thought of as being both
homogenous and multiple. It is worth following this connection, at least a certain way,
for it takes us back to risk and finance.
19 In computer-based communication, attributes of the individual (the websites they
engage, their spend at particular sites, and even the content of their communications)
are being monitored and data collected on whatever information is required for a par-
ticular strategic purpose. When a database is mined for information on a persons buy-
ing, borrowing, leisure, viewing, and communication practices, the object of collection
is not the individual but the dividual.
20 In Marxian terms this could be framed as a shift in focus from the site of production
(C-P-C) to the totality of the circuit of industrial capital (M-C-P-C -M). For Deleuze,
and those who follow him, the emphasis has been on marketing (C-M), but not on
finance (M-M). For a Marxian framing, this analysis is in danger of shifting the value
relation from one of equivalence in exchange to one of distortion. This is not to deny
that capital manipulates consumption, just that it is a different order of issue from the

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Bryan, Rafferty, and Jefferis Risk and Value 327

one addressed here. We may say that the employment contract is unfair because the
employer holds the power, but Marx was emphatic that it be understood as a voluntary
and equivalent exchange, of labor power for wages. And therein lies the basis of surplus
value: that the employer buys commodity labor power but acquires control of value-
creating labor (Marx [1867] 1976: chap. 6).
21 Like a derivative, dividuation has both a flexibility and fluidity of form by being unen-
cumbered by the meanings that attach to the underlying, aggregated individual.
22 The International Monetary Fund (IMF 2005: 5) also emphasizes in this context the
need for household responsibilization and financial literacy:

Overall, the transfer of risk from the banking sector to nonbanking sectors, including
the household sector, appears to have enhanced the resiliency and stability of the finan-
cial systemmainly by widely dispersing financial risks, including throughout the
household sector. Policymakers may now need to take the next logical step by helping
households to improve on their financial education and to obtain quality advice and
products necessary to manage their financial affairs. In fact, there is a growing consen-
sus, in both the public sector and the financial services industry, on the importance of
promoting the financial education of households. Clearly, households will remain
responsible for their investment decisions.

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