You can’t check a news report these days without coming across some reference to “the markets.” The reason is obvious. Activity in financial markets are shaping our lives in so many ways, and pretty much determining our economic presents and futures. Given this reality, it’s worth stepping back for a moment and understanding who or what “the markets” really are, and where they are taking us.
A good first step here is to understand what they are not. Economic professionals like to pretend that financial markets (what’s usually meant by the term “the markets”) represent the collective wisdom of countless individual investors, a kind of economic democracy with millions and millions of votes made at kitchen tables and workplaces by ordinary folks like you and me, a collective wisdom concerning the true worth of stocks, bonds and other assets. A wisdom far greater and less fallible than that of democratically elected public officials.
Hogwash! Today’s financial markets are nothing of the sort.
What they are, in fact, are vehicles for short term (often very short term) decisions by a few thousand stressed out and highly caffeinated 20- and 30-somethings, sitting in cubicles in a few score office towers in a half-dozen large cities, guys (they are overwhelmingly male) employing esoteric tracking and trading programs concocted by a few computer programmers, an assemblage working together with a single purpose: not to advance the well being of us all, but to produce short-term profits for their companies and bonuses for themselves.
Sound like a new variant on the old Adam Smithz ethic? A variant in which individual self-interest works toward a common good? Wrong!
The personal greed on view here does not translate into a collective good. The chief beneficiaries of these market doings are not creators of valuable things like railroads, energy industries, steel as in the Robber Baron era. They are not, by-in-large, allocating capital in ways that while enriching themselves enrich others, not enlarging the common pool of wealth that improves the human condition generally. The chief beneficiaries of these markets are creators, peddlers and users of financial products like derivatives. The spin-offs of their machinations don’t trickle down as wealth and greater economic security for the many, but as ever more concentrated wealth for the few and ever more insecurity for others.
An evil conspiracy? If only. There’s no club of Rome here, no Elders of Zion, no Templars, noMasonic Order running this show. No tight-knit pool of selfish wisdom guiding things in lieu of collective wisdom emanating from countless small investors. A real conspiracy, at least, might sometimes practices self-serving moderation to quiet and pacify its opponents.
Instead, the markets today have reached the stage of their devolution in which what’s produced are just makeshift patches on proliferating sinkholes that the markets themselves produce. Even market leaders who once fancied themselves masters of this universe now play the role of Wizards of Oz after Toto has pulled away the curtain. Exposed, yes, but unlike that wizard, no longer able or willing to stop what they’ve been doing.
Do I have any suggestions about how to fix this terrifying state of affairs? None whatever. The remaining stability in the international financial order, as I see it, is now only due to the enormous inertia inherent in any vast system.
A great many things could have been done in years past to prevent this from happening. They weren’t. In consequence, here we are…