As someone who has spent the last decade working as an investment advisor, I was an avid champion, and supporter, of capitalism.
However, like many in the industry, I eventually became disillusioned. Making money for the sake of money, after all, is quite hollow. While some are building companies, or buildings, or offering services; my life as a small-time hedge fund manager left me feeling like little more than a bougie, aristocratic gambler, toiling my days in front of a screen playing the stock market.
The time has come for me to set the record straight. I do not believe in taking an absolute stance on capitalism, at this point in history; it has become too intertwined, too complex, too dependent upon the will of key players and legislators, to be summed up as “good” or “bad”.
The reality is, that the future of capitalism – and the fate of humanity – remains in our hands. As such, the following piece is an intro to the multifaceted world of finance and capitalism.
So what is the point of this piece? Anyone can attack the many flaws of capitalism, and denounce those facets that brazenly (or sneakily) hold us back from reaching our true potential, a world in which every human being has the right to be free.
But it takes a nuanced and balanced perspective, to call attention to those facets of capitalism, that may actually present us with the chance to change the course of history, for the better.
Stock Market: The Longest Con
In many ways, the stock market is one of the two most harmful systems at the core of capitalism.
Of course, at the individual actor level, there are exceptions to this. Any company that is run by good, honest people; and is not destroying the environment, or the lives and livelihoods of stakeholders, customers or innocent civilians, may be one of the “good guys”, in a system that, on the whole, is completely broken. Examples of good companies, might be 4Front; Iroquois Valley Farm; Nordstrom; etc. Likewise, I know and have worked with many honorable, trustworthy investment advisors and professionals.
But back to the bigger picture.
The line between con artists, and financiers, has always been a blurry one. If this sounds crazy, consider that Bernie Madoff – the greatest con man of our era – was the CEO of NASDAQ. Jay Gould and Big Jim Fisk – two of the most famous financiers of the 19th Century – were con artists (who conned Commodore Cornelius Vanderbilt into attempting to corner the market for shares in the Erie Railroad, by simply printing more and more stock, so as to make the market uncornerable). So was Daniel Drew (who sold bloated cows to Henry Astor). Enron – hailed as one of the most successful stocks of the late 20th century – was essentially a con. Dick Cheney was the CEO of Halliburton, while he was Vice President of the United States – and successfully advocated for a costly, destructive war in Iraq, that would enrich him beyond belief.
So why is the stock market a con? First of all, it is controlled by a small number of people. Every boom cycle has historically ended in a bust; and during the bust phase of the cycle, the average American becomes poorer, loses land or assets to the banks; while the top 0.1% (notably, those in control of and in bed with banking institutions) get richer.
Second of all, the stock market perpetuates the status quo, giving an incredible advantage to incumbent firms. In this day and age, everyone knows Monsanto, Lonmin, Seaworld, McDonald’s, Texaco, Halliburton, are evil; so why are these players still around? Because they are part of the Fortune 500; they are owned by every investor, rich and poor, who owns an index fund like SPY or QQQ. Furthermore, the stock market, with its functioning like a giant digital casino, effectively separates us from our money to such an incredible extent, that most of us have no idea where our money is actually invested – and thus, what it is actually supporting.
I’m still working on this piece; but I include the title, to call attention to the fact that what we call “real estate” – or the earth we live upon – is the common denominator that underlies all human activity.
By investing in real estate (ideally without leverage, unless we can afford to repay bank loans rather than get foreclosed on), we are directly contributing to building the future we wish to live in.
The Unique Phenomena of Greed in Modern Capital(ism)
Modern Capitalism, like any system, is generally characterized by its fundamental structure. It has no emotions; and thus, it has both redeeming qualities, and harmful characteristics.
On the bright side: capitalism is a system for encouraging human productivity. It allows humans to interact with each other across the world.
On the down side: It’s generally impractical, counterintuitive, and grating to the soul, to be greedy with anything natural: food, land, resources, love, compassion, nature. These are things that will go to waste, if hoarded; or if owned by a tiny fraction of the population. The sharing of these things, creates positive feedback loops of happiness and human productivity.
Along with the stock market, the other facet of capitalism that I consider most problematic, and anti-human, is fractional-reserve banking, and the concept of interest (not so long ago, uniformly called “usury”, and banned by nearly every major religion). Interest, in its current form; combined with the fact that money, is the only thing in the world that defies the natural law of decay; encourages greed and perpetuates increasing economic inequality. This is not the fault of people who ask for interest; that is only normal today. It is the structural acceptance of interest, as a fair mechanism for underpinning modern capitalism, in our era of increasing economic inequality, and massive conflicts of interest that exist between big business, and the condition of the environment and the average human on earth.
On the down side:
Money is the only thing that defies this convention.