-----Original Message-----
From: Sid Shniad [mailto:[EMAIL PROTECTED]]
Sent: March 13, 2001 7:10 PM
Subject: Capitalism's Casino (the stock market) - The Guardian
The Guardian March 5,
2001
Capitalism's Casino
As social security dwindled, Americans gambled on the stock market
to protect their futures. They're losing
By Gary Younge
Six months ago a church worker in Harlem put me on hold for what
felt like an indecently long time. Just as I was about to hang up on our
conversation about the church's moral responsibility to balance the
competing goals of historical preservation, economic development and
racial and social diversity in the area, he returned to my ear as abruptly
as he'd left. "Sorry," he said. "That was my broker. That's a call I had to
take. Now where were we?"
A few days later I mentioned this to a social worker in Brooklyn by
way of an amusing anecdote. He was amused - but only by my naivety.
"You always take the call from your broker," he said. "I'd put my wife on
hold for him. And she wouldn't be mad if I told you either. She'd do the
same thing."
In a country where the percentage of people owning stock and
equities had risen by 31% in four years, following the stock market had
become a national sport. With more than a third of the nation owning
stocks, Wall Street and Main Street appeared to have converged. The
average investor might be in his or her late forties, white and professional
but stock ownership had breached the barriers of race, social class,
ethnicity, political affiliation and region in a way previously reserved for
God and Coca Cola. Around 80m Americans owned stocks or mutual
funds - more than watch the Oscars, surf the internet or voted in the 1998
congressional elections and double the number in 1983.
Everyone, it seemed, could be a dealer; and dealing and following
your stocks could take place everywhere. Thanks to new technologies
you could trade from your home and check your stocks on your mobile
phone in an aeroplane and in most business foyers, where hungry eyes
feasted on flashing numbers flickering across television screens.
All things considered, this was hardly surprising. Between 1982 and
1999 prices on the stock market climbed every year but one. In 1999 the
Nasdaq leapt 86% and reached its high point this weekend last year. Just
as Fukuyama proclaimed the end of history, so theorists believed the
"new economy" could defy gravity and logic.
But the ramifications went way beyond the economic. Socially, the
stock market was the main topic of conversation at water-coolers,
barbecues and dinner parties. "I felt I had to get some stocks just so I'd
have something to talk about," said a Brit who moved to New York two
years ago. People joined investment clubs in thousands and some
mutual-fund seminars with top money managers were standing room
only.
Culturally, it was de rigueur. Business presenters became household
names. The anchorwoman for the business channel, CNBC, found herself
so besieged that she started asking her husband to pick up the Chinese
takeaway. "I'm trying to get out of there with my food," said Sue Herera,
"and the cook's asking, 'What's with Intel?'"
Television shows like The Street and Bull turned the stock market
into
prime-time soap operas. "Wall Street is the new American pastime," said
Michael Chernuchin, the creator of Bull, last year. "People follow the Dow
and Nasdaq like they are sports scores. The average New York cabby
used to have the Daily News on the front seat beside him. Today, he also
has Barron's and the Wall Street Journal."
So long as graphs went skywards the outlook remained sunny. But
with markets plunging, and the economy flattening, the stock-buying
American public now find themselves under a stubborn, dark cloud.
Membership of investment clubs has dropped 23% in the past two years;
advertising in personal finance magazines has nose-dived; The Street
was cancelled halfway through its run thanks to poor ratings. In the space
of just two weeks last month the number of investors describing
themselves as bears almost trebled while the number of bulls more than
halved, according to a membership poll by the American Association of
Individual Investors.
To some, this signals nothing more than the jitters of novices who
were in it for the quick buck rather than the long run. The increase in
stock ownership, argued the right, demonstrates both the invincibility and
democratisation of capitalism, turning millions from spectators to players
in the free market. With everyone from social workers to the clergy
involved, the primacy of the market was entrenched.
Whether this was wilful disingenuousness or wishful thinking (or
both)
is not clear. Either way it represents a fundamental misinterpretation of
the phenomenon. For while some joined the investor class with making
an easy fortune in mind, the motivation for most of this new generation of
investors is not getting rich but not becoming poor.
Since the Republicans started slashing spending on wealth,
healthcare and education and weakening labour laws, prompting job
insecurity, people have looked for ways to make themselves less
vulnerable. A survey released last year by Ariel Mutual Funds and
Charles Schwab revealed that saving money for retirement, children's
college education and emergencies were all cited before "obtaining a
better lifestyle" as reasons for investing in stocks.
This was not confined to the US. Many Britons invested in private
pensions, endowment policies and private health care because they could
see the writing on the wall for the welfare state, pensions and the NHS
under the Conservatives.
And while the political complexion of governments may change, the
basic belief that the market can, should and will play a meaningful role in
supporting our social needs prevails. Herein lies the ideological impetus
for the third way and private-public partnerships pushed by Blair. It also
provides the glue for Bush's planned social security reforms, whereby
workers will have "individual retirement accounts" with managers they can
designate themselves.
With the stock markets taking a pounding, the fig leaf for this
political
direction has been removed. In its place we see that the politics of the
past 15 years has been based on the assumption of permanent economic
prosperity. What sense does welfare to work make if there is no work?
What point is there in private finance initiatives if capital is scarce?
Meanwhile America's baby boomers sit and fret. With each market
bulletin they see their hopes for a comfortable retirement and a sound
educational grounding for their children fade. Worse still, with the paper
value of their assets plummeting, many have spent against savings that
have withered away.
Economists call it dis-saving. "The collapse of savings has been one
of the most striking phenomena of the US economy in the 1990s," said
the Financial Times. The trouble is, like those who took out endowments
20 or so years ago in Britain only to find they cannot pay off their
mortgage today, many here thought they were playing it relatively safe.
Naive? - possibly. But their choices were limited. Having been
ideologically cajoled and politically coerced to invest in their "own
future"
they now find they have gambled it in capitalism's largest casino.
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