Faster computers and speculative capital

Today's (4/14/06) Wall Street Journal reports more evidence of the connection between speculative capital and electronics. An article titled "Supercomputers Speed Up Game" by Edward Taylor, Aaron Lucchetti and Alistair Macdonald reports on how faster computers are contributing the swelling of automated stock trades and consolidation among the world's stock exchanges.

The use of computers in trading of course is nothing new. In fact, modern speculative capital (post-Bretton Woods, started with the advent of money markets) only exists because of networked computers. But the march of technology -- faster, smaller, cheaper -- continually changes the game. The trend allows smaller players into the game:

Buyers and sellers have been matching up electronically since the 1980s. But an increase in computer capacity readily available to even small hedge funds -- investment pools for institutional investors and wealthy individuals -- has changed the game. "With four people and 50 computers that have the power roughly equivalent to a Cray supercomputer, we can achieve what someone else would need one trader and 100 analysts to accomplish," says Jonathan Kinlay, chief executive of Proteom Capital Management Ltd., a Bermuda-based hedge fund with about $100 million under management.

Nasser Saber, in his excellent and unique book Speculative Capital described how speculative capital tends to more and faster trades to take advantage of increasingly smaller price differences in different markets or (what amounts to the same thing) different derivative configurations, the practice called arbitrage. Proteom, mentioned above, exploits differences in the S&P 500 Index and the individual stocks that make up the index (if I am reading the article correctly):

Proteom uses computers to execute complex trading strategies based mainly on stocks in the Standard & Poor's 500-stock index and their tendency to rise or fall sharply and quickly, a measure known as volatility.

Testifying as the importance in electronics in this practice:

"This business could not have existed 10 years ago [because] the computational power was not available," Mr. Kinlay adds. "The execution of a trade, the analysis of the live data, the updating of databases and the construction of portfolios of stocks are all automated."

The technology has also reduced trading transaction costs, make more trades financially feasible. The article cites the growth in transaction volume at many exchanges, as well as the growth in the share prices of the exchanges themselves.

Of course, one good turn deserves another, driving the process forward: "'There is an arms race [among exchanges] to be the fastest,' says Steve Swanson, president of brokerage firm Automated Trading Desk LLC."

Here's a link to a paper I did on speculative capital.

jd

Global Studies Association conference 2006

The Global Studies Association will be having its North American conference on May 12-14, 2006 at DePaul University in Chicago. The theme of this year's conference is "Alternative globalizations". The International Studies Program at DePaul is co-sponsoring the conference.

For more information see the conference web site.

jd

Draft of a project idea

The world is in a bad [okay, need to clarify] state. An effective effort to change this state requires an accurate assessment of the problem. While current responses have been very creative organizationally [network form], the response has suffered from a theoretical poverty [in terms of fundamental processes at work, nature of process, where we are in the process]. The absence of a clear, coherent understanding of historical roots and current state has resulted in a scattered and generally ineffective response.

"Globalization" as a total umbrella of current period.

Confusion over what "globalization" is. Is it something different? If not, old strategies and tactics should work. Is it something new? Then new strategies and tactics are required.

If it is something new, what is it?

The answer to this last question should determine the political response.

-- globalization as something distinct is in dispute
-- idea of stages seems to be in some dispute
-- [proceed on assumption that there are stages] determining an appropriate political response requires an accurate assessment of current stage. If globalization is a distinct stage, it requires a distinct political response.

Research will explore concept of globalization as a stage, by exploring one aspect of globalization -- speculative capital -- and its relationship to the environment.

-- capital is a social relation -- describes a particular kind of relationship between people in act of production/reproduction.
-- through production and reproduction, this relationship extends to the environment as foundation of economy; also source of well-being (reproduction)

Look at three contemporary financial structures.

