Month: December 2004

Many politicians, mostly Republicans of course, would like us to believe that what’s good for the stock market is automatically good for the United States. In fact, they would like us to believe that the two are virtually synonymous as Thomas Frank points out in a chapter entitled “The Democracy Bubble.” In fact, even the so-called liberal media, which should know better, has gone out of their way in recent years to bolster this idea by focusing on “common men” who have been successful in the market and on rich investors who are really just like your next door neighbor.

Unfortunately, the facts do not readily lead to the same conclusion:

Before we proceed, however, let us be clear about the stock market’s actual contributions to economic democracy in the United States. However widely dispersed stock ownership may have become in recent years, the vast majority of shares are still held by the wealthy. It is this simple, incontestable fact of American life that, more than almost anything else, has permitted the massive skewing of wealth distribution in the last two decades. Stocks are the economic engine that has generally made the rich so very much richer than the rest of us, first through the bull market of the eighties and then through the bull market of the nineties. There is no controversy or secrecy about these facts: Even an economist as partial to the New Economy as Lester Thurow acknowledges that America’s widening inequality can be attributed directly to the rising stock market. A full 86 percent of the market’s advances in the last four years of the bull market, he points out, went to the wealthiest 10 percent of the population. The majority of the population, not owning any stock, shared in the great money handout not at all.” The booming stock market of the nineties did not democratize wealth; it concentrated wealth.

When politicians talk about giving tax breaks to investors, they are inevitably talking about giving tax breaks to the wealthiest Americans, not to middle-class Americans and, certainly, not to poor Americans. While politicians could perhaps make the argument that we need increased tax breaks to ensure that more people invest their money rather than consuming more and more, they cannot make a convincing argument that such tax breaks will benefit the average voter, despite their attempts to do so.

Nor can they make a successful argument that “owning a piece of America” somehow makes you equal to wealthy stockholders:

As for the notion of representation through stockholding, it is important to remember that “one dollar, one vote” is the definition of plutocracy, not democracy. While it is true that even the smallest of shareholders is entitled to attend companies’ annual meetings and help themselves to the free radishes and nonalcoholic beer dispensed there, their votes are, in almost all cases, woefully insignificant in comparison to the massive clout wielded by institutional investors. In the case of mutual funds and pension plans, the instruments most frequently cited for their democratizing effects, individuals have even less of a voice. The voting is done for them-and by law, in the case of certain union pensions-by the manager of their plan or mutual fund.

I don’t know about you, but the $20, 000 I have invested in mutual funds for retirement has not allowed me to have much input into how the companies I “own” conduct their business. If I thought it did give me more say, I might actually buy stock in some companies that are polluting the environment so I could have some say. Of course, I’m not really foolish enough to believe that the votes I would get for $20, 000 would have any effect on the way such businesses behaved.

Equally absurd is the notion that because of increased investment in the stock market that the middle class is now in control of the market:

The notion of the “middle class’ somehow “taking control” of Wall Street may be a little dotty, but it’s hard to disagree with the underlying aspiration for a democratic economy, a financial system that respends to the needs of the people. Traditionally, of course, the institution by which the middle class has “taken control” has not been the mutual fund or the discount brokerage, but the labor union, which has a proven historical track record for democratizing the distribution of wealth. Unfortunately, Nocera had no interest in seeing the working class join the “money class”; in fact, when it came to unions, he has nothing but scorn. What unions brought was not economic democracy but inflation, the great bogeyman of his beloved “middle class.” In establishing this point Nocera made it clear that unions, as representatives of “the lucky few,” were fundamentally not “us”; in fact, they were basically indistinguishable from all the arrogant bankers and other who denied “us” our rightful percentage in the first place. “Whenever a union chief won a demand that his members receive wage increase exceeding the cost of living,” he wrote in a chapter on the economic climate of the 1970s, “his action made inflation worse for all of us, which had to bear the cost of those higher wages for the lucky few.”

As I mentioned in an earlier entry, my wife and my joint earnings qualify us as “upper income,” or in the top 20% of wage earners in America. Still, it took me most of a lifetime to find $20,000 to invest in stock after I paid for 1 1/2 homes and helped two kids through college. If it took me that long to save up money to invest, I imagine those who made less than us, supposedly 80% of the population, would find it even more difficult to do so. Personally, I have no delusions that I am talking control of Wall Street, and, judging from recent scandals, it’s questionable if anyone has any real control over Wall Street except Wall Street insiders.

