Blame the Stock Market for Economic Inequality

Sometimes when you sit in the cheap seats, up in nosebleed territory, the world below seems far away and small. Although the individual actors may lose definition, the view offers compensations in terms of seeing overall patterns, movements and strategies. Watching the economy from the cheap seats is very different because all the action is above where all the rich folks are, and the cheap seats are below, sometimes far below. When doom befalls those in the pricey seats, the fallout reaches to the cheap seats, and although the impact is less, it makes already difficult lives tougher. But in the pricey seats there can be mayhem – some win – some lose – some topple back to the cheap seats. When those in the expensive seats, the box seats, win, the people in the cheap seats can watch the celebration but they are not invited to the after-party.

What my analogy says is that you don’t have to be an economics major to know about the ebb and flow of money in the world. And you don’t have to be an expert to draw some interesting conclusions. Listen to the news. Pundits quite often point out that people at lower income levels do not own stocks, but most economic decision-making must consider how bills, laws, regulations, taxes, all things economic (even tariffs) will affect the stock market. That means that the economic needs of folks who do not own stocks don’t matter much in decisions that affect the economy. Even so, the whole economy, top-to-bottom is affected by whatever economic measures are taken. The poor can get poorer, or there may be times when a flourishing economy at the top temporarily lightens economic stresses at the base.

Progressives blame Capitalism for the economic inequality that has become increasingly apparent both in American and globally. But if you listen from your cheap seat you eventually understand that a lot of the blame belongs with the stock market. Capitalism can and did exist without stocks or stock markets, but once the stock market turned investment into a game that anyone with money could play, it was as if Capitalism went on steroids.

In order for the partnership to work, industry and business have to keep the investors happy with ever-bigger profits, rising stock values and higher dividends (if they are offered). This means that workers only get higher wages after owners and stock holders get paid. Since businesses get more investments when profits go to stock holders than when they go to workers guess who gets robbed?

When there were strong unions, workers could demand a share of the pie and then stop working (walkout, go on strike) if they were ignored. Conservatives have always opposed unions, but in the past decade they have managed to weaken unions by passing right-to-work laws which have stripped workers of much of the power they once had to act as a balance against the demands of stock holders. The market is doing well, worker incomes are not.

The profits that go to shareholders keep making those who have stocks and those who own businesses richer, and since money equals power, these particular citizens are able to exert a lot of pressure in Washington and can keep getting laws passed that favor those who are already wealthy. Lobbyists, PACS that fund elections, laws like the Supreme Court decision that gave free speech (and votes) to dollars (money equals speech, corporations are people) have expanded the power of wealthy Americans who own stock. And because those who cannot afford stocks know that everyone is hurt if the stock market tumbles they are afraid to oppose even the most outrageous legislation (like the Trump tax cuts) because they don’t know how their opposition will affect the overall economy and their own everyday lives.

The stock market becomes a rocket that delivers more and more money to those who already have it and turns workers into statistics in a global worker market where American salaries already seem too magnanimous.

If it is the stock market that is responsible for a lot of the economic inequality that exists then do we do away with the stock market? Well, good luck with that. And although this conclusion was reached in the cheap seats, when the question was put to the “Google” it was clear that there are already expert articles which show that economists were ahead on this. It can take longer to draw valid conclusions about money when you have always been in the cheap seats.

https://promarket.org/how-market-power-worsens-income-inequality/

“With income, the story is a familiar one of rising inequality. In 1989 and 2016, the poorest fifth had 3 percent of pre-tax family income. But the top fifth of families saw their share of income rise from 57 percent in 1989 to 64 percent in 2016. Put another way, the bottom group’s share remained miniscule, the top group’s share rose by 9 percentage points (or one-sixth), and middle America saw its share diminish.

For corporate equity, we find that the lowest-income fifth of families had 1.1 percent of corporate equity in 1989, and 2.0 percent in 2016 (over the same timespan, the second-bottom quintile share went from 3.5 percent to 1.6 percent, so the total share of corporate equity of the bottom 40 percent fell). By contrast, the highest-income quintile had 77 percent of corporate equity in 1989, and 89 percent of corporate equity in 2016. Hence, corporate equity is considerably more skewed than expenditure or income, and has become considerably more skewed over the past three decades.

Even if the shares had remained unchanged at their 1989 levels, excess market power would have exacerbated inequality, because stock holdings were considerably more skewed than consumption. But because consumption inequality remained little changed, while inequality in stock holdings worsened, the effect of market power on inequality was even more substantial in 2016 than a generation earlier.”

https://www.sciencedirect.com/science/article/pii/S0304387817300858

https://digitalcommons.iwu.edu/uer/vol15/iss1/7/

https://www.nytimes.com/2018/09/07/business/us-stock-market-income-inequality.html

A solution I like better than trying to close the stock market (which would be even harder than passing sensible gun laws) is for everyone to “inherit” some stocks when they turn 18, or 25, or, even better, at birth – and not risky stock, good solid stock, in accounts they cannot cash in until a real need arises (college, training, buying a house, starting a business) that also will serve as an investment. Medical emergencies would be handled in another way. Then everyone would have a reason to follow the market, to wish the economy well, to learn about investing and to experience an opportunity to have an economic goal and to reach that goal. This would also go far to lessen economic inequality, and reparations could be managed by giving those who have been held back by racial discrimination a larger share in the market.