First, examine these structures

(a) in terms of infrastructure necessary to make them possible
(b) in terms of demands, needs, opportunities that make them possible

Are these structures possible under other conditions? Or, if there are historical precedents, how are they the same, and how different, if at all? So could they arise in their current form under other conditions, or are they specific to current conditions? If they cannot arise under other conditions, then they are evidence of something distinctive about Capital today [part of a general category I call speculative capital] and therefore globalization [which is capitalism today].

[Use Carolyn Merchant's "ecological revolutions" as a framework, although will need to fill out areas where I think that it is lacking. use other environmental historians, e.g. William Cronon. Basic concept is that changes in mode of production (although will need to break this into smalled chunks, to look at at level of stages of capitalism) result in different ecologies]

Second, examine the financial structures

(a) in terms of property ownership
(b) connection between immediate participants [investors mainly] and the environment; agents of the participants and the environment.

What are the features of these relationships to the environment? [These relationships are mediated throug property relations.] Are these relations to Nature the same as in the past? If they are similar, in what ways? If not, how are they different? If the relationships are different, that is, they describe a different ecology, how do we characterize it based on the cases? [Or, to use "ecology" in a more traditional or narrow way, how are the ecosystems different?]

If the relationships are different, they are evidence again of something distinctive about capital today.


jd

P2P Foundation

Here are some links to The Foundation for Peer-to-Peer Alternatives resources:

The P2P Wiki includes sections of the foundation itself (background, statement of purpose, links); topics and projects; and various P2P resources.

The P2P Foundation blog.

The P2P Foundation newsletter.

jd

Claypool-Stroger race follow-up

A brief follow-up on yesterday's post -- Forrest Claypool conceded the Cook County Board of Commissioners president race to John Stroger yesterday afternoon when it became clear that, even with many ballots still uncounted, there was no way that Claypool could win.

According to the Chicago Sun-Times, Claypool acknowledged the strength of the south and westside black vote in re-electing Stroger, even though it is unlikely that Stroger, bedridden with a stroke and with possible paralysis and brain damage, will be able to actually continue to serve as board president. Per the Sun-Times, "If Stroger can't make it, the county's 80 Democratic committeemen will pick the new nominee. And it is those ward bosses, Claypool said, who led Stroger to victory."

In another wrinkle on Chicago machine politics, according to the Sun-Times:

Should Stroger be unable to run the $3 billion county government through 2010, it is expected that a candidate from Chicago's African-American community would be selected to fill his spot... Mayor Daley and other elected officials are expected to press for a black candidate so as not to antagonize black voters before next year's mayoral primary.

jd

The Claypool-Stroger race

I did a little bit of work on the Forrest Claypool campaign for Cook County (Illinois) board president. Chicago is in Cook County; Cook County is the second largest county by population in the U.S. (after Los Angeles). The board president is the chief executive of a $3 billion county government. The county commission board president also automatically chairs the Cook County Forest Preserve District board, which controls over 10% of county land set aside as natural and recreational space.

Cook County voters went to the polls yesterday (3/21) to vote in the Democratic Party primary, of which the most controversial contest was for the county board president seat. John Stroger, the incumbent was challenged by a county commissioner, Forrest Claypool, seen as a reformer. The race has indeed been close -- as of this writing, the Cook County Board of Elections suspended vote counting last night, with about 15 percent of the precincts uncounted. Stroger has a few percentage point lead.

I have been trying to what the race means. My initial interest in the race was because of the Forest Preserve. The preserve covers some 68,000 acres of woods, rivers, prairie, lakes, trails, soccer and football fields and picnic areas. The preserve forms a green belt around Chicago. The preserve is a wonderful resource, endangered by neglect and mismanagement, and in need of defense and protection. The forest preserve was the reason I got involved in the Sierra Club's work on the Claypool campaign.

