Capitalism's Casino

Mark Munsterhjelm gustav88 at
Sun Mar 11 22:57:01 MST 2001

The Guardian

Monday, March 5, 2001

Capitalism's Casino

As social security dwindled, Americans gambled on the stock
market to
protect their futures. They're losing

By Gary Younge

Six months ago a church worker in Harlem put me on hold for what
like an indecently long time. Just as I was about to hang up on our
conversation about the church's moral responsibility to balance the
competing goals of historical preservation, economic development
racial and social diversity in the area, he returned to my ear as
abruptly as he'd left. "Sorry," he said. "That was my broker. That's a
call I had to take. Now where were we?"

A few days later I mentioned this to a social worker in Brooklyn by
way of an amusing anecdote. He was amused - but only by my
"You always take the call from your broker," he said. "I'd put my
on hold for him. And she wouldn't be mad if I told you either. She'd
do the same thing."

In a country where the percentage of people owning stock and
had risen by 31% in four years, following the stock market had
a national sport. With more than a third of the nation owning stocks,
Wall Street and Main Street appeared to have converged. The
investor might be in his or her late forties, white and professional
but stock ownership had breached the barriers of race, social
ethnicity, political affiliation and region in a way previously
reserved for God and Coca Cola. Around 80m Americans owned
stocks or
mutual funds - more than watch the Oscars, surf the internet or
in the 1998 congressional elections and double the number in 1983.

Everyone, it seemed, could be a dealer; and dealing and following
stocks could take place everywhere. Thanks to new technologies
could trade from your home and check your stocks on your mobile
in an aeroplane and in most business foyers, where hungry eyes
on flashing numbers flickering across television screens.

All things considered, this was hardly surprising. Between 1982 and
1999 prices on the stock market climbed every year but one. In
the Nasdaq leapt 86% and reached its high point this weekend last
year. Just as Fukuyama proclaimed the end of history, so theorists
believed the "new economy" could defy gravity and logic.

But the ramifications went way beyond the economic. Socially, the
stock market was the main topic of conversation at water-coolers,
barbecues and dinner parties. "I felt I had to get some stocks just
I'd have something to talk about," said a Brit who moved to New
two years ago. People joined investment clubs in thousands and
mutual-fund seminars with top money managers were standing
room only.

Culturally, it was de rigueur. Business presenters became
names. The anchorwoman for the business channel, CNBC, found
so besieged that she started asking her husband to pick up the
takeaway. "I'm trying to get out of there with my food," said Sue
Herera, "and the cook's asking, 'What's with Intel?'"

Television shows like The Street and Bull turned the stock market
prime-time soap operas. "Wall Street is the new American pastime,"
said Michael Chernuchin, the creator of Bull, last year. "People
follow the Dow and Nasdaq like they are sports scores. The average
York cabby used to have the Daily News on the front seat beside
Today, he also has Barron's and the Wall Street Journal."

So long as graphs went skywards the outlook remained sunny. But
markets plunging, and the economy flattening, the stock-buying
American public now find themselves under a stubborn, dark cloud.
Membership of investment clubs has dropped 23% in the past two
advertising in personal finance magazines has nose-dived; The
was cancelled halfway through its run thanks to poor ratings. In the
space of just two weeks last month the number of investors
themselves as bears almost trebled while the number of bulls more
halved, according to a membership poll by the American
Association of
Individual Investors.

T o some, this signals nothing more than the jitters of novices who
were in it for the quick buck rather than the long run. The increase
in stock ownership, argued the right, demonstrates both the
invincibility and democratisation of capitalism, turning millions from
spectators to players in the free market. With everyone from social
workers to the clergy involved, the primacy of the market was

Whether this was wilful disingenuousness or wishful thinking (or
is not clear. Either way it represents a fundamental
of the phenomenon. For while some joined the investor class with
making an easy fortune in mind, the motivation for most of this new
generation of investors is not getting rich but not becoming poor.

Since the Republicans started slashing spending on wealth,
and education and weakening labour laws, prompting job
people have looked for ways to make themselves less vulnerable. A
survey released last year by Ariel Mutual Funds and Charles
revealed that saving money for retirement, children's college
education and emergencies were all cited before "obtaining a
lifestyle" as reasons for investing in stocks.

This was not confined to the US. Many Britons invested in private
pensions, endowment policies and private health care because
could see the writing on the wall for the welfare state, pensions and
the NHS under the Conservatives.

And while the political complexion of governments may change, the
basic belief that the market can, should and will play a meaningful
role in supporting our social needs prevails. Herein lies the
ideological impetus for the third way and private-public
pushed by Blair. It also provides the glue for Bush's planned social
security reforms, whereby workers will have "individual retirement
accounts" with managers they can designate themselves.

With the stock markets taking a pounding, the fig leaf for this
political direction has been removed. In its place we see that the
politics of the past 15 years has been based on the assumption of
permanent economic prosperity. What sense does welfare to work
make if
there is no work? What point is there in private finance initiatives
if capital is scarce?

Meanwhile America's baby boomers sit and fret. With each market
bulletin they see their hopes for a comfortable retirement and a
educational grounding for their children fade. Worse still, with the
paper value of their assets plummeting, many have spent against
savings that have withered away.

Economists call it dis-saving. "The collapse of savings has been
of the most striking phenomena of the US economy in the 1990s,"
the Financial Times. The trouble is, like those who took out
endowments 20 or so years ago in Britain only to find they cannot
off their mortgage today, many here thought they were playing it
relatively safe. Naive? - possibly. But their choices were limited.
Having been ideologically cajoled and politically coerced to invest
their "own future" they now find they have gambled it in
largest casino.

<gary.younge at>

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