- (Summary.) What are stock markets? They are markets for contracts that require unsustainable growth. Pro-sustainable corporations should not share profits with Wall Street—but with the people and planet that pay for those profits.
- Unless stocks are deemphasized and bonds emphasized, it is mathematically impossible that solar energy—or anything else—might create sustainability.
- Protesting stock markets is as important as protesting air pollution—but nobody is doing so.
- The New York Stock Exchange is not an original or necessary institution for capitalism, democracy, Christianity, America or free enterprise.
- There is no magical law that requires stock markets to have happy endings.
- Overpopulation is not mandated by religion so much as by stock markets.
- No movement is making the essential moves against Wall Street to make sustainability possible.
- Frequently asked questions and answers.
- Responses from prominent persons.
(To discuss this article, click here for Krystof Huang’s Facebook page. Illustrations from Wikipedia.org.)
1. (Summary.) What are stock markets? They are markets for contracts that require unsustainable growth. Pro-sustainable corporations should not share profits with Wall Street—but with the people and planet that pay for those profits.
A small but well-known minority of environmentalists and economists is quite rightly dedicated to developing an economy that is “sustainable” because it does not depend on “growth.” We already are using up resources as if we had 1.5 planets. Anti-growth activists are a step ahead in common sense. Interestingly however, they never clearly denounce stock markets. What is a stock market? It is a market for contracts which tacitly promise to emphasize growth. Obviously, any society that depends on stock markets must depend on growth.
Many anti-growth activists were probably inspired by a famous lecture, Arithmetic, Population and Energy, given by physics professor Albert A. Bartlett from 1969 to 2013. This began with this pronouncement: “The greatest shortcoming of the human race is our inability to understand the exponential function.” Prof. Bartlett thus denounced global population growth which averages about 1.2% annually. Unfortunately, Prof. Bartlett passed away a few years ago. We are unable to ask if Bartlett might similarly denounce US stock markets with an average annual growth of about 7% to 11%? In addition–as many economists seem to affirm–stock markets require population growth. So long as the economy is tied to stock markets, it is unlikely to stop population growth without devastating the economy.
This article does not predict the next financial crash or preach about morality. Based on initial responses, many people may wrongly assume that this article is like many others—either preaching that investing is immoral or predicting an imminent stock market crash. That is not what this article is about.
A primary goal of this article is simply to encourage any anti-growth person to ask any financial expert whether a lack of growth would collapse the stock markets? And if so, would the stock markets thus collapse the economy? The probable answers are yes and yes. On top of this, stock markets are uniquely destructive. In addition to general industrial growth, stock markets require population growth and price inflation. Therefore, a stock market not only requires unsustainable growth for itself—but also forces society to pursue every form of unsustainability. Until, of course, there is inevitably a massive all-out war, epidemic, famine or financial collapse.
A more sustainable alternative to stock markets already exists in bond markets. We can not expect any nation simply to dismantle its financial system. Is there a readily-available alternative to stock markets? Yes! There are bond markets. Far more money is already invested in corporate bonds than in stocks. Many investors of all sizes also believe in an “all-bond portfolio.” Thus—stock markets not only make sustainability impossible—but also are quite unnecessary.
This article does not criticize the stocks of “private” organizations, which are simply divisions of ownership. The so-called “public stocks” of stock markets are quite different. As explained above, public stocks are, in essence, a contract promising growth.
In contrast, a corporate bond is a simple loan. This money can be used for expansion, i.e., growth. However, it can also be used to repair equipment, etc. Moreover, financially speaking, the corporate bond-buyer does not care what the purpose is. Whether or not the purpose is growth, and even if this purpose fails, the company agrees to repay the bond with interest. Also, instead of focusing on “growth,” the executives of corporations that are not owned by stock markets are more free to decide at some point that “we are rich enough.” Thereby having more freedom to emphasize such things as ethics, product quality, employee benefits, pollution reduction or work conditions. Thus with bonds, the entire direction of some corporations might change from a focus on growth to a focus on the long-term quality of life for all. In contrast, for stock market corporations, ceasing to emphasize growth is unfeasible and verboten.
Also, so long as there are large stock markets, there will be large stock market crashes. These in turn can cause bond market crashes. In fact, a stock market crash is about the only thing that can cause a well-regulated investment-grade bond market to crash. Therefore, not only are stocks unsafe—but the existence of large stock markets also causes bonds to be unsafe—which otherwise might be safe.
Why do anti-growth activists not denounce growth-addicting stock markets? One reason may simply be that the idea has not yet occurred to many people. Questioning the necessity of stock markets today may be somewhat like questioning the necessity of kings in medieval times. Or in colonial times, questioning the right of European corporations to control the governments of so-called colonies.
In the nineteenth century, famous British progressives such as Charles Dickens and Arthur Conan Doyle wove tales of sympathy for British people victimized by British society–but said nothing about entire nations ruled by British corporations. Today, perhaps not surprisingly, not one economist has written one book advocating a capitalist economy without large stock markets.
Also, especially in the USA, even the most well-respected concepts of sustainability, such as “preventing climate change,” are often denounced as “anti-business.” Also, the stock market system can be seen as a global poker game, in which the USA is the clear winner. The USA-based S&P 500 index continues to fly ever higher as the USA wins over the investment capital from most other regions where stock markets are clear losers.
For the USA unilaterally to forsake stock markets today might be equivalent to England unilaterally forsaking colonialism during the colonial era. This certainly might have weakened England’s position in the world. Therefore, consciously or subconsciously, it is quite understandable that to start questioning stock markets can seem a lose-lose initiative for anti-growth activists.
Conversely however, if the British people had understood the deep injustice of colonialism, they might have worked multilaterally for a more equitable era and prevented two world wars. Similarly, the stock market era will end someday. Those who foresee this end should do what we can to soften the transition and to hope that the next era is better rather than worse.
Currently, it certainly might seem hopeless to question a de facto “divine right of stock markets“ within any context that is sensitive to politics or popularity. However, before the recent performance of Bernie Sanders, it seemed similarly an apparent non-starter for a US presidential candidate to depend on small donors. Whereas in underdeveloped nations, every small dip in the global stock market has tended to generate disproportionate devastation on currency values, wages and life savings. Thus causing the people of poor countries to suffer as a sort of safety valve for the economies of wealthy countries, rather than to receive any serious benefit. In such nations, it may be primarily a monkey-see-monkey-do attitude–a blind hope of imitating the past success of the USA–that prevents long-term intelligence from surfacing. Moreover, for the survival of human rights as well as of humanity, some people within both “winner nations” and “loser nations” certainly need to start questioning the necessity of stock markets.
Above all, a major step toward sustainability can begin immediately, by developing pro-actively sustainable corporations. Or what this article refers to as “pro-sustainable corporations.” Several possible methods are briefly outlined in section 7 below. Pro-sustainable corporations would not merely have solar panels and recycle their trash. They would also promote sustainability on a more fundamental level–such as by sharing half of the profits with the people and the planet that pay for those profits.
It is a ubiquitous cliché for businesses to say, on placards and receipts, such things as, “It is you, our customers, who make our success possible.” However, how many businesses offer more than lip service or token rewards to truly acknowledge this fact? Whenever any executive or investor can claim responsibility for enabling profits, that person receives substantial compensation. The customers as a whole are certainly responsible for every penny of profits–but generally receive next to nothing.