Historically, the preserve has been a Democratic Party patronage job dumping ground, one of the resources that the machine could use to sustain its army of ward bosses, committeemen and precinct captains. In a writeup I did on the Forest Preserve, I commented that the old machine system worked, more or less, in an era of expanding U.S. economic power. In spite of the waste and corruption, the machine was able to deliver services. But in the environment of globalization and its program of neoliberalism, the foundation of the machine system has been undermined. While the machine tries to operate as normal, the revenues are not there to both grease the machine and deliver services, and services suffer as a result. The Forest Preserve is a case in point, as a damning study by the public interest group Friends of the Forest Preserve describes in dismal detail. The Cook County hospital system and juvenile justice system also stand out as failures. Claypool made these failures regular themes of his campaign to unseat Stroger.

The Claypool-Stroger race expresses a deep political fracture. John Stroger, 76 years old, represents the old Chicago Democratic Party machine. Stroger started working with the southside Democratic Party in 1953 -- before the first Mayor Daley was elected. Claypool represents a different kind of Democrat, a kind of professional manager Democrat who has promised to "reform" county government. As reported in the New York Times, "'What's at stake here is shifting the balance of power from the regular Democrats,' said John P. Pelissero, a political science professor at Loyola University Chicago. 'Cook County sort of represents the last bastion of the old guard of Chicago politics and where they've hunkered down.'" ("A Stroke Adds to Uncertainty in Illinois Race", 3/18/06). It is unlikely that Stroger, a diabetic and cancer-survivor who suffered a stroke last week and has been bedridden since, will be able to run in the November election. In Cook County it is a forgone conclusion that the Democratic candidate will win, so the real battle is who the Democratic Party will run for any seat. If Stroger wins the primary, and as expected, drops out of the race, 80 Democratic Party committeemen -- the control mechanism of the political machine -- will decide who will be on the party ticket in November. The race is really one between Claypool and the machine.

While the function of the party machine is to keep itself in power, it does this by delivering votes for the Democratic Party. Stroger's power comes from the fact that he can deliver southside votes for Democrats. Elected party positions city-wide, county-wide, state-level and up are beholden to his power. (One irony is that the machine at the same time has a chokehold on the black voters of Chicago, not really representing their interests, but at the same time preventing any significant political response.) The Chicago vote is a vital resource for the Democratic Party in Illinois and nationally, so the party leadership by and large came out to support Stroger. Former president Bill Clinton recorded a radio spot for Stroger. Illinois Senator Dick Durbin endorsed Stroger in the final days of the campaign. Mayor Daley endorsed Stroger. From private conversations though, the support is not as solid as it appears. With no love lost between them and Stroger, Rep. Jesse Jackson, Jr. and Senator Barack Obama had their apparatuses help Claypool behind the scenes. Mayor Daley may face a significant challenge in his 2007 re-election bid; he will need Stroger's support. So he lukewarmly endorsed Stroger, although refused to attack his former chief-of-staff Claypool. Other important Daley supporters like Rep. Rahm Emanuel and David Axelrod supported Claypool.

This struggle within the Party represents a deeper shift though. As the Chicago Tribune pointed out in its editorial endorsing Claypool, "correcting all that is wrong demands new and aggressive stewardship in an era when Washington and Springfield cannot bankroll Cook County's slipshod ways... It's been easier for Stroger to complain that Washington and Springfield don't send him enough dollars. The time of easy money from Somewhere Else is over." (Chicago Tribune, 2/19/06). The old school solution is more tax money; Claypool acknowledges and accepts the new neoliberal climate of starved public sector.

Claypool has promised no tax increases to pay for cleaning up the current county mess. As head of the Chicago Park District under the second Mayor Daley, Claypool undertook a program of privatizing Park District functions, as well as professionalizing staff and re-organizing the district to try and break it out of the patronage system and push more decision-making to the individual park managers. He achieved some success and recognition in cleaning up the parks and revitalizing them. Claypool's work was part of a broader challenge to save Chicago from industrial, Detroitesque oblivion and transform it into "Global Chicago":

Other arms of city government are delivering impressively on the civic campaign to give Chicago the amenities and services it needs to compete in the global arena. The park district, once a patronage pit, has become a professional service that has literally greened the city.

