For Eric Tump, or anyone with a dad who talks about being a businessman
Eric Trump tweeted yesterday that:
“The dow is on (fire emoji)(fire emoji)(fire emoji)
the radical left is melting down as we speak knowing that our economy is roaring back to life!!”
Conflating the stock market and our economy is flatly wrong to do, but there is no doubt he is making that “mistake” on purpose. The idea that the stock market can be read as a proxy for the health of the economy is an old tactic that has never been true and has never been less true than in 2020. Nonetheless, I imagine, it is a very effective message.
And look, understandably so. Until pretty recently, I might have said, “well I guess I can’t argue with that.” Long before this family, “he’s been good on the economy” has been a political trump card. But that’s because, pretty much, I had no idea what the economy was, what the stock market was, what they once were vs. what they have become…pretty much I didn’t know anything. I didn’t grow up around those topics, my parents had almost nothing to do with all that, and I never got the sense that there was anything for me there. I did not engage in many conversations about economics with the people I knew, and I did not encounter any real discussion of class in the liberal mass media politics I consumed. But after a few years (and really, after a cursory look) the sham of the whole thing quickly came into focus.
The idea that Trump is good for the stock market — well, that is true! He’s as good as any member of the ruler-employer class could be. But understand, 90% of stocks are owned by the wealthiest 10%, and more than half of Americans don’t own any stock at all. Today’s stock market has shifted to become almost entirely defined by trading behavior that only 40 years ago was consigned to the absolute fringes; it’s become wholly phony system of gambling with hypothetical money, according to rules forged by the rich in government to profit the rich in business that shift the burden of risk onto the poor. So yes, of course, he’s a natural fit. But the idea that the stock market charts some natural phenomenon, just existing out there to dip into and take a reading, an impartial math measuring the will of the masses, like a tally of economic votes, is totally ridiculous. And that it feels like a commonsense notion to think of it that way is the result of decades of successful conservative activism and political hegemony. In reality, it is a system organized by rules, rules that change when new laws are written, and the new norms arise.
I think that when the rich realized that they were the only ones who really knew anything about these rules, even though they affected all of us, they realized that they could exploit our ignorance. Starting in the 80s, the Law and Economics educators, the zealots at Cato and the American Enterprise Institute, the Hoover foundation and the Federalist society, quietly rewrote the rules and bled the American majority dry via a death-by-a-thousand-cuts campaign waged in the tax code, in the new regulations demanded in the name of deregulation, building the new machinery of the corporate welfare state. And the New Democrats were defined by their willingness to wave it all through. It was such a boon for the rich that the phrase “fiscally conservative but socially liberal” was willed by necessity into fashion as a way for Democrats to differentiate themselves from conservatives, as if socially progressive values aren’t deeply intertwined with economic policy.* I am often reminded of the Mark Fisher line, “Many of what we call ‘conspiracies’ are the ruling class showing class solidarity.”
Anyways, the rich continue to refer to the stock market, the thing they worked so diligently to uncouple from any kind of flourishing in the majority, as a way to take the pulse of our wellbeing. If in the midst of pandemic disease and unthinkable job loss, the thing is thriving — that’s almost as much proof as you need.
In fact, today’s stock market mainly acts to obscure the real health of the economy. Most demand is generated through stock buybacks — companies buying up their own stock — a method of artificially inflating the stock price virtually unheard of 30 years ago. This allows for a condition where, not only is the stock market not a measurement of the economic health of the masses, it’s not even a measurement of the health of the companies listed on the exchange. For example, in 2007 the four hundred biggest companies spent 89 percent of their profits to buy back shares of their own stocks. And they told people, “Wow, look! These stocks are in such high demand! The price keeps going up! These companies must be really impressing the everyday American with the value they’re adding.” And then in 2008…well.
