Essay of the Day: Open Source Finance Hacking

“The hacker drive for de-alienated self-empowerment throws up tricky issues. As people with a hacker impulse gain confidence, they can become increasingly intolerant towards conventions, but also towards institutions like large welfare systems, which are viewed as being alienating in their own way. When combined with the individualistic streak, this can make for a libertarian political impulse. At its best, that can be a left-leaning libertarianism concerned with how to empower the underdog from the bottom up, showing solidarity with those in less empowered positions, similar to anarchist mutual aid. In its negative incarnation, though, hacker culture can fetishise personal liberty, a conservative ‘don’t tell me what to do’ libertarianism associated with people who already have power and who do not particularly go out of their way to help spread it. We see this in the likes of libertarian activist Adam Kokesh, who says ‘fuck you’ to authorities, but without really offering much empathy to those who are not empowered, skilled, or connected enough to be as bold as he.”

* Article: Open source finance hacking: The potentials and problems. Brett Scott. Spanda Journal, Special Issue: Spanda Journal special issue on “Systemic Change”, VI, 1, June 2015. Edited by Helene Finidori.

This essay is part of a throroughly excellent special issue of the Spanda Journal on systemic change edited by Helene Finidori, In case of more interest for the issues in this essay contact the author at please contact the author at Twitter https://twitter.com/Suitpossum and or check the blog at: http://suitpossum.blogspot.co.uk/

An excerpt from the introduction, by Brett Scott:

“The global financial system is a notoriously opaque and alienating complex. The system is implicated in social injustice and ecological destruction around the world, and the key financial institutions, such as banks and funds, wield unhealthy levels of political power. The financial sector – that cluster of institutions that sit in the centre of the financial system – have at least five problematic dimensions.

Firstly, the financial sector routinely steers money into projects that are hardwired to breach planetary ecological boundaries. It is thus premised on ecological unsustainability. Secondly, it is an active agent of inequality. Not only do financial professionals reap outlandishly large salaries, but financial instruments like shares and bonds are conduits for powerful cartels of investors to direct money into the powerful corporate sector, often in ways that do not benefit ordinary people.

Thirdly, even if you do not believe that the sector creates inequality, it exhibits high levels of complexity and opacity, which, when combined with the fact that the system is highly interconnected, translates into high levels of systemic risk, the ability for financial crashes in one country to shake the entire global economy.

Fourthly, the sector hosts a particular culture of finance. This tends to be portrayed in the press by pictures of obnoxious traders swilling champagne, but the much deeper issue is the pervasive denial of agency and responsibility found in the sector: Financial institutions like to portray their profession as an apolitical agent of economic efficiency, rather than accepting the highly political nature of allocating credit and facilitating investment processes around the world.

Fifthly, there is the process called financialisation. In basic terms it is the creeping sense that the culture and drives of the financial sector are taking over many aspects of life previously untouched by it, turning everything into investable and tradable commodities. Thus, land and atmospheric pollution rights become parcelled into land investment funds and commodity investment baskets, while people’s life insurance policies get parcelled into structured investment products for hedge funds to speculate on.

These trends, when taken together, have a way of creating ever more alienating and obscure financial phenomena, which appear incomprehensible and uncontrollable to the average citizen. Take, for example, high-frequency algorithmic trading, portrayed by those involved as a force for rational efficiency, but creating hitherto unknown levels of systemic risk.”

* Discussion: Applying the concept of open source to finance

Brett Scott:

Open source culture thus might be a useful way of framing the initial broad changes we might want to see in the financial system. After all, we are stuck within a massively powerful incumbent system, and need to find ways to build anew from that starting point.

Software code is used to build rule systems that steer energy into activating hardware towards particular ends. So, extending this as an analogy, what might financial ‘code’ look like? A financial system, in a basic sense, is supposed to distribute claims on human energy and resources (‘money’), via financial instruments (often created by financial intermediaries like banks), into new economic production activities (‘investments’), in exchange for a return over time.

Here, for example, is a rough financial circuit: A person manages to earn a surplus of money, which they deposit into a pension fund, which in turns invests in shares and bonds (which are conduits to the real world assets of a corporation), which in turn return dividends and interest over time back to the pension fund, and finally back to the person.

Shares and bonds are extractive financial conduits that plug into a corporate structure, but if you look for how they are coded, you’d discover they are built from legal documents that are informed by regulations, acts of parliament, and social norms. They are supported by IT systems, payments systems and auxiliary services.

But it takes more than clearly-worded documentation to be able to create financial instruments. The core means of financial production, by which we mean the things that allow people to produce financial services (or build financial instruments), includes having access to networks of investors and companies, having access to specialist knowledge of financial techniques, and having access to information. It is these elements that banks and other financial intermediaries really compete over: They battle to monopolise relationships, monopolise information, and to monopolise specialist knowledge of financial techniques.

And indeed, that is why production of financial services mostly occurs within the towering concrete skycrapers of the ‘financial sector’, spinners of webs of financial code that is mostly unknown to most people. We have very little direct access to the means of financial production ourselves, very little say in how financial institutions choose to direct money in society, and very little ability to monitor them. We have, in essence, an intense concentration of power in financial intermediaries, who in turn reinforce and seek to preserve that power. And while I may be happy to accept a concentration of power in small specialist industries like Swiss watchmaking, a concentration of power in the system responsible for distributing claims on human society’s collective resources is not a good thing. It is systematically breaking our planetary hardware, whilst helping to fuel a culture of bland individualistic materialism in increasingly atomised communities.”

2 Comments Essay of the Day: Open Source Finance Hacking

  1. AvatarMark Janssen

    There’s only three things you need to know if you want to hack the financial sector:

    1. Banks never learned what wealth is. All they know is the *quantity* of money, but you can print money all day long and you don’t have wealth.
    2. The current system *destroys* more value that it *creates*. It takes from things which were not made by it’s own system: timber, oil(and other energy resources), land, and human lives, so it has not accounted for them properly (medical costs, for example, should be *subtracted* from GDP).
    3. There is no mathematical solution to endless, exponential wealth. The system was predicated on growth, but when you’re going off a cliff faster, GDP rises then, too. Even a child stops growing, despite being fed, so apparently nature has a lesson to teach mankind.

    Now if you’re interested in Hacking the Law, too, see http://wiki.hackerspaces.org/Hack_the_Law.

  2. AvatarMichel Bauwens

    We are absolute moderating comments, our spam filter counter is in the millions but many slip through nevertheless. Normally we only filter non-spam filter if they are blatantly racist, sexist, with personal insults and yes swear words. In this case, you were too fast on the trigger though, we were simply on a four day holiday and no other free labor volunteer took up the task in my absense.

Leave A Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.