The recent steady advance of the stock market, routinely hitting new highs since the Trump Administration took office, deserves some careful thought and assessment. Moreover, such consideration is particularly appropriate in light of two record-setting down days three weeks ago when the Dow Industrial dropped some 1,100 points. Is the party over? Was it a fake party all along? In light of all the other fake news, maybe so…
First, it is necessary to acknowledge the familiar superficial responses heard from the financial industry through its almost wholly owned mainstream media. On the run-up: despite high price-earnings ratios, stocks remain a fundamentally strong investment. The market is reflecting the positive impact of the new business-friendly leadership. As the regulatory playing field is leveled, the market is reflecting a new environment for American business in achieving competitiveness in the global economy. America is becoming great again.
How about the dizzying two days of 1,100 point drops? (Maybe we can blame those on Obama…?) We hear that those are just normal corrections that temper unrealistic expectations, put prices more in line with earnings, and simply build a more substantial base for further advances. In other words, a good thing.
Let’s identify some facts inherent in this welter of fluff. First, although it’s often treated as such, the “market” is not a living, breathing organic entity. And further, it represents anything but the moral core of American culture. It is basically the scorecard for globalization. It represents an assessment of the ability of national and transnational corporations to continue making profits by extracting wealth from all communities – here and around the world. Remember: Profitability potential for major corporations is virtually all that is being measured. If it hurts small business, has negative foreign policy implications, inhumane impacts on communities or (most importantly) causes additional inequality, that is of no consequence. The key question is can corporations make more money?
Is Trump to blame — or credit — for the advances? He would like us to think so, and to believe that we are observing a revival of American capitalism, responding to a less restrictive regulatory environment, free to go forth into the world and dominate the global economy as profits and jobs rain down on us fortunate Americans. Some of this may be valid, but it is more likely that big business is experiencing initial euphoria at the expectation of a return to a laissez-faire system reminiscent of the Robber Baron era of the late 19th century. And that didn’t turn out universally well for everyone.
But examining the “downturn day” news a bit more carefully uncovers some telling hints as to what is really going on. One of the common themes was the fear of rekindled inflation. The evidence? Rising wages and tightening labor markets. Even this potential good news for workers was tempered by the fact that wage increases were stronger in the higher end of the labor markets. “Get more training and you’ll be fine.” Put the onus on the individual worker.
The recent tax cuts allow conservatives to cry loudly: “We can’t afford these social programs or we’ll explode the deficit! We must cut spending…!” Stock market response offers a completely analogous reaction: “These higher wages and overly tight labor markets will lead to inflation! We must tighten fiscal and monetary policy…!” (How about more inmigration then? That’s the surest way to free up labor markets and get workers needed for the currently structured economy). The story is the same: The excessive desires of common people, whether through public or private means, must be tempered with realism lest Corporate America lose the ability to favor us with jobs, goods and services and general prosperity.
In sum, the real implication of current stock market gyrations is that the historic conflict of worker vs. owner is still alive and well. Shedding workers causes corporate stock prices to escalate. Big business still aggressively seeks to avoid paying workers in order to rake in and keep increased profits. Labor and labor unions are a drag on American free enterprise.
In the real world, inequality will continue its incessant advance with every uptick of the Dow Jones Average. And corporations control both the message and the political power to back this trend. Perhaps the news isn’t as good as we thought.