In the 10 plus years that I’ve had the money invested, I’ve made just $5,000 in profits, which breaks down to about $500 a year profit. It’s obvious that those earnings would have done very little to support me. Like most Americans, it was the wages from my job that supported me, not investment earnings. It is the hourly and monthly wages that will continue to support the majority of American families into the foreseeable future. If America’s middle class is to continue to thrive as it has done in recent history it will be because wages will keep up with inflation, not because stock market values continue to rise. For most American families, it would make little difference if the DOW hit the 20, 000 mark, much less maintained the 10, 000 mark.

If the Democrats are going to regain political strength, they are going to have to realize that it is jobs and wages that are vital to American workers and once again convince voters that the Democratic Party can do the best job of protecting and promoting those jobs. While the well being of the stock market is obviously an important part of providing for the needs of all Americans, it is not the sole area of concern and to imply so is to continue to play a shill game on voters.

There are more important measures of the well-being of our nation than whether or not the Dow climbs steadily, and the Democratic Party needs to regain the high ground on issues like day care, education, health-care, minimum wages, labor laws and environmental protection that effect the well being of all of us

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Thomas Frank spends considerable time in One Market Under God, defining what he means by the New Economy, probably because there is no easy definition of the term:

While there are of course genuine economic changes underway in America (as there have always been), this idea is in large part not about economies at all but about ways of thinking about economies. It’s a set of beliefs (importantly, beliefs first enunciated by Ronald Reagan) that, once enacted into public policy, has permitted an upward transfer of wealth unprecedented in our lifetimes; it’s a collection of symbols and narratives that understand the resulting wealth polarization as a form of populism, as an expression of the people’s will.

Frank shows that this new definition of populism is nearly the direct opposite of what that term meant historically. And yet, it is this very grafting onto a nearly opposite set of beliefs that makes the concept of the New Economy so powerful.

In essence the New Economy suggests, as I noted in an earlier blog entry, that the economy is the ultimate democracy, that people “vote” their beliefs by what they buy. In the second and third chapters of his work, Frank points out both those beliefs are flawed and how they have been propagated in the media:

And yet the New Economy is a fraud. Tom Friedman’s formula, “one dollar, one vote,” is not the same thing as universal suffrage, as the complex, hard-won array of rights that most Americans understand as their political heritage. Nor does it mitigate the obscenity of wealth polarization one whit when the richest people ever in history tell us they are “listening” to us, that theirs are “interactive” fortunes, or that they have unusual tastes and work particularly hard. Markets may look like democracy, in that we are all involved in their making, but they are fundamentally not democratic. We did not vote for Bill Gates; we didn’t all sit down one day and agree that we should only use his operating system and should pay for it just however much he thinks is right. We do not go off to our jobs checking telephone lines or making cold calls or driving a forklift every morning because this is what we want to do; we do it because we have to, because it is the only way we can afford food, shelter, and medicine. The logic of business is coercion, monopoly, and the destruction of the weak, not “choice” or “service” or universal affluence.

Anyone who has ever tried to buy only products that reflect their values will quickly see how difficult it is to really “vote” your values. First, it’s difficult just to know what products do or do not represent a particular value.

For instance, I’ve always tried to buy locally-grown produce, but it has become increasingly complex to do so in local markets, except perhaps in local Saturday Markets held during the summer. Most grocery stores simply don’t label where products come from, and too often the labels conflict with the produce that is actually in the bins. If you want to support organic products, it becomes much more difficult as most supermarkets carry a very limited line of organic products. And it’s certainly anyone’s guess how the workers who handle these crops are treated.

I would hate to think that every time I finally settled for a product that was less than what I really wanted, that I was somehow voting for what that product repesented. If the market I’m shopping doesn’t carry fair-trade, shade-grown organic coffee does that really mean that I support the coffee growers who are destroying the rain-forests, or does it merely mean that companies make it increasingly difficult to really express our values through our purchases? Do I have to quit buying my grandchildren toys if I think it’s wrong to outsource American jobs to China?

On another level, I was more than a little dismayed to find out that the “socially-responsible” mutual fund I invested in had invested heavily in Wal-Mart stock. Walmart may be many things, but I never in my wildest dreams thought that my retirement funds would go to support a union-busting company. Yet, unless I’m willing to spend my retirement actually studying and following the stock market, something I’m definitely not willing to do, then I have little choice but to invest through mutual funds, effectively depriving me of my “vote” if we are to believe advocates of the New Economy.

Thomas Frank spends considerable time in One Market Under God, defining what he means by the New Economy, probably because there is no easy definition of the term:

While there are of course genuine economic changes underway in America (as there have always been), this idea is in large part not about economies at all but about ways of thinking about economies. It’s a set of beliefs (importantly, beliefs first enunciated by Ronald Reagan) that, once enacted into public policy, has permitted an upward transfer of wealth unprecedented in our lifetimes; it’s a collection of symbols and narratives that understand the resulting wealth polarization as a form of populism, as an expression of the people’s will.

