No, We Are Not Going to Beat Capitalism on the Stock Market

By Nathaniel Flakin

Republished from Left Voice.

Given the news over the past week, you would be forgiven for thinking that Occupy Wall Street had come back with a vengeance. Back in 2011, activists occupied a small park in front of a Lower Manhattan bank — now they seem to be “occupying the stock market” itself. Ten years ago, the bankers and brokers could just get their cops to arrest the pesky occupiers — but now, with the loss of billions of dollars at stake, armed thugs in blue are not going to do the trick.

The stock surge for GameStop has rattled financial markets. A motley horde of Internet users have been giving hedge fund managers a run for their money. Those who bet that shares of the retail chain GameStop would lose value (short sellers) have been thrashed as the stock price surged higher and higher, thanks to the targeted actions of thousands of small investors.

The bankers, who for more than a generation have been praising deregulation and the “invisible hand of the market,” are now calling on the government to protect them from losses. So have “little guys” taken over the stock market? Will the revolution be organized on Reddit?

Of course not. This was never going to take down the hedge fund system. At best, its greatest “hope” was to do some short-term mischief and maybe kill one small fund. Melvin Capital Investment is losing billions and might collapse — but Reuters has reported that Blackrock, the biggest asset management in the world, stands to earn $2.4 billion from the rising stock price. As Derek Thompson has explained in The Atlantic, Melvin Capital Investment was betting on GameStop’s stock to fall — and that was always a risky bet:

[GameStop’s] stock had already fallen from $56 a share in 2013 to about $5 in 2019. GameStop’s short sellers were essentially betting that a company publicly valued as “horrendous” should really be valued at a level commensurate with the notion of “truly horrendous.” They risked billions of dollars on the financial equivalent of a qualifying adverb. It’s really risky to aggressively short a company whose stock, having fallen 95 percent, is floating around $5; there just aren’t a lot of numbers under five.

A Rigged System

The discussion around GameStop has shown that the system is hopelessly rigged: even when small investors manage to exploit the rules to their advantage, those rules are simply changed to prop up the big capitalists.

But that’s only the beginning of how it is rigged. Virtually all stocks are controlled by a tiny minority of capitalists. How are all the working people in the world, even if they invested all their savings into the stock market, supposed to compete with the gargantuan sums owned by the likes of Elon Musk, Jeff Bezos, and their wealthy corporate cronies?

The rumblings have led Democratic Party “progressives” such as Elizabeth Warren to call for new regulations. She wants action to “ensure that markets reflect real value, rather than the highly leveraged bets of wealthy traders or those who seek to inflict financial damage on those traders.” Those “highly leveraged” traders,” by the way, are the hedge funds. Warren is worried about someone inflicting damage on them. 

How Capitalism Works

The entire episode is making lots of people wonder: Is this any way to organize an economic system? After all, as the back-and-forth trading has unfolded through these rather absurd machinations, who has been thinking about the effect on the livelihoods of tens of thousands of GameStop employees?

But this casino is how all decisions are made in the capitalist system. Where is housing built, and who gets to live in it? Which medical breakthroughs get funding? Which wars are waged? The same rules deciding the future of GameStop decide all these questions as well.

The stock market and its fictitious capital which condenses all the absurdities of the capitalist system into one small space. So much of the market is about “fictitious capital” — money lacking any material basis in actual commodities or productive activity. As the Marxist economist Rudolf Hilferding explained:

On the stock exchange, capitalist property appears in its pure form, as a title to the yield, and the relation of exploitation, the appropriation of surplus labour, upon which it rests, becomes conceptually lost. Property ceases to express any specific relation of production and becomes a claim to the yield, apparently unconnected with any particular activity. Property is divorced from any connection with production, with use value. The value of any property seems to be determined by its yield, a purely quantitative relationship. Number is everything; the thing itself is nothing! The number alone is real, and since what is real is not a number, the relationship is more mystical than the doctrine of the Pythagoreans.

A Way Forward

Within this absurd system, thousands of working-class people, investing their stimulus checks, might be able to steal a little something back from Wall Street — with the help of an app cynically named Robinhood. 

Yes, the ruling class is pissed that normal people are disrupting their casino. But the market remains their casino. The experience of this kind of “activism” will lead people to draw the wrong conclusions. We’re already seeing calls for more “democratic” and “fair” rules for the stock market, rather than for toppling the stock market itself.

And what happens if small investors are successful? Then some of them might become big investors. So, this kind of activism may create some new capitalists — but it’s no way to beat the capitalist class. In a fight over stocks, the rulers will always have an advantage.

But you’re in luck: Marxism is a 150-year-old science of how to eliminate the bourgeoisie and its exploitation and oppression. If we pool our money, we shouldn’t invest it in stocks; — we should use it to build up organizations that will fight for our interests —, not by trading stocks, but by organizing our strength in terms of material force.

A Problematic Ally

If you’re not convinced, consider one troubling figure who has been cheering on the small investors against the short sellers: pandemic profiteer and Internet troll Elon Musk. He understands the giant casino that passes for a global economy. After all, he has leveraged a small, almost completely unprofitable car company into a personal fortune of $180 billion. Musk is obviously not trying to bring down the system that is rewarding him with such vast wealth, nor does he have some personal vendetta against short sellers. Instead, Musk understands that this is capitalism at work.

