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Documente Cultură
Turbulent Worlds
Financial Markets and Environmental Crisis
Melinda Cooper
Abstract
Focusing on the speculative methodologies used to generate models of the
financial and meteorological future, this article develops a series of theses
on the evental and atmospheric quality of contemporary power. What is
at stake in the circulation of capital today, I argue, is not so much the
exchange of equivalents as the universal transmutability of fluctutation.
Whether we are dealing with the turbulence of world financial markets or
that of complex earth systems, the non-dialectical relation can itself be
extracted, recombined and liquefied, as it were, in a dimension of its own.
In the same way that financial derivatives price the variable relation
between and across national currencies, weather derivatives now make it
possible to issue contracts on the unknowable contingencies embedded in
complex atmospheric relations. This reconfiguration of value requires a
thorough rethinking of classical sociological conceptions of debt, promise
and political violence.
Key words
biopolitics debt
environmental politics
financial markets
imperialism
Worlds in Transition
HE INTEGRATION of financial markets in the early 1970s initiated
a period of enduring and structural turbulence in world economic
affairs. When the convertibility of the dollar against gold was
replaced by floating and volatile exchange rates, the unpredictable was, of
necessity, factored into the calculus of world economic futures. Henceforth
turbulence could not be prevented; it could only be managed. The abolition
of national controls over exchange rates has not, however, signalled the
demise of imperial power as such. Rather it has engendered a qualitatively
Theory, Culture & Society 2010 (SAGE, Los Angeles, London, New Delhi, and Singapore),
Vol. 27(23): 167190
DOI: 10.1177/0263276409358727
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of the US economy from the turbulence of world financial flows, calling into
question the willingness of global investors to sustain the liquidity of Wall
Street capital markets. Even a former chief economist of the International
Monetary Fund (IMF) has remarked that the US has experienced the kind
of precipitous decline in liquidity, credit and employment that, in recent
history, was seen only in emerging market crises (Johnson, 2009). The turbulence that could once be safely exported to the peripheries of the world
economy has now returned to haunt the heartland. For the moment, the US
is protected by the singular privilege of paying its foreign debts in its own
currency, which it is able to create at will. Nevertheless, a turning point has
been reached, not only with respect to the immunity of the US domestic
economy but also its continuing sustainability as world financial power. The
2008 report of the National Intelligence Council, Global Trends 2025: A
Transformed World, expresses concern that the US is currently relying on
an exorbitant privilege which may at some point cease to exist (National
Intelligence Council, 2008).
Doubling but not quite coinciding with the financial crisis is the
growing consensus within the US political and financial class that global
environmental risk (of which climate change has become the key marker)
is not something that can be indefinitely exported beyond American borders.
However tenuous its precise connection with the phenomenon of global
warming, Hurricane Katrina can be singled out as the turning point when
climate change began to be treated seriously as a problem of imperial
management. The change in tack had as much (if not more) to do with the
growing awareness of the geopolitical costs of oil dependence as any sudden
environmentalist epiphany.
In response to these intimations of crisis, an emerging policy discourse
associated with centrist think-tanks such as the Center for a New American
Security (CNAS) and the Center for American Progress contends that
America has no choice but to revisit the kind of grand strategy initiated in
the aftermath of the Second World War. This would not mean a return to
Cold War military thinking but the invention of a new grand strategy capable
of moving beyond the oil-centric geopolitics of the Bush era (see for example
Brimley et al., 2008; Burke and Parthemore, 2008). The problem
confronting these strategists is how to navigate the US-dollar denominated
world through the extreme turbulence of financial, climate and energy crisis.
Will North American power as world power survive the end of oil? Will the
US be able to maintain its exorbitant privilege that of issuing the worlds
reserve currency in the face of geopolitical alignments between China,
Russia, Africa and the Middle East? All of these questions are connected
in more or less perverse ways to the increasingly visible effects of climate
change. As ice caps melt, formerly un-navigable ocean routes and deep-sea
ocean beds have been opened up to imperial conquest. The prospect of
climate change and dwindling fossil fuel supplies has intensified rather than
diminished territorial struggles over oil reserves and transportation routes.
At the same time, new spaces of conquest have been opened up this time,
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no longer the recesses of the earth and sea but the flow space of hydrological
currents linking ocean, freshwater, atmosphere and landmass evaporation.
The CNAS has recently launched a project on Americas role as protector
of the global commons a problematic that has historically been closely
connected to efforts to expand the American frontier.2 It defines the global
commons as the air, sea and skies the space of atmospheric circulation in
which struggles over new and old energy sources are likely to be played out.
