The most recent turmoil in the stock market caused by Donald Trump’s ill-considered policy to impose tariffs on the entire world, has brought up one legitimate question: what is the correct attitude towards stock market declines and crashes?
58% of US households are invested in the stock market, usually via index funds intended as savings for college and/or retirement. This creates a powerful constituency in favor of policies that support share price growth. At the same time, there are about half as many listed companies today as 25 years ago, and in recent times the "magnificent 7" make up roughly 30% of the value of the S&P500 index. Thus, large swathes of the US population have a pecuniary interest in keeping big tech big. Gramsci could not have invented a more effective mechanism for hegemony -- the stock market is like one of those invisible dog fences creating a boundary around "acceptable" policy.
A characteristically insightful counterargument to the remarkably distorted way that our public discussion of equities markets is conducted. Most compelling is your point that aversion to stock market crashes on the left arises from our inability to imagine an economic system other the form of capitalism we have right now.
...But given the character of actually existing capitalism, I would argue that leftists ought to prefer aggressive wealth taxation in order to finance the social state, and to redistribute income, to a numerically identical erasure of wealth held in equities, no? Both reduce wealth inequality, the but the first alternative also pays for some useful things.
A second reflection: outside of the business press, there is a widespread confusion about how to interpret ups and downs of stock indices. What do they mean about the current or future performance of the economy, especially for the economic fortunes of the working and middle classes? That's probably the source of many non-wealthy people's discomfort with stock market crashes.
I wish I could say let them have their wishes on the Monkey's Paw.
But my better instincts say that what they are, in effect doing, is pushing down value to allow for pure vulture capitalism. Make everything cheap, force out the smaller players, get the wealth into fewer and fewer pockets. The ruling party knows that Climate Change is real, and they're going to extract as much as possible, and exact as much damage as possible, because chaos serves them.
The inconsistencies within the left seem to exist on the foreign policy front too. Nominally, left is anti-imperialist yet many on the left support foreign interventions more enthusiastically then their isolationist counterparts on the right.
The logical reason for caring about events in the equities market(s) is that the factors causing these movement are likely to be important in other ways. The stock market is the messenger. The serious issues pertain to fixed income and insurance (swaps), which, if they enter into panic zone generate potentially disastrous defaults and instability.
A fall in the value of equities may reduce inequality, but it does little to improve the lot of the average person. In any case, even after a considerable stock market collapse, the level of inequality will remain so high that the extraordinarily wealthy will retain much the same power that they currently have. Also, to the extent that equity prices reflect some approximation of the present value of future production, even a leftist would be concerned that there may be less of a surplus to share with the low and middle classes.
Admittedly, a loss of equity value might sometimes be celebrated. What matters is the cause of the loss. For instance, if we were to impose a progressive tax on excess profits (i.e. a corporate tax rate indexed to the excess of ROI over some "normal" level), then we would expect to see slowed increases in prices with additional investment in productive activities -- as well as reduced equity values.
What we're seeing today, fear of the economic impact of a regressive national sales tax on imported goods (i.e. tariff), in order to fund reduced income taxes for the wealthy, does nothing but damage the people for whom the left should be most concerned.
First, it isn't true that stock market declines that involve volatility(ups and downs of magnirude over short periods of time) negatively effect the rich uniformly. Since the rich have excess liquid capital in reserve they are able to buy assets at fire sale prices.
Second, once the rich see no value in continuing to invest, no profit accruing to them, they cut costs. They do this mainly by getting rid of their work forces.
Third, once the speculation of the casino is no longer attractive, the bond market comes into play. Instead of a flight of capital into Treasuries, we are seeing the opposite, a flight of foreign capital out of all US assets.
This indicates a much more serious crisis is in store for capitalism and a major contradiction between the two major forms of advanced capitalism will have to be resolved. China with its state capitalism and the US with its reactionary return to purging the state of any involvement in decisions about capital allocation to production.
For ordinary people this means economic misery, a definite recession and possible depression and possible war.
A depression will definitely hurt all capitalists. The positive resolution of a depression which would mean a consequential failure of capitalism is a function of how well progressives have thought out what comes next. What comes when the masses see capitalism collapse for them.
