The Editorial Challenge of GameStop
![[Dado Ruvic/Reuters]](https://images.squarespace-cdn.com/content/v1/5f21dbb91adde3260d4ba1ef/1612812587715-BQH3L3QU4DNDJTMF3CQ7/reddit-gamestop)
[Dado Ruvic/Reuters]
By Tony Karon
There’s nothing new about a group of anarchists conspiring to attack the crooked capitalism of Wall Street.
One group tried a century ago, their chosen weapon being a bomb stashed in a horse-drawn wagon, which killed 30 people and wounded 300. Mercifully, last week’s “attack” on the vampires of finance capital was, by comparison, entirely benign: Its weapon was a smartphone stock trading app called Robinhood, and no blood was spilled in the orchestrated kiting of the shares of GameStop — though it might have resulted in a metaphoric bloodying of the nose of at least one predatory hedge fund.
As a means of “sticking it to the man” by disrupting the working of an institution that exemplifies many of the grotesque inequalities of American capitalism, Robinhood proved as ineffective (though, thankfully, far less violent) as the anarchists’ wagon bomb. But, just as you’re not going to hurt the institutionalized inequality that is Wall Street by setting off bombs, you’re not going to disrupt it by buying stocks. On the contrary.
The Gamestonk fervor posed an interesting editorial challenge for AJ+: How to cover a trend that excited a segment of our audience because it was packaged as a challenge to Wall Street greed, but on which we needed to pour cold water precisely because it was anything but a challenge to systemic predatory capitalism.
All of the following statements are true:
The surge in small investors buying GameStop stock was a major source of excitement for some of our audience, who saw (and perhaps even participated in) something which Reddit posters and even mainstream media coverage portrayed as a way of hitting back at the power of hedge funds on Wall Street, or even challenging the inequalities of capitalism itself.
For some of the participants, subverting the plans of the short-selling hedge funds was an act of revenge stoked by heartfelt rage at the pain caused to their families by Wall Street firms in the 2008 financial collapse.
Even some progressive politicians like Rep. Alexandria Ocasio-Cortez were moved by the spectacle, denouncing the rigging of the Wall Street system against what she characterized “a small win for everyday people.”
This was the proverbial “teachable moment”: Wall Street is essentially a casino that does little good for the real economy where goods and services are manufactured, traded and consumed. More than 85% of all transactions in the stock market are speculative, i.e. investors buying shares on the assumption that hype will make others want to buy it and raise the price of that stock – not because of any estimation of the returns potentially generated by the profitability of the company’s actual business.
This isn’t even a particularly radical view. The idea that the stock market adds little value to (and, in fact, serves as a drag on) our economies and societies has been well argued by the likes of the Financial Times’ Rana Foroohar. It’s a singular failure of mainstream media over the past three decades to be reporting on stock market indices such as the Dow Jones Industrial Average as they measure the health of the economy; on the contrary, those indices mostly measure the rate at which the rich are growing steadily richer, regardless of how the rest of us are doing.
That’s because 84% percent of the value in the stock market is owned by the richest 10% of Americans, and fully half of that 84% is owned by the richest 1%. When we talk of Jeff Bezos growing $70 billion richer during the Covid pandemic or Elon Musk’s wealth growing by $132 billion, that’s not because Amazon’s profits from selling goods and services or Tesla’s from selling cars have grown by those proportions; it’s because the price of the stocks they own has ballooned by those amounts. Equity and capital markets, as we noted above, have risen exponentially as a result of speculative activity (bets, like the ones the Gamestonkers made on GameStop) and the government injecting hundreds of billions of dollars to keep them humming.
While AOC and others are pointing out how the dealers that rig the casino – and their dedicated media, like CNBC – are whining for some wiseguys to step in and eject the smart kids who figured out a system to beat the house, the problem represented by the stock market itself runs far deeper than this or that set of rigging practices.
In truth, the stock market is hardly a platform for rebellion against capitalism or the rich – while the GameStop surge ruined the schemes of one or two hedge funds, other hedge funds made hundreds of millions of dollars in quick profits by capitalizing on the “stick-it-to-the-man” surge. On Wall Street, the man always wins, because the man isn’t one person or firm; the man is the system itself. (Notice how Elon Musk blessed the GameStop surge? You’re not “eating the rich” when the richest person in the world is egging you on.)
Most of the small-time investors drawn into the scheme will lose money, though, as in a ponzi scheme, the early adopters will make bucketloads of cash – the Reddit user who claims to have authored the scheme also claims to have made a personal profit of $48 million on it.
And “everyday people” don’t have money to spend on Reddit-guided stock buys; they’re struggling to put food on the table and pay the rent. Here’s a good perspective from labor movement economist Ethan Miller: “If you don’t look too closely, the activity of the past few weeks resembles a classic story of everyday people coming together to take collective action to topple a corporate fat cat. While a handful of r/WSB users may have come out on top, the real winners in this case were the brokers, market-makers and the hedge funds that control them (including Citadel, which subsequently swooped in to “rescue” Melvin Capital). During periods of high market volatility like we saw this past week, Wall Street banks money no matter what.”
So, how to respond editorially? The best way to do that may be to draw more attention to what the stock market is and isn’t, why people may be looking to challenge its power, but also why they’re unlikely to achieve that goal by buying shares. A good place to start would be by reading economist Doug Henwood’s explanation of why the Gamestonkers “have done the world a service by reminding us of the utter uselessness of the stock market, an institution that serves no purpose besides making a small number of undeserving people rich.”
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