It is entirely understandable to lampoon the hypocrisy of Wall Street, and it is natural to cheer on the underdog victory of the Redditors over the hedge fund managers, which as I write is quickly spilling over into other securities such as those of AMC Theaters and big box home store Bed Bath & Beyond. The anxious reaction to all of this on the part of pundits and finance executives demonstrates that their grip on the status quo is threatened by the gamification of investing. But this democratic turn is no solution to the problem of capital markets. If anything, it shows acutely how the markets have become disconnected from what is actually valuable and what the real economy is for.
The wealth of finance capitalism chases after the leading edge and puts its resources almost exclusively into investments that yield the highest rate of return. When Republicans cut corporate taxes in 2017, big business used its extra cash on stock buybacks, rewarding investors with more than $1.1 trillion in purchases. Instead of putting valuable capital into long-term investments that have real social utility, much less into increasing workers’ wages, investors and corporate executives prop up a fantasy world of financial products that is disconnected from the real economy and those who depend on it. The tragedy is not that Internet posters have played an elaborate and costly game of gotcha on Wall Street. It’s that the everyday business of Wall Street does that to the rest of us.
While I have not been following the whole Gamestop saga all that closely, it strikes me as a textbook example of how you can’t use the master’s tools to tear down the master’s house.