It is not only the actual space of atmospheric circulation that the US aspires
to dominate, however, but also and more importantly, the abstract, topological space of the securitized risk markets, in which weather turbulence
plays an increasingly significant role. It is a measure of the growing political imbrication of climate, energy and economic futures that some of the
most far-reaching of current proposals for coping with climate change are
being developed in the financial sector. The Stern Review, sponsored by the
UK Treasury in 2006, promotes financial solutions to climate change not
only as a means of funding the transition from carbon-based to alternative
fuels but also as a lucrative business opportunity in itself (Stern, 2006). The
market for weather risk management extends beyond carbon trading to
include a whole spectrum of novel financial instruments designed to price
and manage the risks associated with extreme weather events, natural catastrophes and unexpected temperature fluctuations (Mills, 2008). The worlds
major weather risk markets are currently housed in the United States the
expansion of these markets would therefore seem to offer one possible exit
strategy from the liabilities of the dollaroil nexus.
The convergence of US strategic, geopolitical and financial interests
in an overarching logistics of turbulence goes some way to explaining the
recent volte-face of the US political class on the question of international
negotiations on climate change. In the build-up to the Copenhagen conference of December 2009, which is set to revise the Kyoto protocol for 2012,
the US was looking to establish its exceptional position in world politics not
by absenting itself from the negotiating table but rather by imposing itself
as world leader in the commercial and political opportunities offered by
climate change. Under the rubric of climate change security, an emerging
policy discourse insists on the necessity of responding to financial, ecological and energy crisis in the context of an integrated grand strategy of
imperial power.
My intent in this article is not to offer any predictions about the
evolving fortunes of American imperial power. Nor am I interested in adding
to the vast futurological literature on the combined financial, climate and
energy crises. I would like to focus instead on the specific futures methodology that has come to inform strategic planning in each of these domains.
What I am referring to here is scenario planning, a forecasting technique
which attempts to divine not this or that aspect of the future but the multiple
future worlds attendant on alternative actions in the present. In its
globalizing scope, scenario planning might be characterized as the practical, methodological counterpart to the power relations described by world
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unfold (2007: 145). The scenario method has been particularly influential
in the United States. Post-9/11, it has become standard procedure in
disaster planning and response, where it serves as a model for simulation
exercises designed to prepare for the unexpected crisis event. It is also the
method of choice for public administrations, private think-tanks and
academic research institutes interested in shaping the future of strategic
and economic decisions around energy, foreign policy and the natural environment. The National Intelligence Council publishes a scenario-based
report every four years, which offers three alternative perspectives on the
evolution of key global trends (geopolitical, strategic and economic) over the
following 15 years. As explained on the website:
Scenarios are plausible alternative views about how the future may develop.
They differ from forecasting in that they do not attempt to predict the future
based on linear extrapolations of the past. Scenarios do not seek to project
the future. Instead, they focus on the identification of discontinuities and how
these could potentially develop as a set over time.7
investigation of emerging financial markets in environmental, weatherrelated and climate-indexed products, before reflecting on the geopolitical
ambitions that function as their mirror image.
Trading Turbulence Climate Change Futures and Weather
Derivatives
The last decade has seen a rapid expansion of financial innovations
seeking to couple the economic risks of climate change with the riskdistributive capacities of the liberalized capital markets. In recent years,
the market for weather risk management has expanded beyond the more
familiar cap-and-trade credits to include a whole spectrum of novel financial instruments designed to price and manage the risks associated with
extreme weather events, natural catastrophes and unexpected turbulence.
The latter include catastrophe bonds, securities that manage the risks of
improbable but catastrophic natural events, and environmental derivatives,
financial instruments that respond to unpredictable fluctuation in the
weather. Initially, most weather contracts were designed to meet the needs
of a particular buyer and seller and were sold over the counter (OTC)
through large investment banks and insurance companies. As the market
has grown, there has been a trend toward the standardization of products
that are now traded like other derivatives through the Chicago Climate
Exchange and the Chicago Mercantile Exchange, which list and trade
futures and options on temperature indices for dozens of cities in the US,
Europe and Japan. As banks, insurance houses and hedge funds have
moved into weather products over the past five years, the market has
undergone a rapid expansion, to the point that the World Bank is now
pushing developing countries to adopt them as a way of managing climate
change risk. Interestingly, while the viability of derivatives as a form of
unregulated transnational money has come seriously into question over the
last year, trading in weather derivatives has been one of the few markets
to survive the credit crunch relatively unscathed.