Perhaps the most important sectors for developing pro-sustainable corporations are also the easiest: social networking, finance and internet commerce. As demonstrated by the rapid rise of Ebay, Facebook and Google, these sectors enable a compelling new approach to challenge huge giants without huge initial assets.
Therefore, new laws or political movements might not be the most essential factors needed to reverse the suicidal direction of modern civilization. What might be more essential might be for the same types of people who developed Facebook, Google and Amazon to recognize that when they join the stock market–they thus fail to support the people and planet that support them. They are thus abusing billions of people as well as furthering the destruction of society and the environment. We need for such people instead to create more corporations such as Newman’s Own–which promise “all profits to charity.” Or perhaps at least, “half the profits to help the people and the planet that pay for the profits.” Such is the new direction of pro-active sustainability that this article hopes to inspire.
Please note that “pro-sustainable profit-sharing” does not intend to mean “sales commissions”–and generally intends the opposite. A pro-sustainable business plan, like any other, might or might not include quid-pro-quo rewards for some people who cajole other people to spend money. By itself however, any such system results in most people paying the most while receiving the least in return. The goal of “pro-sustainable profit-sharing” is to turn such traditions upside-down. To help people when they need help the most, as opposed to rewarding already-successful sales people. This might be done by funding local charities or with a donation-matching policy for “crowd funding” type systems.
“Pro-sustainable profit-sharing” also does not hamper the profit motive. A shop owner is unlikely to buy something from someone else’s shop if he sells it himself. Similarly, customers are likely to favor a business which behaves as if they are an owner. Thus, if the concept of pro-sustainable profit-sharing is properly developed, it could rapidly force a majority of businesses to shun the stock market. Otherwise, their customers will shun them.
Of course, many small companies might not generate much profit to share. Therefore, the level of sharing would need to change according to the level of net profit, while still enabling successful entrepreneurs to amass millions–albeit probably not the obscene billions enabled by stock markets. Perhaps small companies could also create a pooled profit-sharing system.
At any rate, the basic idea is to convince customers to patronize pro-sustainable companies which profit-share with them–vs. stock market companies which profit-share with Wall Street investors. This should not be difficult.
2. Unless stocks are deemphasized and bonds emphasized, it is impossible that solar energy—or anything else—might create sustainability. Of course, it benefits the environment to develop non-polluting energy sources. However, overall “sustainability” must include financial stability. Otherwise, we face ever-repeating wars and stock market crashes and consequential ever-increasing populist demands to dismantle environmental protections. Not to mention the inevitable depletion of resources if our economic system requires endless growth–regardless of how “environmentally friendly” we manage to be.
From about 1900 to 2000, we had a very inexpensive source of energy called “oil.” The personal computer also increased productivity several times over. All with little net increase in financial stability.
In contrast, the ancient Hawaiians perfected fish farming. Thus, they primarily needed to eat fish and then go surfing and dancing. Also, ancient Hawaiians were never told that they must eat more fish every year. That would have sounded ludicrous to everyone.
Today however, we so-called modern people are told by most economists and politicians that we constantly face ruination, not only if productivity fails to grow, but even if the rate of growth fails to grow. Nobody seems to ask, “Why?” Or, “How does this possibly make sense?” At the crux of this naked inanity are stock markets.
Once a business joins a stock market—it can no longer survive merely by earning millions of dollars. It must constantly increase those profits—or else its stock price will collapse—because nobody wants to hold on to a stock that does not increase in value. As mentioned above, public stocks are, in actual essence, a contract promising growth. The moment that a company does not pursue growth, this is tantamount to a breach of contract.
Also, the average stock must be profitable—or else most investors will sell most stocks—and then of course the entire stock-based economy is in peril. Therefore, many economists will assert that the economy requires constant population growth and price inflation. Thus, the majority of stock prices can increase, simply because there are more customers who also are forced to pay more. I.e., a stock market is unworkable unless it is subsidized–artificially propped-up by free windfalls from population growth and price inflation. Meanwhile, the same economists do not even think to question stock markets because they are assumed to be the core enablers of “progress.” This is as baseless as a huckster selling a used car that supposedly gets you places—just so long as you get out and push.
In the early nineteenth century, the McCormick Reaper enabled each farmer to feed many people. A hundred years later, the automobile engine further multiplied productivity. In the 1960′s, typical working-class housewives did not go to work. Many predicted 3-day work weeks for their husbands. Nobody predicted both spouses working. (Time Magazine, February 25, 1966: “The Futurists.” Fortune Magazine, March 1970: “The Myth of a Leisure Society.” Thom Hartmann in 2011: “What Happened to the Leisure Society?” ) Then the computer multiplied productivity again. And yet—just like cave people cringing in fear of a saber tooth tiger—today, after two hundred years of fantastic productivity increases, most people live hand-to-mouth and in fear of a man-made monster called “the economy.”
Anyone who thinks about it can see the massive incongruity between the history of “progress” we are taught in school vs. the current ever-precarious economic situation. This is primarily because a stock market is obviously not designed to disburse the fruits of productivity so much as to be fed with productivity which it devours into nothingness. Even more obviously, stock markets repeatedly cause financial crashes to devastate every nation that embraces them.
Of course, like slot machines, part of the lure of stock markets is huge intermittent bursts of wealth. The 1990′s benefited from the combination of new “technology” companies acquiring huge wealth with minimal hard assets, plus new levels of involvement for China. However, the high level of stock market growth was not sustained. Nor since the 1990′s have China or Europe seen stock market indexes that are consistently breaking even. Its largely unsuccessful stock market has largely been a clear negative for China, reducing its ability to enjoy its profits in foreign trade. In the USA, stock markets have consistently rebounded, but this has not translated into better salaries for the average person. Nor can these rebounds continue while surrounded by a non-rebounding global situation.
An obvious solution is gradually to increase taxes on stock market investments—until society as a whole invests almost entirely with bonds. For the following reasons.
- Stock and bond markets both have ups-and-downs. However, when stock prices fall, we sell. When individually-held investment-grade bonds fall, we hold to maturity. Thus—in addition to stocks requiring infinite and impossible growth—stocks inevitably magnify instability while bonds generally regenerate stability.
- Also—bond markets are viable at lower growth rates. From about 1920 to 2010, average annual growth was 5-5.8% for US Corporate Bonds and 7-11.8% for US stocks. It requires about 490 years at 5.8% annualized growth to deplete the same level of resources as in 100 years at 11.8%. A phase-out of stocks will obviously “buy time” for the planet.
- Above all—with bond markets, there is nothing that relentlessly requires the corporation to grow or the investor to invest! Having a “possibility” to grow vs. a “requirement” to grow is an obvious difference. This translates into a “possibility” to deplete the planet vs. a “requirement” to do so. Stock markets relentlessly require “grow-or-die” to take on a life of its own. And yet, no prominent “sustainability” advocate ever seems to acknowledge this.
- This article does not criticize the stocks of “private” corporations, not listed in stock markets, which are merely divisions of ownership, closely tied to the actual incomes of those corporations.
- When a business joins a “public” stock market—most people assume this merely enables more people to invest—but in fact, this totally changes the business, rather like attaching a second business on its back. The corporation is now combined with a sort of ponzi scheme, in which it is normal for stocks to sell at several times their true values. As any stock broker or economist will affirm, this scheme does not allow corporations the choice of slowing or ceasing growth. To do so is to risk the crash of the stock markets, of the corporations and of the national and global economy. This is often termed the “grow-or-die” imperative. I.e., so long as there are large stock markets, every nation and corporation is required to give absolute priority to growth—and thus forbidden to give priority to the environment or to society—except in limited initiatives which do not conflict with growth.