You can start laughing now – but it could work and it would be so much more peaceful than a revolution.

Photo Credits: From Google Image Searches – Wall Street Journal, Giphy.gif

 

 

 

Gary Johnson /Libertarian – From the Cheap Seats

 

libertarians3bigGaryJohnson

Gary Johnson, a Libertarian is running for President in 2016. Although he would never be my choice, as an option to Donald Trump he seems like a stellar choice for Conservatives and I am surprised that more Republicans have not jumped on board. Except for the fact that he thinks we should legalize drugs, especially marijuana, to end the War on Drugs and that we should treat drugs use as an illness, not a criminal act, his platform seems as if it is right out of the Republican playbook

Gary Johnson spent two terms as the Governor of New Mexico and he managed to leave New Mexico with a million dollar surplus although he had to slash and burn to do it. He is a small government guy. He wants to close the Department of Education and HUD immediately if he wins the election. He is in favor of letting the states deal with most social programs on their own and he favors vouchers for schooling and privatizing prisons.

He believes in low taxes which is good because by the time he has finished cutting budget items he doesn’t need all that revenue. He used the veto 200 times in his first six months in office (Wiki) and has been called “Veto Johnson” and “Governor Veto” (Wiki). He was considered a good governor in New Mexico although some of his more controversial ideas did not fly. “Johnson’s accomplishments in office were described as follows: “no tax increases in six years, a major road building program, shifting Medicaid to managed care, constructing two new private prisons, canning 1,200 state employees, and vetoing a record number of bills. He really became popular for his handling of the disastrous Cerro Grande Fire.

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You can find a list of his statements on important Presidential issues at

http://www.ontheissues.org/Gary_Johnson.htm

To summarize, here are just a few of the stands he has taken, stated in his own words:

On abortion his most recent stand was “don’t require insurers to provide birth control, May 2012”;

On economics he states “National debt approaching $20 trillion is bankrupting us, Jan. 2016” and “No bank bailout; no farm subsidies; no stimulus, May, 2012”, “Cut federal budget by 43% to bring it into balance, Feb. 2012, “End the Fed; they’ve devalued the dollar by printing money, May, 2011”

Where have I heard these cold-hearted judgments based on an economic point of view that is not shared by all economists? Republicans say these things incessantly – they say them as if they become truer with repetition. Yes, Mr. Johnson left New Mexico with a 1 million dollar surplus, but why? How does having money sitting in a government account help the people? How did almost shutting down the New Mexico state government to attempt to extort acceptance of school vouchers help the people?

Johnson is against the Affordable Care Plan, says that “government managed healthcare is insanity”, says “ObamaCare is unconstitutional; so is Bush’s Medicare Rx plan” and these are obviously statements that warm the cockles of many a heart on the right. He does however, want to “let the Patriot Act expire” and he says, “the Founding Fathers would be disgusted about spying on Citizens”, which might not go over quite as well with Conservatives.

Some quotes on War and Peace:

  • We are no safer after years of failed nation-building abroad. (Jan 2016)
  • Afghan nation-building will fail; withdraw immediately. (Aug 2012)
  • Cut all support and aid to Israel. (May 2012)
  • No military threat from Iraq, Afghanistan, nor Libya. (Aug 2011)
  • Iran is not currently a military threat. (Aug 2011)
  • Let Israel deal with Iranian nukes; not US role to tell them. (Aug 2011)
  • Absolutely would not have gone into Libya; get out now. (Jul 2011)
  • We wiped out al Qaeda 10 years ago; leave Afghanistan. (Jun 2011)
  • No threat from Libya; so no authority to topple dictator. (Jun 2011)
  • Afghan War initially warranted, but not for 10 years. (May 2011)
  • Military surveillance should discover WMD before invasion. (May 2011)
  • I opposed the Iraq War from the beginning. (May 2011)
  • No Afghan timetable; start tomorrow & finish in a few months. (May 2011)
  • Eliminate ineffective interventions in Iraq & Afghanistan. (May 2011)

These stands are more purely Libertarian and might be tough to swallow for some Republicans.

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All in all Gary Johnson has much more in common with Republicans and the right than he does with any Democrats and his economic policies would be real deal breakers for voters seeking an alternative to Hillary Clinton, but not so much to voters looking to ditch Donald Trump. Although I don’t even like to think about having a Libertarian in the White House, given the nonsense that Grover Norquist, another Libertarian, has caused with his well-enforced pledge against raising taxes, I favor having more than two parties involved in America elections and I favor it even more in times like these when there is such an enormous partisan divide.