Musk might have several hundreds of billions of dollars, but he’s a small part of the global capitalist system. We don’t need to buy him out, or beat his ilk at the stock market game. We can use our strength to take power and expropriate them. A workers’ government can put all those riches at the service of all humanity. Now that’s a project worth “investing” in.

GameStop and Revolution

By Peter Fousek

It seems that nearly everyone, from major media outlets and economic analysts to folks hopping on Twitter while bored at home or work, has something to say about the recent market activity surrounding a surprising selection of stocks. The securities in question, namely GameStop ($GME), AMC Theatres ($AMC), and BlackBerry ($BB), are unlikely candidates for financial news headlines at a point in time where their respective products and markets have been all but outmoded. Nonetheless, and in fact on account of their perceived antiquation, these companies (and other similarly “obsolete” brands) have become the focus of widespread popular attention.

And yet, only a marginal few of the countless commentaries currently filling up our newsfeeds make note of the most remarkable conclusions to be drawn from these events. This is not to say that the present analyses and examinations are anything short of illuminating: he reaction of regulatory leaders and financial institutions, while largely predictable, are very important for the public to see and process. As in 1987, 2002, 2008, 2020, and any number of other instances of financial distress, we see the powers that be scrambling for means of self-protection while the system that they have constructed for their own benefit temporarily runs the risk of transforming them into its victims.

Of course, market volatility and the resultant risk of financial devastation is an inherent attribute of capitalist economics. But, when the fundamentalist free market works as it is designed, the brunt of that necessary burden is borne almost entirely by the working masses. Whether through exploitative, unjust labor practices during even the best of times, or through the funneling of massive federal funding in the form of bailouts and subsidies to the wealthy while the already minimal safety nets for the workers are further cut during periods of turmoil, we are not hard pressed to find examples of the inequity of capitalism. For proof of the intentional, systemic nature of this injustice, we need only to notice which class it is that takes the risks resulting in frequent crises: the beneficiaries of the system are simultaneously its guarantors, and from their position of power they are able to keep themselves all but invincible to their own carelessness and greed.

While that inherent impenetrability of the capitalist class has not come close to being displaced by the recent events in the market, it has certainly been shaken. Stock market speculators, betting on the failure of a business and doing everything in their power to see it to that end (without concern for the 50,000+ employees who would resultantly lose their jobs) were forced, if only for a moment, to face financial consequences for their profit-seeking irresponsibility. And they were forced to do so not by competitors, peers among the elite, but by members of the working class.

The sad but almost certain outcome of this moment of resistance to the norms of market trends will be the propping up of the hedge funds at risk, and perhaps increased regulation preventing such unprecedented collective action from readily occurring again. We’ve already seen the popular trading platform (ironically named Robinhood) prohibit its users from buying any more of the securities in question—an effort intended to pressure them into selling before the hedge funder’s short positions expire and the elite are forced to pay their dues. And while there is talk of a class action lawsuit against the platform, with reports that Citadel reloaded their short position before instructing Robinhood to block the relevant trades, we cannot expect real justice from a system designed to protect and perpetuate the existing order.

Despite these obstacles, despite these odds, and despite the unfortunate likelihood of an unsatisfactory short-term outcome, these events that we are currently witnessing should be a major cause for hope. One prevalent stance on social media right now is the position that the working-class day traders should sell. On one hand, doing so would benefit the hedge funds that shorted the stocks, as they would be given the chance to buy back at a lower price than when their contract fulfilment deadlines expire. On another, many of the people who have taken part in this mass movement run the risk of losing their money in a world that has refused them any safety net. The greatest cause for optimism comes from a common response to this stance, paraphrased here has it has been stated by many of the working-class day traders in question: we will not sell, because we have nothing to lose.

Many of us who have bought into this moment of collective action against the status quo have done so with the full knowledge that we might not win. Nonetheless, we have taken our position and chosen to hold it, to demonstrate our dissatisfaction with a system designed to subjugate us while empowering and enriching its elite. Because the system is designed as such, we are not afraid to make sacrifices to challenge the present order. The possibility of change is easily worth the risk of losing what we have, because what we have now is worth very little. But the power of our collective action is valuable beyond belief.

The calamity of the COVID crisis has made it blatantly clear that the capitalist class is more than happy to grow its wealth at the direct expense of our most basic rights and safety. The recognition of this flawed reality is reflected, in its early stages, in the collective action taken against those hedge funds who got too sloppy for their own good. This day trader rebellion is not some singular event, and it will certainly not break the current system. What makes it such an incredible historical moment is that it demonstrates the initial awakening of working-class consciousness. The willingness to sacrifice for the sake of a greater good requires us to recognize the injustice of the present order; the events of the past few days have demonstrated that we are beginning to adopt a mindset of that recognition.

To effectively challenge the status quo in a substantial way (such as that achieved by a general strike) the people cannot act out of short-term self-interest. Therefore, successful collective action and resultant progressive change is only possible once our reality under the status quo is so blatantly insufferable that we become willing to sacrifice it for the sake of disrupting the extant order. This is only possible once we realize that the existing system is exploiting us unequivocally, and therefore that we have essentially no chance of “making it” within said system. That realization then compels us to take the only other option: of trying to make it without. The popular resistance demonstrated by the GameStop situation should inspire us to action because in it, we’re witnessing the working-class organically arrive at a trade-unionist consciousness. This indicates that the historical conditions of the present moment are becoming ripe for the working class to achieve class consciousness, from which systemic change can come.