- In contrast—bonds, which always have the potential to “hold to maturity,” are closely tied to their face values. When combined with common-sense regulation, investment-grade bond markets are able to limit any ponzi-like activity.
- Also unlike stock markets—bond markets do not require population growth or price inflation. Therefore less of a vicious cycle for more industrial growth to sustain more population growth–a population growth which is necessitated by stock markets. With less emphasis on stock markets there would also be less of the vicious cycle that forces people to risk money in stock markets in order to “keep ahead of inflation”–the inflation which is necessitated by stock markets.
- Finally—stock markets make huge gaps in economic inequality inevitable. In addition simply to being able to invest a much larger proportion of their wealth, the wealthiest investors and their hedge fund managers are also able to buy stocks at special prices and to receive rapid notice of market movements. Everyone who watches the news knows the inevitable consequence: stock markets that convert mega-millionaires into billionaires and effortlessly generate more billions for their children and grandchildren. Meanwhile the average workers are considered lucky if their children can afford college and are able to hold on to a home and a job.
Of course, deemphasizing stock markets will not automatically solve every social, environmental and economic problem. However, deemphasizing stock markets is obviously essential in order to make possible any long-lasting social, environmental and economic solutions.
Throw sugar on an anthill—there will be more ants—until the sugar runs out—then comes the die-off. It is a natural tendency of any species sooner-or-later to use up all available resources. Until this is stopped by mass starvation, extinction, epidemics, wars or predation.
The human race has the intelligence to choose a different path—a sustainable path. Stock markets obviously eliminate this choice by systematically demanding relentless growth. When stock markets are allowed to grow to a size that dominates the economy of every nation, then every nation eventually loses the freedom to question even the most suicidal short-term expectations.
3. Protesting stock markets is as important as protesting air pollution—but nobody is doing so. One of the most frequent responses to this article is the assumption that it is “old news.” I.e. many people simply assume that anti-establishment or crusader types already condemn stock markets. Unfortunately, that is not true. Socialists and Marxists often condemn “capitalism” in general. Others more thoughtfully attempt to separate the good from the bad within capitalism. Strangely however, nobody seems to focus on the most key, most ubiquitous and most obvious institution that makes the “bad” factors tick: the stock markets…
• Even an “Occupy Wall Street” movement seems never to have inspired fundamental condemnation of stock markets. The Wikipedia article on OWS mainly lists protests against some of the inevitable consequences of overemphasis on stock markets: “wealth inequality, political corruption, corporate influence of government.” There seems no clear suggestion to reduce the sizes of stock markets themselves.
• There are some film documentaries which clearly warn that our global financial system is unsustainable—but never clearly denounce stock markets. The Four Horsemen — Mother Caring for 7 Billion — Hooked on Growth. There are also a number of books and even a Foundation for the Economics of Sustainability. However, while usually decrying a “dependence on growth,” they usually conclude with suggestions that are vague, debatable or unreachable. Meanwhile, they generally fail to focus upon the most obvious and insistent engine of growth: the stock markets!
• There are several well-known economists who seem likely to agree with reducing stock markets—but have yet to say so. Such as Prof. Gar Alperovitz, whose following statement almost qualifies as a summary of this article.
So long as large… corporations must meet stock market demands for ever-greater (often quarterly) profit increases, they must “grow or die.” This dynamic is diametrically opposed to the need to slow or halt overall growth and resource use in general. And it also runs directly contrary to the need to control carbon emissions in particular. Additionally, corporate political power commonly acts as a powerful obstacle to progress on other vital ecological issues—as we have seen in the United States with the failed climate change legislation and continued efforts to discredit climate change science. (humansandnature.org/economy-gar-alperovltz)
Prof. Richard Wolff, dubbed “America’s most prominent Marxist economist,” routinely makes similar statements. Also, interestingly, in the view of Prof. Wolff, Marxism is not necessarily a competitor to capitalism, so much as a method of analyzing and removing the worst faults of capitalism. (Real Time With Bill Maher, July 31, 2014.) Prof. Wolff often implies that stock markets are close to collapse—primarily because the current style of US capitalism is non-sustainable. Nonetheless, Prof. Wolff never seems clearly to declare that it is stock markets which are primarily responsible for making US capitalism non-sustainable.
There seems no clear indication that Prof. Alperovitz, Prof. Wolff or any other maverick economist has considered the following question. “Can capitalism ever become just or sustainable without reducing stock markets?” According to their stated beliefs, the likely answer might seem to be, “no.” More than that—similar to Prof. Bartlett with his gutsy refrain about “failing to understand the exponential function”—a clear statement against stock markets might seem to be called for at the beginning and end of every lecture. Nonetheless, not one such statement is readily found.
• With no intellectual leaders denouncing stock markets—it is obviously not feasible for political leaders to do so. Bernie Sanders, self-proclaimed “democratic socialist,” may be the harshest critic of Wall Street ever to make it to the US Congress. Every little bit helps. However, his most radical proposal is a small tax on high-frequency trading. Sanders has never proposed to reduce the general tax discount on stock market investing—nor proposed a tax discount for bond investing—nor criticized our dependence on infinite growth. On the contrary, Sanders supporters have argued that Sanders will deliver more growth. (Nor can Sanders be blamed for not bringing into politics ideas which have not yet been popularized outside of politics.)
• There are left-wing as well as right-wing idealists who broadly imply that corporations should not exist—but never focus against stock markets. The elimination of corporations might, of course, eliminate both stocks and bonds and might thus result in sustainability—if it miraculously happens and then miraculously does not result in the level of chaos we have seen in similarly extreme social experiments such as Chavez’s Venezuela or Mao’s China. Moreover, even so far as it has merit, the extreme improbability of a call to abolish corporations does not support sustainability any more than a call to grow angel wings. For a sustainable economy without collapsing the economy—we can simply begin with a gradual removal of tax deductions for stocks—meanwhile mollifying investors with new tax deductions for bonds. I.e., a call to abolish corporations is both questionable and an unnecessarily difficult leap. This obviously makes the more essential change of reducing stock markets only more unlikely.
• When googling the phrase, “stock markets and sustainability,” the only relevant results seem to be about the United Nations SSE Initiative, or “Sustainability Stock Exchanges.” This appears to be a laudable effort to encourage environmentally and socially responsible business practices—such as by scoring and publicizing the more responsible corporations. Similarly, there are broad-based “socially responsible” or “green investing” ETF-type mutual funds with performance histories nearly identical to the S&P 500. Conversely however, all such efforts can also be seen as prime examples of the motto of Albert Bartlett, ”The greatest shortcoming of the human race is our inability to understand the exponential function.” SSE promoters never seem to mention the fact that stock markets themselves fundamentally require growth—including infinite overpopulation, industrial expansion and price inflation. Stock markets also are fundamentally designed as instruments whereby the rich get richer and the poor get poorer. If the SSE were serious, it would at least create some sort of “feedback loop.” Such as perhaps adding 0.05% fees to several mutual funds, and donating the proceeds to organizations similar to Greenpeace and Amnesty International. This does not seem to be done. Moreover, SSE is certainly not contradicting the assertion of this section: in spite of all the talk about “sustainability,” no prominent person or group is questioning the sustainability of stock markets.