But this obsession with stock price, the newfound religion of shareholder supremacy (remember that the vast majority of people are not shareholders), renders the actual wellbeing of the company — is it doing a good job providing services or making goods — somewhat trivial. Take Mike Pearson, for example. The former CEO of Valeant Pharmaceuticals was all over TV in his early days, celebrated for having instituted a radical new management strategy when he showed up. And note, this guy doesn’t know anything about pharmaceuticals. He is a guy with an MBA, who worked as a consultant at McKinsey for 23 years before taking the job at Valeant. Basically, he is a manager, a guy who knows about stocks and just pitifully mumbles the word shareholder over and over in any interview you can find. (Check it out). This is the kind of guy Wall Street refers to as a genius. Anyways, his big strategy to serve the shareholders, lauded as a brilliantly innovative, was this: 1) buy other pharma companies (often through the should be criminal strategy known as a leveraged buyout) 2) fire as many people as possible 3) totally gut the research and development budget 4) raise the prices on every drug they sell and 5) put all that money toward stock buybacks, driving the stock price up and causing everyone to say “wow this drug company is thriving.” However, of course, they wouldn’t be for long, because they were no longer developing drugs. So to keep it up, he had to buy more and more companies, stripping more and more companies of their purpose — making life saving drugs — and more and more people of their jobs. He loved to buy companies that make orphan drugs — rare, lifesaving drugs for which there is no generic alternative, so that people have no choice but to buy yours when the price goes up, even if it’s from $3 a daily pill to $750. He, of course, was majorly invested in Valeant. Reforms around CEO pay included a special prevision that said, though CEO’s are not allowed to take a salary over a certain amount from the company, they are allowed unlimited stock options, because that would tether them to the performance of the company. But it did not tether them to any actual measure of performance at the company — in pharma something like “is this company providing novel, affordable drugs that increase people’s quality of life and add to the human understanding of science” — but simply to the highly gullible stock price. So the stock price goes up, the rich get richer, while all around the country desperately sick people are either 1) uninsured and dying because they can’t afford medication that could total as much as 300k per year or 2) insured and, because insurance is pooled money, their new inflated cost to the insurance company meant increased premiums for everyone. So the company lays thousands of workers off, squeezes its customers for insane money under threat of death, and shifts the burden of those price increases onto the collective American monthly insurance premium. In response? The stock price goes up. The CEO gets paid. The shareholders get paid. After back-breaking work by the ripped off consumers, Mike and his investors are called in front of congress and asked to lower their prices. They promise they will. They never do. Life goes on.
Maybe you think Mike Pearson’s brand of “innovation” is an outlier. And it was, though only in that it strayed from the most common source of efficiency and innovation in modern American business; paying people less, taking away benefits, firing them to replace them with someone who will work for less or a computer who will work for free. Take Amazon, for example. For every 80 billion in sales, Amazon needs about 60,000 employees. To do the equivalent 80 billion in sales, small businesses would need somewhere between 600,000 and 1 million employees. So to notice that Amazon sells things for less and ships them for free is to notice that Amazon is passing the savings of more than half a million layoffs onto you. Or some of the savings. Actually, it is passing along the smallest portion of that savings it can get away with — which less and less as its monopoly grows, unrestrained by the Anti-Trust legislation we used to have, before those same weasels did away with it. Bezos’s wealth has nearly doubled during the pandemic, including one single day in which he made $13 billion, all as a result of increases in the share price.
Consider these selections from Nick Baker’s recent Counterpunch article about economic behavior during COVID…
“Car company Tesla forced all workers to take a 10 percent pay cut from mid-April until July. In the same period, Tesla stock skyrocketed, and CEO Elon Musk’s net worth has now quadrupled from $25 billion to over $100 billion. Business software company Salesforce announced record sales levels one day and layoffs of 1,000 workers the next. The company’s stock rose 26 percent.”
…And…
“Tech monopoly Apple is now the world’s most valuable company, with its total stock worth over $2 trillion — the first company ever to reach that mark — having increased by $1 trillion in just 21 weeks.”
“The secret to Apple’s incredible success? It has engaged in the largest stock buybacks in history, re-purchasing $360 billion of its own stock since 2012, according to the New York Times.”
“Apple has spent $141 billion on buybacks in the past two years alone, after Trump’s 2017 tax cuts enabled the company to return to the U.S. tax-free $252 billion in profits. Apple had held the money in tax havens for years, explicitly refusing to pay taxes and claiming that, if returned to the U.S., the money would be used to “create” tens of thousands of jobs — but that they wouldn’t do it if they had to pay taxes. Trump’s 2017 Tax Cuts and Jobs Act removed the repatriation tax on the same false premise, and, once returned, the money was used for its intended purpose all along and given straight to the company’s millionaire and billionaire shareholders.”