Your point on stock market losses vs. taxation is a very valid critique of many nominal leftists, but more so points to a contradiction in capitalism that causes troubles for progressive liberals and less astute social democrats when they get to power.
Somewhere later in capital v1 Marx claims profit booms typically produce "easy and liberal" conditions for workers given employment gains and greater income from labour market improvements, and that these are wiped out in periods when markets bust. Insofar as taxation drags profit that's otherwise devoted to labour-intensive investments, it can impact not only on employment and wages but also taxes on these. Hence social democratic/labour governments abandoning welfare state policies just as liberal and conservative ones did following the 1970s.
The simple difference of taxes compared to stock market crises being that resources may be reinvested into supports for working people and/or productive investments as you mention later on concerning American R&D, only that more comprehensive strategies of this kind enter the realm of socialist planning in production rather than simple social democratic tinkering around equitable distribution.
You make your arguments with verve and intelligence, but I am not sure I agree with you.
First, stock market calamities often mushroom into huge economic contractions. The result: Many workers get laid off. The 1929 crash began on Wall Street, and in October of 29 it was hardly felt beyond the plush precincts of Park Avenue, but by 1933, millions of Americans were literally hungry.
Second, WHEN MARKETS CRASH, SOME RICH PEOPLE ARE MAKING A FORTUNE. They make a fortune by buying "shorts" in the options market, or bets that a stock will tank.
Indeed, I think that Trump fucked the market because while he erratically imposed tariffs, and then paused them, and then imposed them again and then paused them again, members of his crime family (Jared Kushner et al)made a fortune in the options market
I think your observations may miss another reason "the left" might decry bear markets: speaking the language of the right, especially Trump. It's more a tactical move to highlight conservative/MAGA failure on their own terms and to their own constituencies, rather than an appeal to left audiences.
I don't think that is the only reason "the left" seems alarmed and critical of stock crashes, but I do think it's a significant fraction.
Just speaking about the UK (I don't know the US system) - but something like 17 million people, or two thirds of private sector workers, are saving into a DC pension (source: https://ifs.org.uk/publications/adequacy-future-retirement-incomes-new-evidence-private-sector-employees). I would expect these DC pensions to be heavily weighted towards global equities. So a lot of people in UK have long term exposure to stock markets. There's huge variation in amounts saved of course (most people are still expecting/hoping to be able to rely on the state pension in retirement), and no doubt most people are totally unaware that or how their pension money is being invested.
I don't disagree that the media reporting of stock market gyrations is weird and stupid. My point is that, in principle at least, lots of people (in the UK) should out of self interest have some basic awareness and understanding of stock markets but do not. It's an interesting experiment that we're running here!
«speaking about the UK (I don't know the US system) - but something like 17 million people, or two thirds of private sector workers, are saving into a DC pension»
UK "Middle England" voters are far more obsessed with property profits than with their "stakeholder" stock pension accounts, in part because many accounts are tiny and are invested by default in UK stocks that are not as pumped up by the BoE as USA stocks are ballooned by the Fed and Treasury ("Greenspan Put" and "Plunge Protection Team").
«Haldane believes that property is a better bet for retirement planning than a pension. “It ought to be pension but it’s almost certainly property,” he said.
“As long as we continue not to build anything like as many houses in this country as we need to ... we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.”»
Note: in the UK "pension" no longer means a regular payment during retirement it is currently mostly used to mean "pension pot" that is "stock based retirement investment account", the local equivalents of of a 401k.
Maybe the issue is different. Money is created by people taking loans which are typically only given against assets, such as real estate or shares, bonds, etc. This money is then used by the ones who have taken out loans previously to bay them back with interests. In anemic economic environments, basically all western economies, therefore asset price rises are so to speak last resort sources of economic growth and thus serviceability of existing loans.
One symptom for instance is, that in Australia where two parties, lets call one "Left" and the other one "right", are currently campaigning to for the right to form the next government. The country is in the grip of a severe housing shortage. Both parties run on policies that increase house prices even further, eg. under the guise of "first home buyer support", which simply increases the price the competing first home buyers have to pay by the support they receive.
I enjoyed the article but struggled with the para “ The second argument is that the decline in the stock market precedes further retrenchment of investors because their expectations of future profits decline and consequently investments would be less and ultimately employment will be less too. etc….”
