On Stocks

 Over the last couple days, I've started and stopped a number of posts, but due to our current pandemic (COVID-19), I kept falling behind. I’ll work some of them in later if I can. But for now, let’s focus on something a little more evergreen: the stock market.

I'll be honest, my notes for this post were just the words “Crash Good.” I do plan on justifying that at least somewhat, but I felt it would be best to be upfront about it. Another qualifying parenthetical: I own stocks and they are/were valuable enough to provide me a strong personal interest in having the market be high.

I went on at length about the nature of capital in my previous post, and it’s relevant again here. My borderline antipathy towards the market has to do with the fundamental nature of stocks and corporations. Simply put, a corporation is a machine that makes money, it is the essential tool of extracting capital. Each stock entitles the owner to a tiny piece of the machine, and an equivalent share in the profits. If the machine is good at extraction, the pieces are valuable as a source of capital. Great, except for the fact that for capital to be extracted, it has to come from somewhere. For corporations, that value comes from the workers. (Yes, I am aware that this is a grotesquely oversimplified view of the market, but let's focus on the forest, not the trees.)

I don’t think I was always a Marxist. But it’s hard to say. Most of the time, your beliefs change so slowly as to be imperceptible. If there was a moment, though, or a single fact that made it clear, it was when I understood the degree to which capitalism requires continuous growth. On a long enough timeline (shorter now), we’ll inevitably run out of places to grow, and — like bacteria in a petri dish — will end up eating each other to survive just a little longer.

Whatever replaces “capitalism” must be zero growth — a stable system. It can have money and commerce, sure, but it must be able to survive without growth. There is a way, but it comes right up against the stock market: zero growth means zero net profits.

Back to the capital created by workers, the profit of a corporation is ‘excess’ value created by the employees. Now, for worker-owned businesses, this is not a problem, as the value is (presumably) evenly distributed amongst the employees. The more common scenario, however, is that the created capital is disbursed to the owners of the company via stock, while the workers are paid whatever small monies must be paid in order to retain them. Each dollar of wage is a dollar that does not go into the stock.

The problem with this is obvious, and the results of which we’ve seen firsthand. Wages have stagnated, while the rich get richer. The stock market reflects (or reflected..) this, and as the workers lose power, influence, and share in capital, the stock grows accordingly.

If wages rose, say by an increased minimum wage or by worker ownership of a significant percentage of stock, the market would correct itself accordingly. The market’s fall would be a good thing, since it would mean that the profits were more widely shared, instead of being concentrated within sociopaths like Bezos and Bloomberg. Average quality-of-life would raise, in exchange for a reduction in profits.

Now, the current crash isn’t quite like that. Instead, we have a precipitating event that is causing a dramatic drop in profits (forced closures due to quarantine, etc). While this is less ideal, it counter-intuitively still represents an opportunity for improved quality-of-life for our poor beleaguered workers, albeit an indirect one. Assuming that wages do not fall, their percent of the total available capital increases as the corporations lose value. What this looks like in practice is falling prices, deflation. The stable wage becoming more valuable, not less. We’ve been used to inflation for a long, long, while now, which benefits only the people at the top, those who own the means of production.

So yes, it’s good that the market goes down. For all of our sakes, I’d hope it goes down farther. While the natural inclination of capital is to cut wages proportionally, this is something that is not at all guaranteed, and can, in theory, be easily stymied by worker organization. For without the workers, the corporations have nothing.

A Late-Stage Endorsement

"Those who make peaceful revolution impossible will make violent revolution inevitable." ~ John F. Kennedy

After a long hiatus, I’m finding it refreshing to write something for myself, without any real thought for my audience. Still, it’s important to address the reader, at least as a basic conceit, so with that in mind I will endeavor to explain why it is imperative that Bernie Sanders become president of the United States.

If I had to lay out my thesis in simple terms, it’s this: Bernie is the compromise candidate.

I alluded to the economic precarity in the latter part of my welcome back letter, but repetition is important. In general, the people in power (ie the “boomers”) do not understand the depth of the problem. To use an example, when Greta Thunberg said “You have stolen my dreams and my childhood,” she was being incredibly literal. The youth (‘generation Z’) grow up understanding something that millennials (that’s me) had to learn the hard way: there is no hope. The problems I wrote about 3 years ago have only gotten more dire — we even have a pandemic now, which is exciting.

There are so many issues, I struggled to winnow it down enough to start this sentence, but I think the most central aspect of the problem is the so-called “Late-Stage Capitalism.” I will explain: At its heart, capitalism is an exploitative system. This is not even meant as a criticism, merely a statement of simple fact. The main mechanism is to extract and retain value, which we call capital. The craftsman, assuming he sells his goods, trades his time, expertise, and capital for materials and a greater amount of capital. If he manages to retain enough, he might be able to open a new workshop and thereby increase his ability to retain capital. Or, if he fails to retain capital, he can find himself unable to make the initial trade. He then might have only his time and expertise and be obligated to trade those for capital directly. In the real world we would call this a “Job” or a “wage”.