…and this:
“… CEOs, leading shareholders and corporate executives have dumped more than $50 billion in stock since May. CNN notes that these “insiders,” as they are known, “are privy to more information about the true health of their companies than average investors. And if they were confident in the market rally, insiders would be unlikely to sell now.”
In closing I would say, just remember the stock market is a fake tool, increasingly measuring how much the rich are profiting at our expense. The market is not some natural thing, it is a political economy, designed according to the will of those involved with its design. It is certainly not “free” and no one who talks about it that way wants it to be. Stock traders are not cool guys who take risks and live on the edge. Innovation in the finance industry means finding new ways to shift the burden of risk onto the poor. If you know these kinds of people, let them know there is no moral nuance in their lifestyle — by profiting from stocks they are endorsing the economic rules that punish the vast majority of Americans, and people all around the world, for profit.**
When people say it’s good for the economy, ask which economy? When people say the stock market is thriving, ask who cares? When people say unemployment is low, ask what kinds of jobs are available and if they could finance their dreams with one.
Without writing new rules for the economy, ones that prioritize a different measure of success, something like human and environmental dignity, we won’t make it to a future that contains either.
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- * From Nick Baker’s article as well: Black men and women have recovered about 20 percent of the jobs they lost in the pandemic,” reports the Post, while white men and women have recovered 40 and 45 percent of their lost jobs, respectively. Between February and May 2020, 11 million jobs held by women have disappeared. The U.S. Census Bureau reports that “one in five working-age adults is unemployed because COVID-19 upended their child-care arrangements,” with women three times more likely than men to have to leave their jobs — and up to five times more likely to decrease their work hours — to take care of children. The losses in the workplace that women are facing today will be felt for decades.
- **One note about this: It is probably more correct to indite the culture than each individual business school student who goes to wall street to soak it up. I do not believe they are immediately privy to the full breadth of the moral catastrophe of their business — especially as so much conservative activism has centered around higher education. Despite being thought of as liberal, and complained about by conservatives (they are the sorest winners in history), most of the ivy league business and law schools are highly biased the other way. So the really insidious thing is the culture, what has become acceptable and is passed down as acceptable, the way the real harm is shrouded in euphemism and abstraction, layers and layers of financial structure insulating the traders from the families wrapped up in their junk bonds, the individual stories that also back the securities. This abstraction by design, written into the rules of the game by its authors way up at the top, helps to shield the day to day traders, those who might not have the stomach for the whole story. Like any repressive regime, they need to break down and mundane-ify the most brutal work whenever they want to recruit the help of their citizens. One thing they rely on is the innate abstraction of scale. I think it is difficult for the human mind to really comprehend what 50,000 mortgages means, 200,000 mortgages. Especially when it’s packaged up and swapped around in their parochial world a thousand miles away from anyone who could be considered “subprime.” It’s just very difficult to comprehend that this stuff is real. They’re making unreal sums of money, everyone around them seems to think it’s fine — if they’re upset about anything, it’s that they’re paying too much tax on the money they make swapping it. The design is a shielding intellectual abstraction, and the scale of their own power is difficult to feel in any real way. And for the rest of us, the incomprehensible scale of a country nearing 400 million, or a world nearing 8 billion, sees us understandably reaching for simplifying heuristics. But when we’re overwhelmed and asking for someone to give us the gist, we are exploitable, and we need to make sure we’re not knocking on the door of someone with a vested interest in skewing their description. The world is so complicated, and at the core our culture yearns for Stuart Hall’s “frameworks of intelligibility, the things which allow us to make sense of a world which exists, but is ambiguous as to its meaning until we’ve made sense of it.” So, overwhelmed by scale, I need to be careful — when Eric Trump hands me a map for navigating a massive and complicated terrain, I want to remember that maps drawn intentionally wrong feel just as real as any other.
1% of necessary references:
https://www.nytimes.com/2020/05/10/business/stock-market-economy-coronavirus.html
https://en.wikipedia.org/wiki/J._Michael_Pearson
https://www.imdb.com/title/tt7909184/
To learn more about the weasels who broke our world, and see where I stole all my observations from, buy Kurt Anderson’s Evil Geniuses (not on Amazon!)
RIP David Graeber