A loss of wealth because of a tax is not equivalent to a loss of wealth because of declines in its valuation. As hinted in the article the latter is a symptom of macroeconomic malaise which will reverberate in employment.
Also, not discussed in the article is the risk of paralysis of the financial system eg 1930 that can follow a stock market crash.
I agree that the loss of wealth due to a tax is not the same as loss of wealth b/c of change in valuation. The latter *may* be more macro-significant, as you indeed mention. However, it is also more fictitious; it is fleeting; it is a "sentiment": sentiments may improve or get worse. On the other hand,. a tax is a clear loss. So one might argue that capitalists could be more discouraged (and thus can "retrench" more) if taxed than when affected by "sentiments".
It would be helpful if you were to break out ownership by type of investors. Pension savings are a hugely important segment, along with insurance. The focus on the billionaire and trillionaire class is warranted, but pension funds are suffering from the ridiculous Trump machinations.
My pointy was explicitly not to discuss Trump. The point is larger: are concerns w/ the stockmarket exaggerated compared to the importance it has in people's real lives? And I did include pension funds. They really make very little difference to the % of households (still around 60% in the US) who do not have any link with the stockmarket. The reason is that those who have pension funds tend also to have other financial; assets.
Knowing you are an evidenced based author, I think that it's worth considering that a very significant proportion of the developed world now depends on stock market performance for pension income in retirement. Most are extremely modest, less than £8k per annum, but citizens are automatically enrolled and so, whether they realise it or not, are extremely dependent on Trump's idiotic policy gyrations. The stock market may indeed benefit billionaires (excessively), but citizen shareholders are being hurt, badly. https://www.thinkingaheadinstitute.org/research-papers/global-pension-assets-study-2025/
Stock market crashes don’t obliterate wealth, they just move it elsewhere. The reason stock price declines are referred to as “destroying value,” is because they reflect a diminished belief in the anticipated future value of the company. The sell offs that drive those declines just transforms assets from stock holdings to cash, which are still disproportionately held by the wealthy.
I disagree that leftists should support market crashes per se. Those crashes might create organizing political opportunities, but not because they destroy the wealth of the rich.
58% of US households are invested in the stock market, usually via index funds intended as savings for college and/or retirement. This creates a powerful constituency in favor of policies that support share price growth. At the same time, there are about half as many listed companies today as 25 years ago, and in recent times the "magnificent 7" make up roughly 30% of the value of the S&P500 index. Thus, large swathes of the US population have a pecuniary interest in keeping big tech big. Gramsci could not have invented a more effective mechanism for hegemony -- the stock market is like one of those invisible dog fences creating a boundary around "acceptable" policy.
More details on these claims are here: https://medium.com/imagining-equity-explorations-into-the-future-of/is-shareholder-capitalism-a-suicide-pact-bd26bd10edd7
Could not agree more. Did not know that the big tech account for 30% of S&P.
A characteristically insightful counterargument to the remarkably distorted way that our public discussion of equities markets is conducted. Most compelling is your point that aversion to stock market crashes on the left arises from our inability to imagine an economic system other the form of capitalism we have right now.
...But given the character of actually existing capitalism, I would argue that leftists ought to prefer aggressive wealth taxation in order to finance the social state, and to redistribute income, to a numerically identical erasure of wealth held in equities, no? Both reduce wealth inequality, the but the first alternative also pays for some useful things.
A second reflection: outside of the business press, there is a widespread confusion about how to interpret ups and downs of stock indices. What do they mean about the current or future performance of the economy, especially for the economic fortunes of the working and middle classes? That's probably the source of many non-wealthy people's discomfort with stock market crashes.
I wish I could say let them have their wishes on the Monkey's Paw.
But my better instincts say that what they are, in effect doing, is pushing down value to allow for pure vulture capitalism. Make everything cheap, force out the smaller players, get the wealth into fewer and fewer pockets. The ruling party knows that Climate Change is real, and they're going to extract as much as possible, and exact as much damage as possible, because chaos serves them.
The inconsistencies within the left seem to exist on the foreign policy front too. Nominally, left is anti-imperialist yet many on the left support foreign interventions more enthusiastically then their isolationist counterparts on the right.