The growth in markets for environmental risk is a direct consequence
of the internal transformations of the insurance industry over the past few
decades. The disintermediation of banking, finance and insurance in the
late 1980s and 1990s meant that insurance brokers were now able to
repackage and sell risk in the form of tradable securities. As the capital
markets became a legitimate sphere of risk-hedging for insurance companies, the worlds major reinsurers (Swiss Re, Munich Re, Allianz) began to
replace their formerly cautious investment strategies with newly designed
insurance-linked securities such as catastrophe bonds and weather derivatives (Sigma, 2005, 2006). While weather-related risk had once been
covered through indirect means, such as property insurance, the contingencies of the weather could now be directly hedged and traded in the capital
markets. The curious effect is that climate change and the critical or
singular events it may engender has become a speculative opportunity
like any other in a market hungry for critical events.
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Other products again are structured around physical flows (streamflow and
wind) and critical change-of-state events such as precipitation (snow, frost,
rain). Each contract involves a buyer and a seller who agree on the weather
index on which the contract is to be based, the time period and the index
threshold or strike. In a temperature-based weather swap, for example, two
companies who face opposite weather risks can enter into a contract, with
payments falling to one or the other party depending on whether the temperature moves above or below a certain threshold; while in weather-based call
and put options, the buyer receives a payment if the average temperature
over a given period falls above or below the strike threshold.13
Derivatives are contracts that allow a business to hedge against the
occurrence of unpredictable, adverse events ranging from exchange rate
fluctuation to political turmoil and extreme weather. Traded in the financial
markets, derivatives also allow investors to wager on the relative chances
of the derivatives contract itself, effectively transforming the risk-hedging
contract into an instrument of speculation. Janus-faced, derivatives merge
the actuarial and the speculative, circulating as hedging instruments and
wagers at one and the same time. A recently published manual for the derivatives trader urges the reader to adapt to the event time of the financial
markets (Webb, 2006: 910). What follows is a series of chapters introducing the investor to the complex menu of events now available for trading.
Volatile weather, exchange rate fluctuation, a turbulent political climate
all of these provide occasions for entering into a derivatives contract. So too
do the systemic catastrophe risks from financial crisis to hurricanes
which materialize once a certain, critical threshold of turbulence has been
crossed. Where the neoclassical economist discards the unexpected event
from his calculus of the future, the trader in derivatives focuses on the
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fluctuation itself and the critical points at which an unexpected event might
happen to occur. Derivatives-trading demands a particular kind of relationship to the future, one that might be characterized as speculative, as
opposed to predictive, expectation. Since the price assigned to the future is
itself a function of the collective expectations of all traders, no single
expectation can hope to offer a rational forecast.14
Prior to 1980, the bulk of derivatives trading was in commodity-related
futures allowing buyers to hedge against future price changes in a given
storable asset such as wheat or cotton, and each of these categories was
traded separately. Forwards, futures and options are all derivatives contracts
that speculate on the price volatilities of storable commodities, with differing degrees of abstraction. From the 1980s, however, these contracts were
rapidly superseded by derivative products that could be applied to nonstorable products such as financial instruments and repackaged among
themselves. Not only did futures markets begin to be dominated by transactions on financial instruments but also new types of derivative contracts
such as swaps emerged that were from the outset financially oriented and
could not be understood through the discourse on commodity derivatives
(Bryan and Rafferty, 2006: 48). In the process, it is the very relationship
between the measurable substance of the commodity its stored value
and the event-related nature of price that is reworked: where traditional
derivatives contracts traded in the future prices of commodities, financial
derivatives trade in futures of futures, turning promise itself into the means
and ends of accumulation.
In this regard, derivatives pose a number of challenges to orthodox
theories of money. If money is time, then time is no longer that which
measures the movement of commodities and the labour invested in them.
In what are called the money markets, money mediates itself and time
relates to time, becoming a function of its own fluctuation (LiPuma and Lee,
2004: 118). Thus money must be conceived within a logic of the event rather
than a dialectic of form, limit and measure (such as Hegel delineated in his
Science of Logic and Marx famously reversed in his derivation of the
commodity form). Interestingly this returns us to the very early work of Marx
the Marx who in his doctoral thesis on Lucretius referred to the clinamen
as the accidens of the accidens, an accident constitutive of entire worlds
(1975: 63, 51).