• Of course, stock markets are often condemned as unsafe or immoral—but only while confirming an “ultra naïve denialism” regarding the global effects. The net message is that stock markets are just another personal choice akin to gambling and smoking. Not that stock markets are like dictatorships—an anachronistic impediment to the future of humanity. Therefore—far from implying that it is important to reduce stock markets—the clear implication is the exact opposite. The wars, job losses and political extremism triggered by stock market crashes—the loss of life savings due to inflation—the loss of the environment due to overpopulation. All these are somehow ignored—or assumed not to be related to stock markets—or assumed not to affect anyone who does not buy stocks. As discussed in section 4 below, this naïvely denies the obvious facts. There is no “choice” of being unaffected by stock markets.
• Most unfortunately, a leading exemplar of “ultra naïve denialism” about stock markets may also be a leading advocate of sustainability: the Club of Rome. As discussed in the documentary, Hooked on Growth—one of the most influential voices for sustainability is the 1972 study, The Limits to Growth. The Club of Rome, which commissioned the study, consequently issues periodic reports, generally including warnings against growth-reliance. Presumably, the Club of Rome must know that stock markets require growth-reliance? Nonetheless, there seems to have been no clear priority for curtailing stock markets. Instead, their major report of 1991, The First Global Revolution, primarily concludes: “All these dangers are caused by human intervention in natural processes, and it is only through changed attitudes and behavior that they can be overcome. The real enemy then is humanity itself.”
Of course, changes in attitude and behavior are needed. However, a higher priority is the freedom to change. Otherwise, this becomes a classic example of blaming the victim. Attitude and behavior can make no difference when chained to the floor. So long as the economy is chained to stock markets, the only directions open to humanity are growth or collapse.
Nonetheless, the Club of Rome must be commended for working ceaselessly to become both pragmatic and readable. A 2016 summary report was posted on ClubofRome.org: A Finer Future Is Possible. The following excerpts are chosen to highlight the agreements and disagreements with this article.
To avoid collapse, we need to embrace a new cultural story, one where humanity lives in harmony with nature and where social tensions are drastically reduced… As this new story will take several years to implement we need a strategy to survive in the short-term and buy time… Buying time will work only if it is accompanied by reforms in the sectors of finance and business, agriculture, energy and the nature of work…
The dominant economic system is built on the notion of growth in GDP, which, as presently organised, requires an ever-higher throughput of energy and materials… To maintain economic growth, and so output, modern society seeks to meet non-material needs with material goods, celebrating consumerism. Conversely, if humanity stops consuming, the economy falls into a recession, with rising unemployment and even wider inequality…
For there to be a change to a better system, social and political leaders throughout would need to demand change. To do this they need to understand that change is both possible and desirable, that it would lead to a better outcome. They need to see a better way forward. New power bases and political movements operating at all levels of society, would also be needed – local, national, regional and, eventually, global. These would consist of collaborating networks from civil society, from research and policy communities, from business, from faith groups, from cultural groups, and from new economics practitioners. Such groups are needed to fuel and sustain change…
The key elements of a better economic system… ‘Quarterly Capitalism’ drives continuous growth and ecological overshoot. It contributed to the financial crisis too, as banks took on too much debt to boost returns. Shift from a shareholder to a stakeholder economy (one that includes employees, society and the environment, for example)… New investment methods (rather than just debt and equity) and the ending of tax exemptions for debt…
This article largely agrees with the gist of the above statements. However, please note that the second paragraph above describes precisely how stock markets operate: “The dominant economic system is built on the notion of growth in GDP… Conversely, if humanity stops consuming, the economy falls into a recession, with rising unemployment and even wider inequality…” Nonetheless, there is absolutely no follow-up statement which places any blame on stock markets.
This article does not claim that deemphasizing stocks vs. bonds will solve every problem. The Club of Rome seems to be working hard to detail many other steps. Nonetheless, the Club of Rome seems off-target on the all-important core issue. This is that, much more than bond markets or any other institution, stock markets make sustainability impossible.
Perhaps the Club of Rome has simply not considered making a strong distinction between stocks and bonds (a.k.a. equity and debt). They also do not seem to distinguish between investment-grade bonds and speculative debt instruments and the illegal abuse of those instruments by banks in 2007—due to competitive grow-or-die demands created by stock markets! Thus, the Club of Rome seems only slightly and equally to call for deemphasizing stocks and bonds, by way of introducing unspecified “new methods.” This will be exponentially more difficult and less effective than merely favoring bonds—already familiar to all and favored by many. Most strangely, they seem to suggest ending tax deductions for bonds but not for stocks—the opposite of what anyone who protests stock markets would propose.
More fundamentally, the Club of Rome seems to imply that emphasizing growth-dependence is a choice made by corporate executives and investors, and which choice is merely facilitated by the two relatively passive and slightly naughty methods of stocks and bonds. If so, this is amazingly naïve.
An individual investor who buys a bond, a.k.a. “fixed-income security”—unlike the stock investor—is not demanding eternal infinite growth but a one-time fixed return. Bond investments can be reinvested, thus possibly achieving constant growth for investors. However, as for corporations, nations and the planet earth, the differences between bond and stock markets could not be greater. To recap the detailed discussion in section 2 above: Having a “requirement” to grow vs. a “possibility” to grow is an obvious difference.
Similarly, advocates of social justice perennially lament the huge and increasing gaps in financial and political inequality—meanwhile failing to say a word against the stock markets which make this inevitable.
It is childishly obvious that stock markets both require growth and are major engines of growth. As already repeated above, public stocks are, in actual essence, a contract promising growth. This should especially not need to be argued with world-renowned economists who specialize in “sustainability.” Nonetheless, because of not being written by a broker or a PhD in economics, this article is having extreme difficulty in being posted where it might be discussed by a significant number of people. The history of this article might someday prove to be analogous to the tale of “The Emperor’s New Clothes,” in which esteemed experts remained silent, while only the smallest voice was able to say the obvious.
This article also disagrees with the Club of Rome’s reliance on laborious “collaborating networks” or convincing John Q. Public to see the “long-term” or “benefit to society” view. (As on page 36 of A Finer Future.) For John Q. Public, “long-term view” equals “moral persuasion.” Perhaps this might be possible. If so, however, all the more reason to find ways to appeal to a short-term view. This might be equally difficult but can not be more difficult—and once achieved, becomes far more relentless and fast-acting. Also, if only John Q. Public can be won over based on short-term views, “collaborating networks” might become superfluous.
Section 7 below briefly outlines one slight possibility for winning over the government of China to a sustainable paradigm—followed by two strong possibilities for winning over John Q. Public—by appealing only to their short-term self-interest. If only one prominent leader or intellectual would point us in that direction. Unfortunately, no such thing seems to be happening.
4. Contrary to popular assumption: the New York Stock Exchange is not an original or necessary institution for capitalism, democracy, Christianity, America or free enterprise.
This article merely points out that modern society is dominated by corporations—which are funded by stock and bond markets—and that long-term stability and peace are possible if and only if we merely deemphasize the stock markets!
Some people will instinctively respond that to deemphasize stock markets is somehow to advocate “communism” or “totalitarianism.” This is obviously not true. Here are the facts.
- Bonds are not communist. The US government and most US corporations sell bonds.
- You can buy books on the “all-bond portfolio.” This is already a well-known, well-respected investing method.
- China and Russia are communist or totalitarian or both—and have stock markets.
- Washington, Jefferson and Franklin were not communists—and had no stock market.