...

Daley persuaded the state legislature to give him control over the park district in 1993 and the school system in 1995. He created a corporate style of management in each, with a board and a chief executive, and appointed two of his best managers, Forrest Claypool at the park district and Paul Vallas at the school system. Neither had experience in their new areas, but both were former city hall officials with good track records and, more important, good relations with the mayor.

...

Both agencies underwent a thorough turnover in top management, with Claypool and Vallas hiring top staff with strong personal loyalties to the two executives. They quickly erased the two systems' budget deficits, partially through downsizing, efficient management, and contracting out. Between 1993 and 1997, Claypool cut the park district's total staff by 27 percent, from 4,938 persons to 3,577... The park district increased its spending on two core functions, recreation and landscaping, from 14 percent to 29 percent of its budget. (Richard Longworth, "The Political City" in Global Chicago edited by Charles Madigan, Chicago: University of Illinois Press, p. 80)

In this light, Claypool is the candidate of globalization writ in the fine print of local politics. He represents the kind of candidate that Democrats need, as a party of globalized Capital, to take up the flag of a kinder and gentler neoliberalism. The "no help from Washington or Springfield" is part of the broader fallout of globalization: polarization of wealth, privatization ("contracting out") of public services, the contingentization of work, unleashing the market etc. etc. Claypool is a candidate to make government work -- to make globalization work -- within these accepted new parameters. The Democratic Party's dilemma is that it wants the kind of guarantees that the Stroger machine can deliver, but at the same time needs to re-cast itself in the mold of candidates like Claypool.

Unions supported Stroger because of the jobs Claypool eliminated while at the park district. For the most part, Chicago city unions seem to be hopelessly wandering into the future gazing longingly in their rear-view mirror. Here is a problem of half-measures and false choices. Assuming that the Chicago Park District was better off for Claypool's changes, one has to ask, how is this possible? Why didn't the unions ensure that the parks were clean, beautiful and served the people of Chicago? How is it that fewer and better-trained staff, privatized services, and distribution of management responsibility can deliver better services? One possible answer is that there is nothing holy about unions -- trade unions historically have been an apparatus of worker control, not worker liberation. This is not to say that organizing is hopeless, or not desirable. We have been at this crossroads for some time. How do we have a revolution in the trade union movement so they become organizations of liberation, where members desire to serve not "the public" but their community? And likewise, a revolution in every organization that presents a false choice of old programs and tactics versus worse choices? In the Claypool-Stroger campaign, the false choice is between the old machine where the incentive is the patronage job, versus neo-liberalism, where the incentive is a shrinking paycheck and the terror of unemeployment. A real choice would be where the incentive is joy -- the joy of service without fear no food, no house, no heat, no health care, no education.

In another light, Claypool is an agent of creative destruction -- the clearing the blockage of sclerotic machine politics that mires any hope of change in the muck of graft and patronage. Claypool is the candidate of network politics, the atomization of politics into temporary intersections of interests, of technocratic meritocracy, a dismantler and clearer-away and fixer-upper. And in this light, Claypool is an agent of a kind of progress. The old system cannot be sustained; it is collapsing under its own top-heavy weight. So how will the collapse be managed, to what final end? If Claypool wins, and pushes forward his program, some political space will be opened up for greater maneuvering and more creative and humane solutions. I think.

Whether the process can be fought to its conclusion is to be determined.

jd

Complexity and Goethean science

From Daniel Wahl's "Zarte Empirie: Goethean Science as a Way of Knowledge" (Janus Head 8(1), 2005):

It is in the process-orientated understanding of the relationship between the whole and the parts that Goethean science and complexity theory meet. Both sciences understand the cyclical rather than linear causality that makes the part and the whole depend on each other in the symbiotic relationships of co-evolution. Both Goethean science and complexity theory are holistic sciences as they conceive wholes as being more than the sum of their parts. Both are paying attention to the interactions and dynamics of the whole and focus more on quality than quantity.