The performance of the stock market is the subject of daily news report under the general subject heading of ‘the economy’. Increased activity on the stock market is usually correlated with improving economic health. There is just one fundamental problem with that picture – the stock market is not the economy, and to present it as a barometer of economic well-being is seriously misleading.
The stock market fluctuations are all very interesting, but they are divorced from the pain and tribulations of a pandemic economy. Contributing editor at Pacific Standard magazine, Jared Keller, wrote that the stock market is divorced from everyday economic reality:
Day-to-day swings in the stock market don’t indicate anything about an economy’s long-term vitality. That’s because it only represents a small sliver of U.S. employment.
Stock markets booms are all well and good, but they are not the basis of economic recovery from recessions, including the pandemic-induced downturn. Stock market booms are no basis for constructing a renewed economy of shared prosperity.
Paul Krugman, Nobel prize-winning economist and professor, has commented that the post-Covid-19 recovery is bypassing those who need it the most. The pandemic is still rampaging through communities in the United States – and the stock market rebound is increasing the wealth of the existing ultra-wealthy financial elite. Why is any putative recovery not helping the most needy? It is because stock market rebounds assist the large multinational corporations, but leaves the rest of us behind.
Krugman elaborates further that the top one percent of Americans own more than half of all stocks. The bottom half of Americans own only 0.7 percent of stocks. The ultra-wealthy 1 percent are the major players and beneficiaries of stock market activity. This is far removed from the daily and practical realities of unemployment and poverty faced by millions of people.
Matt Phillips, from the NY Times, explains the disconnect between the Wall Street stock market and American working class communities:
Part of the reason is the makeup of the stock market, and the fact that the giant companies that make up the S&P 500 operate under very different circumstances than the nation’s small businesses, workers and cities and states. They are highly profitable, hold significant sums of cash and have regular access to public bond markets. They’re far more global than the typical American family firm.
Thomas Palley, economist and writer living in Washington DC, writes that stock market prosperity is an obsessive concern which promotes a toxic illusion. Share markets create wealth for their major investors, but that wealth is not shared with the rest of the population. This has implications for the Australian economy, structured as it is along neoliberal capitalist lines.
From 2003 until 2013-14, the corporate media in Australia hailed the mining boom, a period of continuous revenue generation through the sale of our mineral and natural resources. The duration of the mining boom is flexible by a few years at either end of the time period. Be that as it may, the Australian public was invited to celebrate the ostensible ‘good times’ of increased profits due to this mining boom.
Let’s accept that Australia experienced a resources boom, beneficial to the economy. Richard Denniss, chief economist from the Australia Institute, asks a pertinent question: with all this revenue from the mining boom, did anyone suggest building world-class mental health services, or improved domestic violence resources, financed by at least a portion of the profits from the mining boom?
Did the substantial majority of the profits from the resources boom go into the coffers of the giant mining and energy multinationals, with Gina Rinehart being a typical representative of this billionaire stratum? The most effective strategy of the billionaire class is convincing the rest of us that wealth will trickle down to all of us in a cascading waterfall of shared prosperity.
Cutting the budget deficit is presented as an all-important goal – except when the multinationals want subsidies from the government in the form of tax cuts. As Denniss explains:
When powerful groups want subsidies, we are told they will create jobs. When powerless groups want better funding for domestic violence shelters or after-school reading groups, they are told of the need to reduce the budget deficit.
Millions of Americans are food insecure, while the stock market experiences a resurgence. Food banks are delivering assistance to increasing numbers of unemployed and working poor families. How are any of these people going to rise out of poverty because of the increasing profits on Wall Street? It is time for governments to stop protecting the riches of the transnational corporations, and improve the lives and health of working people.