- Adolf Hitler was propelled to power by the stock market crash of 1929. Stock markets cause totalitarianism. They are not a cure for it.
Others may respond with an astonishing level of what seems to be self-inflicted blindness—or, as termed above, ultra-naïve denialism: “This is a free country. If you do not like stocks or what they do, then just do not buy them.”
Ironically, this is exactly what this article argues should be true. If the stock market game were deemphasized to the level of a Las Vegas casino, then we might all choose to play it or ignore it. Unfortunately, that is clearly not our situation.
- Unlike casino games, every news show frets about stocks. Because they affect everyone.
- The stock market crashes of 1929 and 2008 caused millions to lose their jobs and possibly their life savings—regardless of whether they bought stocks.
- Walk in to any office of any stock broker and ask what will happen if you do not invest? The answer is that more than 1/2 the value of your savings will be lost to inflation.
- Walk in to any university and ask any economist, why do we have inflation? The answer is that we must have inflation to support the stock markets.
- If a prostitute is forced to pay 1/2 her income to a pimp, she is said to be “owned” by the pimp. Similarly, everyone is somewhat “owned” by the stock markets.
- For more thoughts in this direction, Google the phrase, “inflation is invisible taxation.”
5. Contrary to most financial experts: there is no magical law that requires stock markets to have happy endings. Most financial gurus will advise a never-sell buy-and-hold strategy for stocks. Also, for those who desire greater safety, large investments in corporate or municipal bonds. This is in spite of the ubiquitous refrain by the same people: “past performance does not predict future performance.”
Buy-and-hold is like a religious faith based on the performance of US stocks in the previous century. This ignores the fact that, during most of the previous century, the situation was entirely different. The EU did not exist and roughly half the planet (Russia and China) was primarily non-competitive non-capitalist. This also ignores what happened in 2008 and also what has happened to most non-US stock indexes since 2008. (See the 2006-2016 performance graph below.)
Also, we saw numerous bankruptcies and near-bankruptcies of US blue-chip corporations, insurers and regional governments in 2008: California, General Motors, Goldman Sachs, AIG, Lehman Brothers, etc., etc. This has proven that corporate and municipal bonds are now like wooden fire escapes: only safe just so long as there is no great need to be safe. Investment-grade corporate bonds should be safe. If not for our over-emphasis on stock markets, most bonds would be safe. Currently however—so long as the stock market has the power to trigger a cascade of blue-chip bankruptcies—then allocating anything for corporate or municipal bonds primarily means that you can allocate less for maximum-safety gold or US Treasury TIPS.
Meanwhile, buy-and-hold is working badly for the Eurozone and Chinazone stock markets—which have not regained the losses from 2008 nor even from the dip in 2011. (See EZU and FXI in the graph below.) It is reasonable to hope that, for a good while, US-based investments may continue in a solo flight that defies global gravity. However, it is not reasonable to assume that this is a certainty. It is not reasonable to advise any investors to entrust substantial portions of their life-line either to corporate bonds or to buy-and-hold stock positions.
My simulation results below suggest that it might be possible to reduce risk with stop-and-go strategies. However, this can not save the planet, but might only mitigate recessions for some investors. The real answer is gradually to increase taxes on stock market investing. Partly so as to repay some of the huge expenses that stock market crashes cause to society. Partly to reduce the sizes of stock markets.
6. Overpopulation is not mandated by religion so much as by stock markets.
Overpopulation and stock markets are the two most destructive factors facing the human race. So long as we have either one of these factors, the human race obviously cannot achieve long-term peace and security. They are also closely related. As mentioned in sections 1 and 2 above, many economists will affirm that, in addition to the “invisible tax” of price inflation, stock markets must also be subsidized via eternal population growth. This may be a significant reason that, after switching from hardcore communism to a stock market economy, China eventually abandoned much of its famed population control efforts. Ironically, China currently is also cash-rich, and therefore could instead add insurance programs for a superior bond market which is not growth-dependent. Nonetheless, this alternative never seems to be considered by anyone, whether socialist or capitalist, and whether progressive or conservative.
Here is an example of how even the most enlightened thinkers can be blinded by the current conventions of economic reasoning. Fareed Zakaria is a prominent progressive journalist and author, a participant of the Davos World Economic Forum, known for independent thinking and strongly in favor of environmental protection. Fareed Zakaria is not an economist but has a PhD in political science, has several honorary degrees and has repeatedly editorialized on economic issues. This includes several articles encouraging countries, including China, to abandon population control efforts. Here are excerpts to show Fareed’s thinking on overpopulation–and which also seems typical of economic experts.
According to the U.N., the average woman needs to have 2.1 children to maintain the population of a developed country. But in the European Union, every single country is below that 2.1 level… Not only will some countries’ population shrink they will also get older. Europe’s over 65 crowd will increase to over a quarter of the population there by 2050, according to the U.N. Japan’s will be over 1/3. That means that already cash-strapped countries will have higher bills to pay to provide retirees with pension and health benefits.
So, it’s no wonder that Denmark and other countries are getting creative to promote procreation. The Japanese government has funded matchmaking events. South Korea’s government is trying to reduce the extravagant price of weddings to encourage more marriage… A region in Russia encouraged citizens to bear a patriot on June 2012, Russia Day, offering money, refrigerators and even cars…
The U.S. has a younger population than Europe to begin with, and it takes in lots of immigrants. And immigrants tend to have more children than native-born Americans. So the United States, compared to many other large, rich countries in the world, will be demographically vibrant and growing for decades, and immigrants will help drive that growth… (Fareed Zakaria GPS, “What in the World,” June 14, 2015. Podcast at TuneIn.com. Also see: “Could China’s One-Child Policy Change?” July 12, 2012.)
Thus, Fareed cheers on macabre efforts to eliminate elbow room in countries which already have no elbow room. Meanwhile paradoxically celebrating the fact that the US has superior growth potential because it is less overgrown. The fact that this population growth must ultimately place the US in the same dilemma as those other countries is blithely ignored. Perhaps most telling of Fareed’s limitations is his April 27, 2013 monologue, “Global Poverty Paradox.” Here are some excerpts. (Based on a video at YouTube.com. A full text is at transcripts.CNN.com.)
Watching countries from around the world grow and prosper, we tend to assume that global poverty is falling. But when I dug deeper, I realized that the picture is more murky. Put simply, most of the reduction in global poverty has to do with one country, China. Take it out of the equation and the numbers look very different… By registering double-digit growth for three decades, Beijing has transformed the fortunes of a poor nation within a generation. That’s amazing. But it tells you that in the rest of the world, progress has been much, much slower, if there’s been progress at all.
There’s a lesson here for other developing countries. Take India for example. New Delhi has also made strides against poverty. The problem is, those strides have only been a few steps ahead of population growth. Look at the numbers. In 1981, 429 million Indians lived in poverty, about 60% of the population. By 2010, the percentage of impoverished people had dropped to 33%. And yet the total number of Indians living in poverty was still around 400 million. Why? You see, India’s population had expanded by about half a billion. For all the millions who were lifted out of poverty–millions of others were born into it.
What is the answer? Growth! In the 1960′s and 70′s, India was infamously stuck in a rut of slow growth–with a mediocre 2% a year often. Then in the 1980′s it began opening up–and in the 1990′s New Delhi scrapped much of the old socialist set of controls. By the mid 2000′s India was growing at around 9%. That growth helped create India’s middle class and dramatically reduced the number of people living in poverty…
That’s why India’s recent drop in economic growth is alarming. Those most affected would be the poor… Global poverty is falling. But China deserves most of the credit. And, thanks to the Communist Party of China, we now know that the road to poverty alleviation is: capitalist-led growth!