This system works.. fine. In theory. Unfortunately for all of us, there is an underlying assumption — a zero-ith law, to make a reference. The greatest source of capital has always been the natural world. It grows food, there are shiny rocks to pick up, I need not elaborate further. Follow the trail back, and it will always lead to some basic extraction of value from the earth. This eventually creates a problem, as we are now seeing quite clearly. The great majority of the ‘natural’ capital is finite, and the parts of it that aren’t are generally unable to meet sustained demand (for instance, overfishing). So-called “human capital” is inherently reliant on natural capital, as human beings need things like food, water, and clean air in order to live.

In the past, perhaps, natural capital was effectively infinite. Examples of overuse were anomalous, such as consuming all the passenger pigeons. However, the days when the aggregate impact of human activity was insignificant is long gone, if it ever even existed. This is basically just a long-winded way of talking about the tragedy of the commons, except that the planet itself is a giant commons and we’re the ones facing the tragedy. The idea is pretty straightforward, as every individual has a base level of need below which they cannot survive, the human population is increasing, and the world is inherently finite, there will reach a point where people’s needs will not be met. As Malthus might say, something’s got to give. Obviously, we are not at this point yet — isolated pockets aside — but we don’t need to get all the way down to bare subsistence level before we see problems. Capital accumulation snowballs, dividing into the haves and have-nots. We’ll talk more about the billionaires soon. The have-nots are obligated to exchange their time in order to live and are — as a rule —structurally unable to accumulate capital. As capitalism has been around for a long time, there are very few unexploited natural sources of capital — not a lot of places you can go and just stake out a claim. Just about everything is owned by someone.

Now, of course, the average American worker is significantly worse off than in our stick-figure model. Not only do they not have capital, they are forced to leverage their future ability to accumulate capital and to make economic exchanges that are less than ideal. Student debt and paying rent, to give an example of the former and the latter. This double-whammy exacerbates the aforementioned structural disadvantages — i.e. the system is rigged. The fundamental assumptions — that everyone has access to natural capital, that the supply of natural capital is inexhaustible, that making use of natural capital has no downsides — no longer hold. This is a fact that the younger generations feel in their bones, their basic survival needs forcing them inevitably into a cage of work and debt. It is economic slavery, plain and simple — the chains are simply more abstract.

The boomers should not be surprised that socialism is popular among the young, if anything, they should be surprised that it is not more popular. It goes without saying that the beneficiaries of this system do not have any desire to dismantle it, and programs of wealth distribution which would otherwise blunt the system’s sharp edges are manifestly unpopular among the billionaires.

Of course, they would not be billionaires if they were not short sighted in this regard. Better writers than I have explained at length why it is unethical to be a billionaire in a world where people are literally starving and dying preventable deaths, I will merely be gesturing in the direction of the argument.  But the fact of the matter is that very few would choose this system that they are forced to live in, if given the slightest choice in the matter. The phrase “the consent of the governed” comes to mind, and it’s appropriate here, as the entirety of the edifice rests on mutual understanding and respect for the rules that govern capital accumulation. While it’s true that we live in a society, that concept is a far more fragile thing than most people realize.

I implore you, boomers, try to enter the zoomer mindset. Looking around you see a world full of riches and luxuries that you have no hope of obtaining. If you work hard, go to a good school, you too can make 35K and live in an apartment with roommates. Looking around in the mall, at the tentacle facades of multi-national corporations, staffed by minimum wage workers. Who decided this? Why not just take what we want? The only reason the person behind the counter cares is that their manager might fire them if too much stuff gets stolen. And so on up the chain, until it’s just a billionaire owner trying to get a higher profit margin.

The instant someone offers a plausible way out, people will take it. Capitalism consumes and churns, creating millions of people who have literally nothing to lose. Historically speaking, this comes via populism, and eventually it’s always a choice between socialism and fascism (or imperialism, if you prefer). We can either build a society that frees us from the malicious incentives inherent in capitalism, or we can scramble to become the group on top, profiting by hurting anyone we can get away with hurting.

I have no illusions that Bernie will be able to do that, his proposals are only extreme by American standards — and by the standards of other non-first world countries. Most of them have made a conscious effort to take care of their citizens, cushioning them from the thresher at the foot of Moloch. Try not to let people starve to death, take care of the public health, invest in youth. Pretty basic stuff, as society goes. We’re all in this world together, “rugged individualism” is the world’s biggest scam, and Atlas Shrugged should be rightfully ignored by anyone more mature than a stunted teenage boy. Bernie merely represents a step in the right direction, and one that we desperately need. Not taking the step is possible, but unwise. There’s simply too much momentum, historically speaking. One can only rule over a disaffected populace for so long; though I’m sure the Romanovs must have felt near invincible right up until the end.

Ultimately, though, our hand is already collectively forced. We’re currently being dragged headlong into fascism by the current party in power, who are gleefully destroying anything they can’t loot or subvert. The scaffolding upon which our society rests is actively collapsing, it’s merely a matter of where we want to land. For me, the choice is clear.

A government of the people, by the people, for the people.