The stock market is reaching record high level. Is it really good news to our economy? William Lazonick, Director, University of Massachusetts Center for Industrial Competitiveness, describes that the prevailing stock market ideology enriches value extractors, not value creators, in his Huffington Post article “How ‘Shareholder Value’ Is Killing Innovation” (1 August 2017). In fact, there is concern that “The Fed is getting worried about the stock market,” according to Business Insider (5 August 2017). Truth be told, the stock market is just an institutionalized casino where profit vultures mine and store wealth for posterity and perpetuity.
Most people understand that whenever and wherever there is a for-profit business model, money has to be and will be made to be delivered and directed to a selected few. Typically, the capital owners are on the top of the food chain and most of them are predatory, constantly on the lookout for profit. As soon as they spot a profitable business, they zero in as investors, demand to be rewarded with their investments, soak up as much money as they can and eventually leave with their gains to prey on another target. They claim that it is their right for their return on investment (ROI). I call them the ‘profit vultures,’ but Mr. Lazonick refers them as ‘predatory value extractors.’
Such profit seeking for profit’s sake kind of investment concept is counterproductive to the conventional idea of devoting money plus time, effort, and energy to a particular undertaking with the expectation of a worthwhile result in the long run. What is supposed to be a positive, healthy and mutually beneficial relationship becomes impersonal, selfish and exploitative. Whatever is deemed as worthwhile over time becomes solely as monetary profit. The time, effort, or energy aspects of planting seeds, breeding, nurturing, growing and harvesting in the end are completely lost in the evolution of investment, culminating in the creation of the stock market.
In the early history of investment, the purchasers of stocks, bonds and other securities were literally described as speculators. According to some purists, they still are. Being labeled as investors now give them certain legitimacy but the stock market is still like a big casino and speculation is rampant. Anyone with money can buy shares of the companies listed on the stock market and sell them at any time as long as the market is open for business. It requires minimum amount of time, effort, or energy. As a matter of fact, the whole process can be computerized and preprogrammed, to maximize the chance of profiteering.
There is little regard to a company’s potentials other than the ROI. Long term investment for capital expenditures like hardware, machinery, equipment, etc. or for employee wellness, training and empowerment, meant to increase productivity, may make a company profitable but take a longer time to bear fruit. Those are hard ROI money. Why go the hard way when there is an easy way?
Easy ROI money involves short term manipulation of various financial instruments, assets and processes, through flipping, high frequency trading, stripping companies of valuable assets to cash out by mergers and acquisitions, price fixing, loan sharking, gambling (or hedging for the financially literate), tax cheating, insider trading, cooking the books, etc. Some may be legal and some may not and a lot of such practices are likely in the grey area, but it does not stop some investors and their financial partners from taking advantage of them.
Such financial maneuverings with the explosion of new and complex but mostly non-productive financial products created with the help of the mathematics and computer talents and wizards have enriched hedge fund managers, investment bankers, big bank CEOs, mergers and acquisitions specialists, financial instruments traders, financial advisers, portfolio managers, financial services analysts, etc. There is even a new term, ‘financialization,’ created just to describe such phenomenon. According to Oxfam’s annual study of inequality released in January 2016, the financial sector is a prime source of rising inequality; one in five billionaires comes from that industry. Income inequality has become an insidious and infectious disease that rears its ugly in unexpected territories these days.
How do countries founded on democracy like the U.S. and Europe, allow such misdeeds to happen and continue? Self-interest and greed have driven the profit overdrive to the extreme and to the mainstream, to the point where it is powerful enough to override the moral norm and sometimes the legal limit, from bending the rules and cheating to outright breaking the law. Unless they are apprehended, the avaricious ‘profit vultures’ are presumed innocent until proven guilty.
Capital owners have always been the originators of businesses and the promise of profit has always been the motivation and reward of starting new businesses. It seems to work until recent history, but the profit mandate is increasingly giving people license to feed their insatiate appetite for greed endlessly. Now, such profit overdrive has become so addictive and contagious that it has the potential to disrupt and upend the capitalist economic system.
How do we solve such a problem? I propose one solution:
The Nature Order Zociety or NATORZ will swap profit mandate with universal job guarantee at living wage made possible by G.R.E.E.N.-laundering and Greenopoly, and create a circular need-based economy to anchor sustainable, self-sufficient and resilient communities. It will serve our survival physical needs, rebuild and reinvest in socially cohesive and healthy communities, prevent the tragedy of the commons, and harness and utilize our creativity for self-actualization and purposeful lives while solving the world’s most pressing and needy problems, especially climate change.