In other words, Fareed begins rather astutely by showing that a supposed drop in global poverty statistics is almost entirely due to one nation with unusual economic growth. If we look at the other underdeveloped nations–then we see that “mediocre” a.k.a. “median” economic growth–the level of growth which most nations can expect most of the time–solves nothing. Nonetheless, Fareed somehow concludes that economic growth solves everything. This seems to be done by ignoring half of his own data. Fareed is “alarmed” by a lack of economic growth–but not alarmed by India’s population rapidly growing by half a billion. Fareed also neglects to mention that, in addition to unusual economic growth, China has experienced an unusual level of population control. Fareed’s resulting philosophy seems to go something like this.
(This is a satirical reiteration. This does not intend to imply that Fareed Zakaria would make such suggestions for individual financial planning–nor that Fareed has unconventional views. Quite the contrary. The hope is for Fareed and others to see that their views on overpopulation, albeit thoroughly conventional, would obviously be absurd and destructive if translated to an individual basis. And thereby to consider whether the satire and the reality are equally absurd. Except that the reality is on a global level which is leading to global destruction.)
Suppose Bill and Bob are neighbors who both have struggled to raise six children. But today, Bob’s family is emerging from poverty. Why? Because Bob got a job paying the highest salary in town! So, the answer to poverty is for people like Bill also to get the highest salary in town, or close to it. Then they can live happily ever after. Just so long as they decide to keep up this high salary.
Of course, Bill and Bob also might make things saner by raising fewer children. However, then who would take care of Bill and Bob in their old age? Some primitive people believe in saving money for old age. Even some economists still cling to this outdated idea. However, we modern economists understand that too little spending can slow down economic growth. The modern, educated person knows that the only way to plan for old age is to have substantial numbers of children.
Of course, these children must have even more grandchildren and great-grandchildren. Each generation also must have better jobs than the last. Otherwise, everyone slips back into worse poverty than before. Therefore, the only way permanently to reduce poverty is permanently to achieve capitalist-led growth!
Fareed seems to conclude from similar half-baked reasoning that poor nations simply must follow China in achieving about 10% annual economic growth. The following questions are not mentioned. Firstly, can the average underdeveloped country reasonably hope to maintain several times the economic growth of the average developed country? Secondly, can even China reasonably hope to maintain annual economic growth in the region of 10% or even 5%? Thirdly, what happens when each surge of young people reaches reproductive age and creates a greater surge of more young people? And these obvious questions do not include the side effects of growth. Such as environmental depletion and an ever-increasing dependence on GMO crops or chemical agriculture.
A growth-dependent plan is a non-plan. Any economic plan that relies on growth is self-evidently confessing that it is not able to achieve much by its own merit. A growth-based plan is like someone saying, “We are living so far beyond our means that we cannot pay off our credit cards. Shall we organize our priorities and find ways to economize? Nah! Let’s just pile on the debt and count on getting a raise or a better job every year.”
The most significant question for growth-based planning is also the most simple: Why? Why with all its technology and brains does the human race not achieve long-term security for all? Why do we instead rely on an uncertain, rabbit-like existence, inevitably leading us to yet another war or recession or other variant of the cyclical die-off of rabbits?
A rapid reduction of GNP will always be a huge challenge. However, a serious economic vision should at least plan for everyone to survive comfortably under neutral or slightly negative economic growth. Then when any growth occurs, it will result in huge benefits for all. Instead, we have a system described by Fareed where 2% annual economic growth causes misery and 9% growth results in a temporary reduction of misery. Then instead of question the sanity of this system, Fareed seems to conclude, “So, we just have to have growth around 9% or more and keep it going.”
Thus, when overpopulation mixes with economics, one of the most multi-faceted thinkers suddenly can seem as two-dimensional as the salesperson for a Ponzi scheme.
Increasing China’s population is also not going to stabilize its stock markets. Firstly, China has no room for population growth without severe social and environmental degradation. Secondly, stock markets are globally competitive. The USA has numerous strategic advantages—including that it is far less overpopulated. If China were to rid itself of the destabilizing factor of its stock markets, China could attract investors to a new type of nationally-insured corporate bond game. Conversely, China has no chance of winning the stock market game and is foolish to try. In insisting on maintaining a major stock market, China is also thus destroying the potential security advantage of its corporate bond markets.
The obvious and inevitable consequence of a global stock market economy will sooner-or-later be an unwinnable war between China and the United States—triggered by both superpowers desperately seeking to satiate an insatiable need for growth.
Perhaps it is progressive thinkers such as Fareed Zakaria who may someday be seen the most responsible for the disintegration of modern society–due to their failure to recognize the obvious need for population control. Self-serving billionaires and politicians cannot be expected to rise above the animals they are. It is progressive leaders like Fareed Zakaria who the world must depend on to promote the most basic principles of sustainability—and who often fail to meet this responsibility.
On the other hand, political humorist Bill Maher, another progressive icon and often a collaborator with Fareed Zakaria, can claim the unusual distinction of consistently denouncing population growth. However, Bill Maher seems to claim that the answer to most such problems lies primarily in abandoning religion in favor of “human reason.” Evidently within his idea of human reason, Bill Maher also advocates routine drug intoxication. Also, even though well beyond a struggling comic on the rat pack circuit, Maher continues to schedule events at Las Vegas casinos—which are certainly a match for the Vatican in promoting irrationality. In order for humanity to abandon tradition in favor of reason, it is necessary for a few reason-based people to exist. Meanwhile, as discussed in section 3 above, no progressive leader seems to have followed human reason far enough to denounce unlimited stock market growth. Which is certainly the equal of population growth in causing the inevitable annihilation of global resources.
Obviously, reproduction is essential for any species. Therefore, nature logically might have created an off-switch for logic wherever reproduction is concerned. It might thus be understandable that even the most rationally-trained people are often bizarrely self-contradictory concerning the clear mathematical imperative of limiting the global human population.
Also, art, music, humor and religion all speak more profoundly to humans than science because — like humans ourselves — art, music, humor and religion are sublime and inexplicable fusions of the rational with the nonrational.
Unfortunately, there are no large institutions representing art, music or humor relating directly to the improvement of human behavior. In contrast, the following categories of organized religion each directly influence about one billion or more people: Roman Catholicism, Protestant Christianity, Hinduism and Buddhism, Islam. All have also influenced one another away from warmongering and towards instruments of peace. Furthermore, at the heart of all these religions are moral codes—which can be defined as rules for doing right while disagreeing with natural instinct. I.e., the very purpose of religion can be defined as traditions developed to check against the ultimately self-destructive instincts of nature, which always result from an unchecked following of nature’s constructive purpose.
Logically, it is only with the help of large organized religions that large numbers of people might permanently be influenced to stabilize the global human population. Also, the traditional purpose of organized religion can be aligned toward doing so. However, only Roman Catholicism is unified enough to spearhead significant changes. And unfortunately, Roman Catholicism was originally aligned with nations which required high birth rates in order to maintain defensive armies — and today is aligned with nations which have stock markets. Consequently, Roman Catholicism continuously teaches that couples are obliged to procreate and that condom usage is a mortal sin on a level with murder. Which obviously is nonsense.
