Aaron's Status

8:57 am

I’m feeling the urge to pontificate on capitalism and politics so if that isn’t up your alley feel free to move along.

There is a lot of commentary out there attempting to piece apart what convinced so many people who probably voted for Biden to vote for Trump. Within it are analyses of what “facism” means or what “liberal” means or what it means to be an “elite.” None of this is all that important in my estimation.

The political ebb and flow mainly follows how people are feeling about how easy or hard their life is. In boom times, people tend to vote establishment (on either side of the ideological spectrum) and in hard times, people tend to vote the other way. That hasn’t changed in, perhaps, the history of the country.

What has changed, though, is our ability to actually make life better for Americans. In spite of what are sometimes great efforts by our political leaders to improve our lives, I believe that their efforts are, more often than not, in vain. The reason for this comes down to economics and incentives (as most things do).

Since we got off the gold standard, the way our economy functions (which is the same as any other economy based on a “fiat currency”) is driven by central banks and the Federal Reserve and by the spending and taxation activities of the government. The government spends money into existence and taxes it out of existence.

The number one imperative of practically any American is to gather wealth. Counter-intuitively the wealthiest people have the strongest imperative to add more wealth and also the most flexibility to find ways to do so. Until relatively recently, average people were entirely disinterested in the “financialization” of the country. The average person had no reason to pay attention to the stock market; you earned a wage, received a pension upon retirement, and only the “wealthy elites” played in the land of equities and securities.

But now everyone has an equity concern since the 401(k) killed the pension. Corporations no longer have concern for their employees beyond their at-will tenures, and regular people care a lot about whether the stock market’s overall value will grow.

All of this seems superficially A-OK until you consider this ground truth:

1. An average American’s ability to retire at all is dependent upon the growth of the stock market.

2. The stock market cannot grow infinitely.

We have fooled ourselves into thinking that our economy can simply add value forever. And, for a while, it looked very convincingly so. Technological advancements have allowed fewer and fewer human and material resources to generate absurd multiples of value. Industrialization, the internet, and our more recent explosion of software-based products have created almost endless earnings growth.

But now, if you look around and squint at it, all of the value is getting concentrated in the hands of few companies and people. None of these companies or people give two tugs of a dead dog’s dick whether average Americans can live a dignified life and retire, and it isn’t their fault.

Capitalism and the free market are the most effective system we’ve yet found to harness the intrinsic greed of millions of people and use it to drive outcomes. When the outcome of earning money (making goods and services people need) is aligned with creating a dignified life and retirement for people (attracting workers, paying them, and giving them pensions), everything works great.

But those incentives are no longer aligned. “Financialization” erased the straight line between the activities that generate the majority of wealth and those activities benefitting people broadly. If you want to get really rich in America, you need to make investments and see those investments grow.

Our retirement funds are tied up in all of this, so we now perceive that as a net good, but in reality the kingpins of American business are strip-mining everything they can get their hands on to deliver those returns. When WalMart crushes a local mom-and-pop shop, that’s financialization at work. When private equity buys your veterinarian’s office and fires half the staff, that’s financialization at work. When grocers raise their prices, complain on TV about how “inflation” is “crushing their margins” and then go on record on their earnings calls explaining how they made all of that shit up, that’s financialization.

That’s what’s on my mind this weekend. Of all things.

I guess I didn’t say anything that you could do about it. Uh, my bad, I actually don’t have any fucking idea. Good luck out there.