Frank shows that this new definition of populism is nearly the direct opposite of what that term meant historically. And yet, it is this very grafting onto a nearly opposite set of beliefs that makes the concept of the New Economy so powerful.

In essence the New Economy suggests, as I noted in an earlier blog entry, that the economy is the ultimate democracy, that people “vote” their beliefs by what they buy. In the second and third chapters of his work, Frank points out both those beliefs are flawed and how they have been propagated in the media:

And yet the New Economy is a fraud. Tom Friedman’s formula, “one dollar, one vote,” is not the same thing as universal suffrage, as the complex, hard-won array of rights that most Americans understand as their political heritage. Nor does it mitigate the obscenity of wealth polarization one whit when the richest people ever in history tell us they are “listening” to us, that theirs are “interactive” fortunes, or that they have unusual tastes and work particularly hard. Markets may look like democracy, in that we are all involved in their making, but they are fundamentally not democratic. We did not vote for Bill Gates; we didn’t all sit down one day and agree that we should only use his operating system and should pay for it just however much he thinks is right. We do not go off to our jobs checking telephone lines or making cold calls or driving a forklift every morning because this is what we want to do; we do it because we have to, because it is the only way we can afford food, shelter, and medicine. The logic of business is coercion, monopoly, and the destruction of the weak, not “choice” or “service” or universal affluence.

Anyone who has ever tried to buy only products that reflect their values will quickly see how difficult it is to really “vote” your values. First, it’s difficult just to know what products do or do not represent a particular value.

For instance, I’ve always tried to buy locally-grown produce, but it has become increasingly complex to do so in local markets, except perhaps in local Saturday Markets held during the summer. Most grocery stores simply don’t label where products come from, and too often the labels conflict with the produce that is actually in the bins. If you want to support organic products, it becomes much more difficult as most supermarkets carry a very limited line of organic products. And it’s certainly anyone’s guess how the workers who handle these crops are treated.

I would hate to think that every time I finally settled for a product that was less than what I really wanted, that I was somehow voting for what that product repesented. If the market I’m shopping doesn’t carry fair-trade, shade-grown organic coffee does that really mean that I support the coffee growers who are destroying the rain-forests, or does it merely mean that companies make it increasingly difficult to really express our values through our purchases? Do I have to quit buying my grandchildren toys if I think it’s wrong to outsource American jobs to China?

On another level, I was more than a little dismayed to find out that the “socially-responsible” mutual fund I invested in had invested heavily in Wal-Mart stock. Walmart may be many things, but I never in my wildest dreams thought that my retirement funds would go to support a union-busting company. Yet, unless I’m willing to spend my retirement actually studying and following the stock market, something I’m definitely not willing to do, then I have little choice but to invest through mutual funds, effectively depriving me of my “vote” if we are to believe advocates of the New Economy.

Trying to read and blog Thomas Frank’s One Market Under God reminds me why I’m much more apt to turn, instead, to citing songs like Bruce Cockburn’s:

CANDY MAN’S GONE

Sun climbs toward high noon,
Glints metallic off the bowl of the spoon
Sliding through the air toward parted lips
Watch the expression when the straight taste hits
Face crumples, tongue’s quickly withdrawn
I hate to tell you but the candy man’s gone

Oh sweet fantasia of the safe home
Where nobody has to scrape for honey at the bottom of the comb
Where every actor understands the scene
And nobody ever means to be mean
Catch it in a dream, catch it in a song
Seek it on the street, you find the candy man’s gone
I hate to tell you but the candy man’s gone

In the bar, in the senate, in the alley, in the study
Pimping dreams of riches for everybody
“Something for nothing, new lamps for old
And the streets will be platinum, never mind gold”
Well, hey, pass it on
Misplaced your faith and the candy man’s gone
I hate to tell you but the candy man’s gone

Although Cockburn doesn’t try to present a logical argument to support his argument, it’s hard to miss the point of lines like “Oh sweet fantasia of the safe home/ Where nobody has to scrape for honey at the bottom of the comb.”

Everyone likes a taste of success, but the reality is that most people spend their lives struggling to just get by, and that’s unlikely to change soon. Of course, it’s one thing to spend your own life trying to get rich, but something quite different to try to run a country based on that idea.

Individuals have the right to make their own choices and to live with the consequences of those choices, for better or worse, but society still has an obligation to look out for all its citizens, particularly those exploited or preyed on by businesses, not just those who’ve managed to roll their talents and assets into personal wealth.

Does anyone really believe that if we keep electing politicians who are “Pimping dreams of riches for everybody” that all of our people will somehow magically become richer? Does ensuring that the rich get richer, really ensure that the poor won’t get poorer?