Nonetheless, religion is obviously not entirely to blame for nonsense. The Roman Catholic church has often gradually been persuaded by scientific reason—such as that the earth is not the center of the universe. However, a religion can not be expected to abandon tradition for reason—when those supposedly representing “reason” are fanatics for tradition. It is not priests so much as the mathematically-trained economists who maniacally insist on infinitely more children. Even though the anti-mathematical ignorance required to believe in “infinite population” is far more obvious than required to believe in an earth-centered universe.
In contrast to economists, the Bible teaches that God created every species. Therefore, to destroy any species is to declare war against God. Not to mention the extinction of dozens of species every decade due to human overpopulation.
Also, if all Christians are one family and all Muslims are one family — as both of their scriptures teach — then before having a second child, all parents should at least pay for the education of another child who is living among garbage.
In order to have any hope to stabilize human population, we obviously must respect and ally with traditional religious disciplines and family values while only correcting one destructive and ungodly hypocrisy. Such as does not seem to be the current direction of any popular movement.
Meanwhile, even hardcore environmentalists are split into two camps: those who acknowledge that human population must be stabilized vs. those who blindly follow conventional economists. Those who suggest that we stabilize the population are of course basically correct —but generally fail to see that we cannot stabilize population without causing economic collapse —unless we unplug the economy from stock markets!
While on the other hand — those who suggest that we blithely prepare for 14 billion people have no suggestions on how we consequently prepare for 28 and 56 billion. Some will even argue, with no evidence whatever, that it is “simply impossible” or “must violate human rights” to convince 7 billion people to stabilize the global population. So—a Mars landing is possible, solar powered electricity is possible, artificial intelligence is possible—but population control is automatically impossible? Will population control be easier if we wait until there are 14 billion or 28 billion to control?
It is ludicrous to allow a massive problem to become more massive, in the expectation that this will somehow make solutions easier. Meanwhile, the fact is—well-educated people naturally tend to have fewer children. This trend might not continue. However, instead of nurturing this trend through education—as described by Fareed Zakaria above, governments invoke incentives for more births for the sake of “the economy”—regardless of how crowded the people or stressed the environment. Obviously — no matter how many soda cans we recycle or how seldom we flush the toilet — this endless-growth thinking (or, speaking more plainly, this rabbit-like non-thinking) is at some point going to devolve into war or chaos.
If a person has 7 dozen cats, everyone will label that person as pathological for “animal hoarding.” Somehow however, if a person has 7 billion dollars or a planet has 7 billion people, many of our most respected scientists and economists will cheer this on, thinking only about how to facilitate an increase to 14 and 28 billion. This is beyond pathological. This can not end well.
7. No movement is yet making the pro-sustainable moves against Wall Street to make sustainability possible.
- There is what I call the “High Plains Drifter” initiative. This means firstly, for one reputable economist to write one book arguing that capitalism has a future if and only if stock markets are deemphasized. Secondly, for the leaders of one underdeveloped or “outsider” nation to read said book and thus to start one new game on their own terms: encourage corporate bonds with national insurance programs and low tax rates—meanwhile discourage stocks—and thus become increasingly admired and imitated after each new, ever-inevitable global stock market crash. Russia, China, India, Greece, Cuba, Venezuela and Indonesia obviously should encourage bonds over stocks. Currently however, every nation stubbornly bellies-up to be fleeced at the anachronistic Wall Street game—regardless of whether they are a naïve novice, an atheistic anti-capitalist, a religious fundamentalist or even a chronic loser.
- Or, a “Newman Age” could be upon us if some new promotional strategy somehow enabled stock market corporations in every sphere to be eclipsed by for-charity corporations à la Newman’s Own—with a similar ferocity as My Space was eclipsed by Facebook. Currently however, there seems little significant interest in such projects.
- Or, a “Fight Fire With Fire” initiative might mean for some nonprofit foundation to manage “socially responsible” brokerages, autotrading systems, trust funds and mutual funds. If 1/3 of the foundation’s resulting income were used to finance pro-environmental politicians and organizations—while 2/3 were hoarded and reinvested—this eventually might build up a war chest with which to enable environmentalists to cross swords with billionaires and corporations. Currently however, environmentalists must forever act like the Dutch boy with a finger in a dyke.
The Occupy Wall Street movement has been a vital first step. Just as it is often vital for the victims of child abuse to meet in group therapy. Thus to nurture the courage to vocalize violations by people who they were taught to awe and revere.
It remains to be seen whether internet-based “social networking” is perhaps responsible for destabilizing the Middle East and is perhaps enabling thuggish populists to gain power worldwide. Nonetheless, we thus have proof that technology has enabled a few people to create dramatic changes. What remains to be proven is only whether there are people with the inspiration to make changes for the better?
Ebay, Google and Facebook all had humble beginnings—and yet, soon eclipsed stock market giants, even before joining a stock market. For the first time in history, it is no longer necessary to own steel mills in order to challenge the likes of Carnegie and Mellon. What is lacking today is only the will, not the capability. Each of the above “non-Wall Street initiatives” obviously could be accomplished within fewer than a dozen years by fewer than a dozen inspired individuals. This is probably a narrow window of opportunity and to which almost nobody is yet responding.
(To discuss this article, click here for Krystof Huang’s Facebook page.)
8. Frequently asked questions and answers. Answers to the most directly relevant questions will be incorporated in the main body above, which is already rather long. To avoid further over-complicating this article, other “good questions” will be briefly discussed here.
• “Why over-emphasize stock markets? Tyrants and dictators existed before stock markets and will continue to exist after.” Not necessarily. Democracy, human rights and environmental protection are more recognized now than ever before. Although on the other hand, a careful study of polls indicates that only about 1/4 of the USA is totally clear that Donald Trump is unqualified to be a world leader, to appoint supreme court judges, etc. He calls real news fake news–he has never apologized for demanding the death penalty for some teenagers who were accused of murder in spite of DNA exoneration–he insisted that the previous president was not born in the USA in spite of a full birth certificate–etc. If such a person can be elected president during one of the greatest stock market booms in history–imagine what can happen the next time there is a stock market crash. The human race is clearly in a position where it can move towards sanity or chaos.
This article does not claim that reducing stock markets will solve every problem. However, this article does claim that no solution is permanent unless combined with a reduction of stock markets! I.e., reducing stock markets does not replace anything else for social justice. However this must be included in the agenda. Otherwise the goal cannot be achieved. Meanwhile, the fact is, nobody is even talking about reducing stock markets. Therefore, no solution can be permanent.
Please consider the following. Without stock markets, there would be far fewer billionaires. Without stock markets, “too big to fail” corporations would be far smaller. Hence, without stock markets, the power of corporations and billionaires to evade and to change laws would be far smaller. Also, they could not more-or-less “blackmail” nations into supporting their whims and even bailing them out when they fail. Because not so much of a chunk of the job base or the economy will depend on the largest 1% to 10% of corporations or the wealthiest 1% to 10% of the people who control them.
Meanwhile, one thing we can be sure of. If we were to disassemble the state as known today–but whatever replaces it includes a stock market–then eventually we will have the same injustice and inequality or worse. Today, the Walmart daughters control more wealth than the total combined wealth of 40% of Americans. They are using this money to fund their political desires. This is not democratic. This could not happen without stock markets. So long as there are large stock markets, no laws are going to change this.
