The Stock Market Is a Rich Persons Game – Labour Article
The idea that the financial world was “too big to fail” seems like a dated idea these days. Twelve years on from the 2008 financial crisis it’s easy to claim that the beast that was pre-crash global banking has been put back in its cage. After collectively bailing out these banks we have the institutions in place to prevent such a thing from happening again.
However, we still follow the principles of laissez-faire economics when we handle these giant global companies. In fact, nothing represents the financial world’s dominance more than the glorified gambling ring of a stock exchange. The Gamestop stock fiasco is the most evident reminder that the big winners of the finance game are also the dealers.
The Gamestop situation is an interesting look into the future of stock markets. Individual traders of the internet age can share knowledge, advice and coordinate trading, using websites such as Reddit. To simplify, traders bought stock in Gamestop and other companies causing a spike in those particular stock prices. Large hedge funds then lost a lot of money as a result of “betting against” those particular stocks doing well.
What followed was trading apps like Robinhood restricting user access to buying more stocks. Robinhood in particular has a $200 million dollar stake controlled by the hedge fund company, D1 Capital Partners, which lost 20% of its value. The obvious move by these companies to restrict the market was a sharp wake up call to many, a realisation that the free market they live in might not truly be so free.
Many might argue that the stock exchange is simply a representative model of the larger economy. The mechanisms of the market determine which firm does well and does not. However, if we look closer we can see that that is not the case.
The company General Motors is the 4th largest car producer in the world. It produces over 7 million cars a year and rakes in a staggering $137 billion per year in revenue. Compare this to fellow car company Tesla. Tesla has produced just over 1 million cars in their entire lifetime and rake in just 20 billion a year. In the same market conditions, both being US-based companies, the less productive Tesla has a stock price worth 17 times that of General Motors. Stock “value” is whatever people want it to be.
Advocates of the free market will also say that what the retail traders are doing breaks financial regulations and Robinhood was acting within their rights. I simply ask, how many wall street CEOs were convicted for tanking the global economy in 2008?
Furthermore, how many have been tried since the crash when regulations have been supposedly cleaned up? Goldmann Sachs didn’t face consequences for the 1Malaysia Development Berhad scandal. Nor was HealthSouth blocked from re-entering the stock exchange after defrauding investors of $100 million. So a financial regulatory body, that couldn’t even indict executives working for a salary at a company, could still prosecute a group of anonymous traders on the internet. Laughable.
The financial world is incredibly complicated. The regulations we collectively set on these massive firms have been steps in the right direction but ultimately the power still lies with these banks as always. Wall Street still has a stranglehold on financial resources too dear to leave to the hands of corporate greed. The Gamestop stock situation shows that even in our free market system, owning capital is only a privilege and not a right.
Written by Guest Labour Writer, Joseph McLaughlin
Point of Information
The Stock Market is Anyone’s Game – A Conservative Response
The article above boils down to debates many have discussed before us, and many will discuss after us. Put simply, is capitalism bad or good? Do we all benefit from neoliberalism? These in itself are a testament to neoliberal capitalism as it miraculously seems to keep surviving despite it being “a rich person’s game” and “not so free” as Joseph claims.
Firstly, it is anyone’s game. There so many examples of people from the most impoverished and humble upbringings climbing to the very top of the financial world. This list itself includes twenty-one household names who are real-life rags-to-riches stories. Furthermore, there are thousands of UK based investment firms alone that will let you start investing from as little as a Pound. A singular British Sterling Pound. The Gamestop incident is further evidence anyone can get involved in the stock market. Thousands of people came together to invest in Gamestop (albeit for rather spiteful reasons).
Secondly, there is a reason “stock “value” is whatever people want it to be”. It is because we prioritise the most important industries and innovations. Why is Joseph criticising that people are investing seventeen-times more into Tesla than General Motors? I do hope they realise we are living through climate change. Electric cars and hybrids are the future (albeit distant future). If Joseph does not believe in climate change and the value of investing in renewable energies then I certainly cannot respect their opinion with regards to the stock market and the future of our planet’s economic system.
Finally, I agree that CEO’s should be made more accountable for their failings, I really do. When CEO’s get it wrong, they get it seriously wrong and it costs regular people their livelihoods. Ruining lives and tearing apart communities. Should more stringent cheque-and-balances be put in place with regards to the legal ramifications within the Stock Market? Maybe, I’m not keen on the idea but if it protects the average person they may be needed, especially in the shadow of 2008. On the flip side, investing is a powerful tool for good and prosperity. Joesph does not seem to mention the power of investment and how the Stock Market is being used by the World Bank for projects designed to end poverty. Interesting.
Overall, where Joseph says “greed” they actually mean profit. Corporations such as Gamestop need this profit to keep existing keep employing the 53,000 people it does across the globe. The great thing about our system is you do not have to economically rely on anyone if you do not want to. No one forces you to use banks and you can quite as easily keep gold under the floorboards if you so wished.
Joseph is correct, owning capital is a privilege because it requires skills and/or intelligence to acquire it. It is no good calling it a “right”, especially when the equality of outcome is unattainable, and frankly a pernicious ideology. In the UK where you can get free healthcare, free education, free housing despite around 10% of the world’s population living in extreme poverty today, I do not know why you feel you have a “right” to capital. I find this claim laughable.
Written by Senior Conservative Writer, Peter Pearce
Wall Street is an Unregulated Rich Club – A Liberal Response
Joseph has covered a lot of ground in this article – and I commend them for it. The stock market is a woefully inadequate measure of the economy. It is designed and operates to the benefit of people who are unexposed to the true costs of recessions and crises – namely hunger, debt, and despair.
The ‘democratisation of the stock market’ is nothing to be cheerful about; it is exposing regular people – led astray by the public consciousness – to a game they are unfit to play in. Large investment firms can hedge and spread their exposure, whereas someone pouring their savings account into a company “for the meme” cannot. It is also not going to change the stock market for the better.
Equally, the immunity that bankers are afforded, as Joseph pointed out, will not fix the system. Joseph is right to call for greater regulation. It is right to question why those who caused the crisis – with their negligence, greed, and apathy – walked away with a healthy severance package and a secure future. In comparison to the millions who suffered – some drastically – as a result of their negligence. The bankers can derail a global economy and get a gentle slap on the wrist, while others do nothing but try to live their lives and pay with their houses, jobs and future.
The commodification of these financial assets has been engineered to make more money. What was once an investment opportunity, to expand and better a firm, is now a tool for the uber-wealthy to make money. Paying shareholders dividends – before paying their workers a wage they can afford to live on – is an abhorrent result of this commodification.
We should actually learn from 2008 and grapple with the dominance of Wall Street. It is both too big to fail, and apparently, too big to stand up to.
Written by Junior Liberal Writer, Daniel Jones