Short-term speculation doesn’t help the economy. Stocks plunge or climb capriciously over incongruous events. Even so, market analysts were asked last week if petroleum, auto, construction and medical stocks would be rising with the flood waters in Texas.
Thirty years ago, amidst laissez-faire fanaticism, policymakers urged Americans to gamble golden years on do-it-yourself retirement plans, or 401(k)s. Instead of safe, predictable streams of income from traditional pensions and social security, investing was encouraged.
Originally designed to supplement pensions, corporations used 401(k)s to replace them, and a recent study shows how misguided that 401(k) revolution was. Affluent households stashed away $1.3 million on average. Middle class savings were a paltry $44,000. Squirreling away money to shoot craps in the stock market has proven a poor substitute for pensions.
One solution is to phase out 401(k)s and create a government-run savings plan to supplement Social Security, just as public banks can alleviate government debt at state and municipal levels.
Wall Street is a casino, an entity unto itself far-removed from Main Street, where money is risked to make more money and nothing’s produced for the common good. If trading stocks is high stakes poker, then hedge fund operators, investment firms and derivative-leveraging CEOs are the house. And the house never loses. CEOs make 270 times what average workers make, not including lucrative bonuses and severance pays. Their job is to compensate shareholders, not stakeholders. So, it’s illusory to believe stock market bubbles and corporate profits benefit the rest of us. Neither are bull markets, and other contrived indicators of GNP and economic growth, synonymous with “genuine net progress” or sustainable, improved qualities of life. That disconnect between profits and wages, between “winnings” of the 1 percent and overall stagnation for the rest, has been a prevailing trend for 30 years. Debt crises at all levels are spiraling out of control in large part because of Wall Street’s “trickle-up” redistributions of wealth and capital.
Circulating money and equitable distribution of capital are sustainable economic drivers, not a 1 percent enriched by over half our capital gains. When 1960s CEOs shared corporate profits with workers by boosting, rather than freezing, their wages, economists called it a “virtuous circle of growth.” Then, business leaders abandoned the policy in the 1980s, cutting wages, benefits and jobs. Corporate earnings and wages now comprise the largest and smallest recorded pieces of GDP, respectively. Similarly, the richest 10 percent of Americans own 80 percent of U.S. stock shares. Bull markets, therefore, merely transfer wealth from rich, who’ve cashed their shares too early, to the rich who haven’t. And those capital gains and dividends get favorable tax code treatments. Billionaires and multimillionaires continue to pay 12 percent of their income in taxes each year, while most of us pay twice that amount. A 0.5 percent transaction fee on Wall Street and higher taxes on the rich will alleviate income inequality and get the U.S. out of debt.
Scott Deshefy is two-time Green Party congressional candidate. E-mail: firstname.lastname@example.org.