Of course, there are notable exceptions. Trump and the Koch family did not make their money directly from stock markets. However, they basically created systems that use the stock market system, directly or indirectly. More importantly, stock markets basically enable the largest corporations either to be immortal or to be replaced by ever-larger corporations with the same agenda. Regardless of which corporate monster is sitting on the throne, it is the same system of drawing money out of local communities and into the Wall Street poker-like game called the stock market. Which in turn systematically concentrates wealth in the largest investors.
• “It is impossible to stop stock markets! Why waste time on this article?” Nobody knows the future. Not long ago, it seemed impossible to stop monarchies, feudalism or colonialism. Twenty years ago, most people would have said it was impossible to stop shopping malls. Today, shopping malls might be driven out of business by internet commerce. Ten years ago, few people had heard of Facebook. Today, Facebook has eclipsed MySpace. In another ten years, Facebook might also overshadow CNN and Fox News. Similarly, ten years ago, relatively few people had heard of Bernie Sanders. Now imagine if across from every Walmart there were a Bernie Mart—and if for every Google there were a Bernie Search. Now imagine if—instead of sucking millions of dollars out of local communities every week—the Bernie-types used the profits mainly to help the local customers who paid for those profits? Very soon, everyone in the USA could have a close friend or relative who had received life-saving help—simply because they had used Bernie Search or Bernie Mart. Every time you shop at a store, you should be considered part owner of that store. No “member fee,” no “ideological persuasion,” and no legal complications are required. The store only needs to require itself to give away some profits—without making any promises to any specific recipient. Newman’s Own has already established this business model—except that it donates at-will to charities instead of at-will to customers. In contrast, any Wall Street corporation must send the bulk of profits to Wall Street investors. The customers who pay for Wall Street profits must ultimately be milked like serfs or cattle. Thus, a new business model could place all Wall Street corporations at a disadvantage. Therefore, for the stock market paradigm to wither and die, perhaps all that is needed is for some clever people to develop a clever promotional strategy. Perhaps some of the same people who developed Facebook and Google. This already includes some who questioned whether they should sell out to the stock markets.
The author of this article agrees that it seems unlikely that this article will attract the necessary attention, because it was not written by an economist with the necessary credentials. Thomas Paine was perhaps similarly described as “a corsetmaker by trade, a journalist by profession, and a propagandist by inclination.” Paine was not among those who were qualified to draft the US Constitution.
Nonetheless, Paine’s essay “Common Sense” was the first to express clearly the idea of the United States separating from England and its king. Without that essay, the United States and democracy itself might not have happened. Similarly, in being the first clearly to denounce stock markets, this simple article just might inspire a significant step for long-term human survival. Also, the primary difficulty is not in making huge changes, so much as in inspiring a few people to invest some time or money in the necessary non-Wall Street business initiatives.
• “Haven’t stock markets been around for centuries and made a lot of money for a lot of people?” This is somewhat true for the USA—but mostly untrue for China and many other countries. To this day, neither the China nor the Europe stock indexes have “broken even” from the 2008 crash nor even from the 2011 dip. The majority of stock markets are not working for the majority of nations. Furthermore—China and Russia have communist traditions. Their stock markets are not doing well and they have the ability to turn their backs on them. The main reason for those countries to retain those stock markets is so that a few people in special positions can make billions of dollars. Also, at some point the USA stock markets will do consistently poorly. At such time, to avoid chaos, it will be essential for at least one economist to have written one book about running an economy without stock markets. This article may be the first step toward inspiring such a book.
• “In any case, isn’t it already too late to reverse climate change—and certainly late in the day to deemphasize stock markets?” Maybe and maybe not. There might be a more enlightened age after a brief dark age. In any case—if the human race is destined for failure—it is even more important that a few people learn the reasons for that failure. Otherwise, the old failure of Earth 1 can only lead to new failures of Earth 2, 3 or 4. If even our most enlightened leaders fail to perceive a most fundamental and self-evident truth, there can only be failure after failure until every remnant of humanity withers away.
• Why not focus on “campaign finance reform,” i.e., “getting money out of politics”? Thus reduce the ability of billionaires and corporations to maintain their undemocratic wealth and influence? That is a good choice for emphasis—but without reducing stock markets, it is both limited and temporary. Starting with Ralph Nader’s “Public Citizen” group, significant initiatives for “campaign finance reform” were inspired from the 1970′s until 2010. Then the Citizen’s United Supreme Court decision instantly turned all resulting progress upside-down. So long as we have mega-corporations as well as some individuals that control tens of billions of dollars and that hire and fire tens of thousands of Americans—“keeping money out of politics” is as whimsical a goal as keeping the ocean out of a lagoon. Also, stock markets are what enable and indeed require corporations to merge and to “grow or die” until they become “too big to fail.” In order to have a lasting remedy for “money in politics,” we really have four choices. Make corporations illegal? And thus make it difficult for anyone to develop any kind of business. And possibly turn the US into another Venezuela… Or, as briefly outlined in section 7 above… gradually increase taxes on stock market investing—so that stock markets—which are primarily responsible for the creation and maintenance of billionaires and of mega corporations—are eventually reduced in size and influence to the level of Las Vegas casinos… And/or… develop a non-Wall Street business model, similar to Newman’s Own. But that profit-shares with consumers—thus developing overwhelming public support—thus out-competing Wall Street corporations until they gradually go extinct… And/or… for one economics professor to write one book—explaining why Third World countries can never win the stock market game—and are either foolish or corrupt when they attempt to do so. And to suggest an alternate bond-based system which does well the next time that the rest of the world is having a 2008-level stock market crash. And thus eventually for more and more nations to develop a just political system—and a truly sustainable and crash-resistant economy. Which obviously must not be a stock market economy.
• “Isn’t 5% average annual bond market interest even more unsustainable than 1.2% average population growth?” Perhaps. Firstly however, on average, every human being uses space, creates waste and creates other human beings. Whereas, bond interest does not directly translate into resource depletion. Secondly, if there were no need for price inflation, there would be no need for investment profits. Thus, at any time, as growth dies down, bonds might automatically become less available, less profitable and less necessary—all without causing society to collapse. Thirdly, at worst, it is possible to think of bonds vs. stocks as similar to natural gas vs. oil. Natural gas is a less-polluting “bridge fuel” which can “buy time” as we reduce the use of oil and coal. Finally—in addition to about twice the annual growth rate of bonds—stock markets directly require population growth and directly cause collapse when profits falter. Bond markets are not a perfect solution. However, the primary vulnerability of bonds is that bonds can collapse if there is a major stock market crash. Otherwise, it is clearly wrong to imply that bond markets are nearly as dangerous as stock markets.
• “Aren’t real estate markets similar to stock markets?” Yes, and closely connected, and in some ways worse. Stock markets initially inspire competition to make goods and services affordable. In contrast, the basic goal of real estate markets is to make homes unaffordable and to enslave people in debt. Fundamentally however, it is more appropriate to compare real estate to gold than to stock markets. Real estate markets literally sell “real” property. If only the population would stop growing, then perhaps housing prices could stop increasing. However, the houses would still exist and still be valuable. This is very different from stock markets, which aggressively require both population growth and price inflation—and thus obviously must some day cause a total depletion of the national and global ecosystem—both financially and environmentally.
• “Isn’t this article too long to become popular?” This is indeed a long article—or a short book. Therefore, section 1 was created as a summary to meet the level of interest of most people. The full 9-yard discussion is for those few with the most serious level of interest. Or perhaps the specific focus of one section might especially interest some people. Such people should not be neglected by leaving out anything important.
9. Responses to this article from prominent persons and organizations.