Derivatives challenge the idea that the circulation of money must be
anchored in some fundamental, underlying value, even of a conventional
kind. Indeed what derivatives trade in, according to Bryan and Rafferty, is
the very contestability of fundamental value.15 We cannot predict the unfolding of climate change and its effect on prices, even in the short term. Its
parameters of variation are unknowable. Yet we can create a derivatives
contract allowing us to wager on this very uncertainty. The derivatives
contract also challenges the causal definition of money in its relationship to
debt. If all money is born of debt, with its double reference to promise
and obligation, then what is the particular debt form of the derivative?
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itself that becomes tradable, even or indeed especially when its parameters
of variation are unknowable. In both cases, a reduction is involved. Where
commodity exchange reduces the world to a mass of standardized, qualitatively indifferent exchange values, what the market in derivatives extracts
from the noise and colour of the world are its event-making relations. The
turbulence engendered by connectedness. Turbulence is the event emerging
from an irresolvable relation between two or more flows that are themselves
relations. Derivatives are monetized relations of the relations of capital
(LiPuma and Lee, 2004: 86). Thus the derivative contract might respond to
the relation between two currencies, whose value is always fluctuating, or
it might respond to the relation between exchange rates themselves (the
relations of relations), or between kinds of relations, floating and fixed (as
in the swap contract). It may also express the relation between any number
of circulating flows (atmospheric, hydrological and ecosystemic), in short
the ensemble of relations that generate what we call the weather.
There is no doubt a certain elective affinity between global environmental risks and the denationalized form of promise embodied in instruments such as financial derivatives. This is not a natural affinity, however,
but rather an effect of their common abstractability. In the perspective
offered by fractal mathematics, turbulence is an absolute curvature whose
qualitative instantiation is a matter of indifference. Whether we are dealing
with the turbulence of world financial markets or that of complex earth
systems, the non-dialectical relation can itself be extracted, recombined and
liquefied, as it were, in a dimension of its own. In the same way that derivatives on exchange rates price the variable relation between and across
national currencies or interest rates, weather derivatives make it possible
to price contracts on the incalculable relations and unknowable contingencies engendered by complex atmospheric and hydrological processes.
Through this process of abstraction, derivatives do not lose but rather
gain power of another order. Up until the 1980s, standard economic
accounts described derivatives as peripheral effects of cash or spot markets,
as if the price of derivatives were literally derived from the prices of the
latter. The derivative was therefore assumed to represent (in the case of risk
hedging) or misrepresent (when it is used for speculative purposes) a fundamental value determined in the spot market and ultimately in the exchange
of storable commodities. However, the rise in financial derivatives such as
swaps makes it increasingly difficult to maintain the standard account of
price determination and causality. The derivative-market trades in events
pertaining to the money markets themselves, and in the process inevitably
occasions events of its own making. Derivatives, it might be said, generate
an atmospherics that is utterly indifferent to the qualitative nature of any
one event class (meteorogical, financial and political turbulence are entirely
convertible) and nevertheless effective at generating events of its own kind.
Market-related events on a more or less catastrophic scale have become so
endemic to the workings of capitalist relations today that it is no longer
possible to dismiss them as a surface effect of underlying or real economic
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forces. Far from restricting their movements to the space of the market itself,
financial events reverberate outward, reinvesting and remodulating
relationships among the productive forces, commodities and stocks they are
assumed to derive from (Bryan and Rafferty, 2006: 63). Indeed, it has
become apparent that in most cases, not only prices in cash and commodities markets but also in financial markets specializing in stock, interest rate
and currencies, are now subject to the extreme vicissitudes of derivatives
trading rather than the other way around.
In the era of capital market liberalization, political and economic
power lies in the art of leveraging the event, of harnessing debt accumulation to determine the shape of possible future worlds. While traditional
modes of property-right and promissory claim are not abolished, the appropriation of the event ascends to a leading role in the hierarchy of power
relations, cutting up, subsuming and recombining the risks associated with
the most abstract of economic and social relations. The leverageable event
can be of any kind financial, political or biospheric or a combination of
the risks associated with these. Yet while derivatives abstract from the
substantive nature of things and forces, they simultaneously operate at the
most intimate of material levels, investing the transversal relations that
connect and combine the entire world of priceable risk. The power of
leverage is one of potentiation through connection, the power to liquefy and
freeze relations, to potentialize and depotentialize connections, and thus to
shape (and be shaped by) the possibilities of movement of everyday life.
