The Robinhood of Financial Capitalism

And it happened yet again.

When a group of Reddit-obsessed amateurs short-squeezed hedge funds and billionaire investors, an investing company, Robinhood conveniently restricted stock purchases. The firm, though, in doing so, does not stand up to its name. Robinhood, the heroic outlaw in those long-lost folktales, used to rob the rich and provide for the poor. 

However, present-day Robinhood ensures prosperity and power remain concentrated in the hands of wealthy investors and funds. When smaller investors use the same techniques, these methods become inappropriate (let’s say, inadvertent for the market-makers). On the face of it, capitalists have monopolized finance leading to the financialization of capitalism. While economic activity has risen in the past few decades, the service sector, especially finance, has boomed exponentially, creating pseudo wealth in the hands of a few.

American capitalism is creating a disillusion of economic growth when there is none. Financial markets, volatile in nature, make investors vulnerable to the surprising turn of market sentiments and planned conspiracies. Above all, amid the pandemic, with a demand slump inevitably facing the economy, markets do not reflect the economy in any shape or form. They never really do. 

Further ahead, the heavy stimulus injection reaching the pockets of the group of conspiring Redditors of subreddit /r/wallstreetbets turned the tables of luck and charm against the moneyed investors. Realizing the power of togetherness in short-squeezing stocks like GameStop, they shifted the liability of covering up the difference upon the short-sellers, Melvin Capital and Citron, leading to a steep price rise. 

And this is what the capitalistic form of economy precisely entails. The accumulation of wealth in the hands of capitalists and exploitation of the proletariat or the working class helps capitalism survive. However, with the relentless struggle of labor, internal contradictions lead to the crisis of capitalism. 

This form of capitalism, as outlined by Marx, has changed its configuration over the years. Neoliberalism in the 1970s, globalization in the 1980s, financialization in the 1990s – all are capitalistic regimes.

In an article titled More (or Less) on Globalization, Paul Sweezy, a political economist, underlined three capitalistic history trends post-1974-75 recession. One, a slowing rate of growth. Second, snowballing of multinational corporations into monopolistic ones. Lastly, the process of financialization of capital accumulation. Though globalization improved the spread of information and networks, these trends resulted not due to globalization. 

The acceleration in capital accumulation, immense surpluses, and the lack of investment opportunities in the neo-liberalization era – in the United States and the United Kingdom – due to free markets led to globalization and further financialization. To this, the immediate supply-side measure was to set up an array of novel financial instruments – futures, options, derivatives, hedge funds, etc. It did enough to raise financial speculations and pocket money with the ones with the means. 

Financialization, trapped in an endless cycle of stagnation and explosion, has raised inequality among socio-economic classes. The stocks are highly overvalued, and regulators do little to oversee and prevent the harm. They fall prey to the rich and powerful investors. What is left is an unleveled field for gambling one’s fortunes. 

“In gambling, the many must lose in order that the few may win.”

Capitalism, today, in this form, is no short of a casino. Hence, the term casino capitalism is apt enough. What is lacking is a well-planned economy. Not entirely socialist but also not living to the vices of money in the hands of those few. Otherwise, this repressive system will remain unbeatable, as it did until now. The lackluster integrity of the financial world is in search of its true Robinhood. 

Capitalism has yet survived this crisis, as it has in the past. Economic recessions, since financialization, have become more frequent and more adverse. What was once a lifetime experience for earlier generations today is a come-and-go phenomenon. Economists today are charting out recoveries in different shapes – V-shaped, K-shaped, U-shaped, and whatnot. Governments, providing stimulus – big and small, are extending lockdowns and let the economy sink while the markets boom, bust, and boom. It is an ongoing process of financial bubbles, followed by inevitable meltdowns. Some variations are the play of the free-markets, while others are the results of forced actions. 

Over the past decades, since the 1980s, the gap between productivity and real earnings has increased. In the 1979-2018 period, productivity has grown about six times more than wages. (Economic Policy Institute, 2019) More people today are less wealthy, less happy, and mostly underemployed or unemployed. Ownership of assets is limited to the wealthy, scantier class.  In the United States, homeownership that was once common is on a decline. Other forms of non-ownership, such as rent, are much prevalent. 

This trend will lead to the rise in inequality of money, assets, and opportunities. The monopolized financial market – in the light of financialization – lies in contrast with neoliberalism. The antecedent free-market ideology, with minimal but not invisible government control, now comes with its limitations. Moreover, the triad of international financial institutions (i.e., the World Bank, the International Monetary Fund, and the World Trade Organization) add to this unstable economic order. The interests of national governments, preferably the United States and the United Kingdom, withhold their powers. And the interests of these governments lie at the mercy of influential capitalists, thereby exploiting deprived economic classes. 

Does this treacherous world of finance bring the economy any good? Guess not.