A  short  note  on  dialectics  and  abstraction

While there is general agreement that Marx’s dialectical method emerged from his study and critique of Georg Wilhelm Hegel’s dialectical idealism (1964 [1807]) via Ludwig Feuerbach’s materialism (Feuerbach, 1972 [1839]), there is great debate as to its precise content and import. Since this is not a thesis in philosophy, in what follows I rely considerably upon the understanding of Marx’s use of dialectics and abstraction as presented by Bertell Ollman (2003).

Dialectical thinking replaces the study of ‘things-in-themselves’ with that of things which are inherently understood to also be part of both processes and relations. A process contains both its past and its future; relations contain within themselves their ties to other relations. This is important for the present study for a number of reasons. First, financial capital is not understood in this thesis as a mass of wealth, or increased profits held in the form of financial assets by a bank. Rather

3 It is important to note that this neglects subsequent attempts even within the positivist tradition itself to nuance Popperian falsification in the wake of the Duhem-Quine problem (Lakatos, 1970), which states that no hypothesis can be definitively falsified since it must be tested in conjunction with auxiliary conditions. This is aside from developments outside of the positivist tradition (Kuhn, 1962).

30 it is seen as process and relation simultaneously. It is both an integral part of the ceaseless process of accumulation, its form in constant flux following the requirements of continued accumulation, and an expression of the constantly evolving relationship both between fractions of the capitalist class and between capital and labour more generally. In this understanding, financial capital can not be located within simple dichotomies between productive and unproductive, or between industrialists and rentiers.

As both a method of inquiry and exposition, dialectics does not seek to go back to ‘first causes’ for the purposes of predictive power. Much of the critical scholarship on financialisation seeks to root the increasing profitability of the financial sector in such policy-induced changes as increased shareholder value orientation (Lazonick & O’Sullivan, 2000) or the impacts of pension privatisation (Toporowski, 2000). While valuing such efforts, a dialectical approach recommends that ‘causes’ should be understood in the specific context from which they emerged (often that of the United States in this case), and might themselves have been immanent in the conditions which preceded their emergence. Where complex social systems are the subject matter of inquiry it is more powerful to consider numerous factors and relationships that may determine (or over-determine) the phenomena of interest. Description of these factors and clarification of their inter-relationships provides significant insight without artificially introducing simple causality.

Against those who would argue that financialisation can only be a temporary cyclical phenomenon, dialectics offers the possibility that the quantitative change which characterises cyclical phenomenon can, at a certain point, result in qualitative systemic transformation. Michael Williams argues that supercession is latent in cyclical development, pointing to the “… imperative to investigate the conditions under which systemic transformation might occur” (2001, p. 567). This points to the need to examine the underlying changes in social relations which have emerged from a succession of liberalisation measures to examine at what point a systemic transformation in capitalism might occur. This transformation is discussed at a more general level in relation to advanced capitalist economies in chapters three and four, and in more detail in the Mexican case in chapters six and seven.

Dialectical thought emphasises that the interconnections between different relations of the capitalist system must be understood in their interdependence with all

31 other relations. This interdependence is the ‘whole’ or the ‘totality’ in which the relations must be conceptualised. The totality itself is, of course, not knowable, but it expresses itself through its constituent relations. Applied to the present analysis, this suggests that transformation in financial capital in one context must be placed within an understanding of changes in the broader capitalist system. This commends a theorisation of financialisation in the context of the world market, which will be discussed subsequently. Importantly, awareness of the whole does not imply that there is homogeneity in relations and processes; in unity there is distinction. While this study posits an underlying essence of financialisation, it acknowledges differences in its manifestations, since they are reflected and refracted through different institutional contexts.

It is in this spirit that the case study country, Mexico, is analysed in relation to the broader unfolding of financialisation. This approach enriches the understanding of what is happening in Mexico, but equally an understanding of what is happening in Mexico deepens the understanding of the broader process. Philip McMichael describes this method as ‘incorporated comparison', "… in which inter-related instances are integral to, and define, the general historical process ... the particulars directly realise the general..." (1990, p. 389) If financialisation is understood as a process emerging out of the productive and financial integration of emerging capitalist societies and successive and ever more deeply penetrating rounds of the liberalisation of capital, then the Mexican experience should be seen as a 'moment' of this process, as the particular with the power to reveal the general.

Abstraction, as defined by Ollman (2003), is both a verb for the mental activity of sub-dividing the world in to manageable parts in order to better understand it, and a noun representing the results of this process of sub-division.

Marx’s method starts from the ‘imagined concrete’, that is the given world of phenomenal forms, and proceeds through abstraction to capture the essential relations which explain these forms, ending back at the ‘thought concrete’, that is how the whole is understood in the mind. The process of abstraction, of setting the boundaries of investigation, is critical in determining which relations will be emphasised and how they will be understood.

As dialectics require that social phenomena be understood as dynamic, that change is a part of what things are, abstraction serves to isolate particular

temporally-32 isolated moments or spatially-isolated forms. This is in stark contradiction to the understanding in neoclassical economics that social phenomena always and everywhere tend towards an equilibrium.

Ollman describes three modes of abstraction:

-­‐ Extension – abstracting boundaries in space and time;

-­‐ Generality – abstracting from most specific (the person) to the most general characteristics (natural world); and

-­‐ Vantage point – abstracting to the viewpoint of different places within a relation.

In this work, spatial abstraction will by necessity shift from nation-states to the world market and then back to a chosen nation-state within that world market, its analysis reflecting what was learned at the global boundary. The contemporary Mexican experience is understood as a moment of the global unfolding of financialisation.

The temporal boundary of primary interest is the last decade in emerging-capitalist countries, but to understand this period, it will be necessary to extend the analysis to the period of post-war capitalism. Abstraction in the level of generality will be limited primarily to Ollman’s level two, that is “… what is general to people, their activities, and products because they exist and function within modern capitalism.”

(2003, p. 88) Some space, particularly in chapter seven, is devoted to level one, the influence of particular individuals on the relations of interest. Abstraction to the differing vantage points of non-financial corporations, financial firms and households will be a central theme of this work.