This is a power that operates in the future subjunctive, since the promise
of leverage is a claim over the future in all its unknowability a claim over
event worlds that have yet to actualize in space and time.19 The peculiar
powers, along with the systemic dangers of this form of leverage have been
acknowledged by recent efforts to manage the endogenous risks of derivatives markets. In the wake of the financial crisis, regulators have persistently called for the more systematic use of scenario planning as a way of
preparing for the unexpected events endemic to integrated markets (CRO,
2009: 5). It is now widely argued that the denationalization of money through
securitized debt markets requires a strategy of preemptive risk management capable of responding to contagion across multiple jurisdictions
(2009: 5).
That the pre-emptive power of denationalized money nevertheless
works to secure the imperial privilege of the US dollar is one of the structural paradoxes of the present configuration of world powers. The US is not
so much a national as a world imperial power, the magnetic pull of the dollar
being premised on the intrinsic volatility of all other currencies. There is
thus no contradiction between the denationalization of money, evidenced in
the circulation of such instruments as financial derivatives, and the premise
that the United States acts as the pivot of world power relations. This is an
exorbitant privilege that the United States seeks to preserve, precisely
through its efforts to expand beyond the limits of oil into a newly posited
sphere of abstract atmospheric relations. If this expansion is financial, I
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The war game exercise was the culmination of an ongoing project to map
out the foreign policy and national security consequences of climate change
over a three-decade period.21 The latter project, convened by the CNAS and
Center for Strategic and International Studies (CSIS) throughout 2006 and
2007, brought together a group of national security specialists and climate
scientists to fashion three future conflict scenarios around climate change.
Basing its outlook on the scenario reports published by the IPCC, the group
begins with a baseline scenario of expected climate change, from which it
then derives two, increasingly dramatic visions of unexpected future
worlds.
The problematic of climate change security renews with the focus on
ecological, biological and human security which emerged during the Clinton
years, when defence specialists sought to redefine the conflict environment
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of a post-Cold War era (Dalby, 2002). The intervening years of the George
W. Bush administration have, if anything, intensified the urgency of these
concerns, so that climate change has now risen to a commanding position
within the new security concerns of the incoming administration. The failure
of US intervention in the Middle East, the rising fortunes of China and the
recent financial crisis have all underscored the fragility of an imperial
geopolitics pivoting around the dollaroil nexus. Within current US strategizing then, climate change has become a security concern not only because
it poses political risks of its own (so-called environmental refugees figuring
prominently among these) but also because it is inseparable from the larger
issues of energy security, energy transition and the exceptional role of the
US dollar within world financial flows. If the US administration now aspires
to play a leading role in the post-Kyoto international climate negotiations,
this reflects not so much on the different politics of the Democrats and the
Republicans (both parties had previously contributed to the failure of Kyoto)
but on the growing realization, right across the political spectrum, that
climate change must be incorporated into grand strategy.
What then is the strategic future imagined by these various climate
change scenarios? It is notable that none of the scenarios developed by the
CNAS and CSIS entertains any serious possibility of climate stabilization.
Instead the baseline scenario foresees a future in which post-Kyoto negotiations will lead to reductions without, however, arresting or reversing current
meteorological trends. All three scenarios look forward to a decidedly postequilibrium world, buffeted by greater or lesser degrees of turbulence. The
strategic ineffectiveness of the normal distribution of statistical events is a
given here. Pointing to the fact that even the recent history of climate change
has surpassed the worst-case scenarios of former IPCC projections, the
CNAS and CSIS outline three scenarios, the last of which describes a worldsystemic phase transition a catastrophic tipping point leading from one
metastable climate regime to another. Turbulence cannot be averted then.
The long-term strategy of the US can no longer be one of deterrence, as it
was during the Cold War. Rather the aim will be that of maintaining the
topological cohesion of a world in and through the most extreme periods of
turbulence. In complex systems theory, this property of topological cohesion
is referred to as resilience (the term, which was first used in its contemporary scientific understanding in ecosystems theory, is now ubiquitous in
strategic thinking).
If the discourse on climate security foresees a future in which the
atmosphere will be opened up as a field of conflict, this is both a return to
and a radical departure from Cold War efforts at direct intervention into the
weather. Both the United States and Soviet Union began exploring the
possibilities of geoengineering as a weapon of war at the very outset of
the Cold War, experimenting with techniques as diverse as cloud seeding,
the release of reflective particles into the atmosphere and the use of giant
shades to intercept sunlight. In retrospect it might seem surprising that as
recently as the 1960s, meteorologists were confidently anticipating the
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