Despite the clever sloganeering of Occupy Wall Street, there is too much confusion about the reins that the rich use to maintain the economic status quo. While I can understand that the economy may appear to some as ethereal, we must not let ourselves willfully fall into the trap of obscurantism. To change the world we must understand it, but through our own logic; not by borrowing the assumptions of those who wish to keep things the way they are. Much of the blather we read about the economy obscures the tension between those with money and those forced to sell their labor on the market. If we cannot see things as they are, we will be unable to imagine ways to confront the crisis of inequality. Most damaging is the adopted tendency to use the titillations and drops of the stock market as a barometer for the vitality of the economy. We may all live in the same economy but we do not experience our economic system in the same way. It is time to see it clearly.
The economy has changed dramatically during the past few decades, and though real wages have not increased for the majority of workers, there has been a proliferation of millionaires and billionaires. Ups and downs in the market affect us all differently and these gains have failed to benefit working people. What is the DOW industrial average to a shift worker? What is a bubble to those working in the growing “gig economy?” To build a new economy that benefits the many and not the few, we must dispel abstractions that obscure our thinking and understand that the reason capitalists are uninterested in the massively growing inequality and worsening conditions for workers is because what is good for your boss, investors, and bankers, is not good for you.
The American working class does not share in the profits of Wall Street, but they do share in its losses. Most working Americans have little to no assets, but the subprime mortgage crisis plummeted millions of Americans into poverty nonetheless. In 2008, there were 39.1 million Americans living in poverty, and, by the official end of the recession, 44.1 million Americans were in poverty. These figures could be much higher since these numbers were sourced from the official government measure of poverty, which is rightfully criticized for underestimating the number of Americans in poverty since it does not account for the increase in modern expenses.
While Americans were forced into poverty, the banks that were responsible for the crisis were bailed out. Wall Street knows the rules of the game: no matter how speculative your bets, the Federal government will have your back. Tellingly, no provision has been made for the millions of Americans who lost their homes and livelihood as a result of the greed of Wall Street. The minuscule limitations put on Wall Street are set to be repealed by the Trump Administration, but these rules were written by the same people who caused the crisis.
Proving Wall Street’s incredible ability to learn nothing from previous crises, the stock market crash early in 2018 was essentially a reaction to news that wages were slightly rising for workers (though it appears this was more of a justification to reset the high price of stocks than a cause). A speculative Wall Street bet on the VIX rate, which measures the volatility of the market, made the slump worse. Trading the VIX rate was a Wall Street favorite; traders blinded by euphoria ignored the risk of tying large sums to the health of the stock market, ensuring that highs would be even higher but this also means lows would be even lower. When stocks dropped to historic lows the VIX rate soared and the money tied to these investments evaporated.
There is a fundamental tension between those who are forced to sell their labor on the market and those who possess capital. Today one of the most important manifestations of this tension is the relation of finance and labor. Work creates the commodities and services that are sold. Finance provides the capital. While it is not responsible for material production, finance does provide an important function for capitalist production. For example, for a farmer who only is able to sell commodities after the harvest, finance can provide the money you need to produce up front. In return, they make a claim on a portion of that farmer's profits. Of course, financiers don’t provide upfront capital out of love; they do it in order to profit from her production. This is one of the contradictions of finance: it profits without producing, and while it can provide an important basis for production its inclination is always to profit more. Marx wrote in Capital that for financiers “the process of production appears merely as an unavoidable intermediate link, as a necessary evil for the sake of money-making.” Eventually finance capitalists “attempt to make money without the intervention of the process of production.” Modern economic crises are created from the divorce between finance and production. Finance rushes ahead believing it has shed its responsibility to production and when its folly is realized the entire economy spasms.
The centrality of finance to our economic system is not only a problem because those who control that system can be reckless; it is a problem because there is currently no incentive for the system to work toward the general good. With an orientation toward profit rather than public interest, finance actively works to suppress wages. Potentially, publicly owned banks could alleviate this tendency by pursuing financial policies that benefit working Americans. The financial class opposes their creation.
It is not surprising that financial interests oppose solutions that benefit the public good. Corporations are financed by selling stocks, which entitle stockholders to a share of future profits. The relation this arrangement has with labor is antagonistic. Payment to workers in the form of wages is a cost, which reduces the rate of profit for shareholders. Simply put, when wages are low they profit more.
The value of investment in Wall Street is not only created by the value that stockholders extract from labor, but also through the exchange value of stocks. While the value of a stock can be influenced by reactions to changes in production, like a materials shortage, it can also be changed by ideological factors. Fluctuating prices caused by rumors contradict libertarian claims about the inherent rationality of the market. For example, the Long Island Tea Company was failing and regularly losing money, so it changed its name to Long Blockchain and saw its share price increase 289% despite making no tangible changes to its business.
Wall Street is encouraged—not discouraged—by the depressing proliferation of “gig” jobs and the increase in Americans forced to work two, even three jobs to get by. The extension of the standard working day and the dissociation of workers from a physical location serve to exacerbate the alienation from society many workers already feel. But this is no worry for Wall Street.
Wall Street worries when low wages prevent workers from being able to buy goods and services. There is a contradiction here–capitalists want to suppress wages but need a market to buy their goods, and they have found a solution: credit debt. The working class should shudder anytime the pundit class floats the phrase “market-based solutions”. As it pertains to workers, a market-based solution is punishment posing as pleasure. American workers now can afford consumer products but tied to credit debt and now student loan debt many Americans do not have the freedom to avoid work that is menial and underpaid. The desperation that many workers face is not a bug in the system but is something that is fundamentally tied to the way that our workforce is organized.
During the Great Recession, credit debt as a percentage of GDP surpassed 99%, and today it hovers around 80.1%. The credit system is not something that inherently looks bad for economists and capitalists. For example, this piece in the New York Times: “How Credit-Card Debt Can Help the Poor.” Basically, it argues that, since poor people have no assets, credit debt allows them to make large purchases. While this is technically true, the lack of access to assets and capital for poor people is caused by stagnant wages and lack of access in the first place. While debt provides temporary relief for working people, it only obscures the reality that 40% of Americans have negative net worth. The wealth of the top 1% is built off the poverty of the rest of the country.
Measuring the health of the economy by the vitality of Wall Street obscures the essential conflict between finance and labor. Today only a few profit and they profit on the misery of others. Finance has become the center of modern capitalism but it has no accountability to the public. As long as the interests of the rich dominate our political system, the working class will lose. By understanding our chains, we can break them. The golden age is in us and we will bring it into being.