The logical reason for caring about events in the equities market(s) is that the factors causing these movement are likely to be important in other ways. The stock market is the messenger. The serious issues pertain to fixed income and insurance (swaps), which, if they enter into panic zone generate potentially disastrous defaults and instability.
Agree.
A fall in the value of equities may reduce inequality, but it does little to improve the lot of the average person. In any case, even after a considerable stock market collapse, the level of inequality will remain so high that the extraordinarily wealthy will retain much the same power that they currently have. Also, to the extent that equity prices reflect some approximation of the present value of future production, even a leftist would be concerned that there may be less of a surplus to share with the low and middle classes.
Admittedly, a loss of equity value might sometimes be celebrated. What matters is the cause of the loss. For instance, if we were to impose a progressive tax on excess profits (i.e. a corporate tax rate indexed to the excess of ROI over some "normal" level), then we would expect to see slowed increases in prices with additional investment in productive activities -- as well as reduced equity values.
What we're seeing today, fear of the economic impact of a regressive national sales tax on imported goods (i.e. tariff), in order to fund reduced income taxes for the wealthy, does nothing but damage the people for whom the left should be most concerned.
First, it isn't true that stock market declines that involve volatility(ups and downs of magnirude over short periods of time) negatively effect the rich uniformly. Since the rich have excess liquid capital in reserve they are able to buy assets at fire sale prices.
Second, once the rich see no value in continuing to invest, no profit accruing to them, they cut costs. They do this mainly by getting rid of their work forces.
Third, once the speculation of the casino is no longer attractive, the bond market comes into play. Instead of a flight of capital into Treasuries, we are seeing the opposite, a flight of foreign capital out of all US assets.
This indicates a much more serious crisis is in store for capitalism and a major contradiction between the two major forms of advanced capitalism will have to be resolved. China with its state capitalism and the US with its reactionary return to purging the state of any involvement in decisions about capital allocation to production.
For ordinary people this means economic misery, a definite recession and possible depression and possible war.
A depression will definitely hurt all capitalists. The positive resolution of a depression which would mean a consequential failure of capitalism is a function of how well progressives have thought out what comes next. What comes when the masses see capitalism collapse for them.
Your point on stock market losses vs. taxation is a very valid critique of many nominal leftists, but more so points to a contradiction in capitalism that causes troubles for progressive liberals and less astute social democrats when they get to power.
Somewhere later in capital v1 Marx claims profit booms typically produce "easy and liberal" conditions for workers given employment gains and greater income from labour market improvements, and that these are wiped out in periods when markets bust. Insofar as taxation drags profit that's otherwise devoted to labour-intensive investments, it can impact not only on employment and wages but also taxes on these. Hence social democratic/labour governments abandoning welfare state policies just as liberal and conservative ones did following the 1970s.
The simple difference of taxes compared to stock market crises being that resources may be reinvested into supports for working people and/or productive investments as you mention later on concerning American R&D, only that more comprehensive strategies of this kind enter the realm of socialist planning in production rather than simple social democratic tinkering around equitable distribution.
You make your arguments with verve and intelligence, but I am not sure I agree with you.
First, stock market calamities often mushroom into huge economic contractions. The result: Many workers get laid off. The 1929 crash began on Wall Street, and in October of 29 it was hardly felt beyond the plush precincts of Park Avenue, but by 1933, millions of Americans were literally hungry.
Second, WHEN MARKETS CRASH, SOME RICH PEOPLE ARE MAKING A FORTUNE. They make a fortune by buying "shorts" in the options market, or bets that a stock will tank.
Indeed, I think that Trump fucked the market because while he erratically imposed tariffs, and then paused them, and then imposed them again and then paused them again, members of his crime family (Jared Kushner et al)made a fortune in the options market
https://davidgottfried.substack.com/p/trump-on-a-tight-rope-between-madness
I think your observations may miss another reason "the left" might decry bear markets: speaking the language of the right, especially Trump. It's more a tactical move to highlight conservative/MAGA failure on their own terms and to their own constituencies, rather than an appeal to left audiences.
I don't think that is the only reason "the left" seems alarmed and critical of stock crashes, but I do think it's a significant fraction.
The stock market matters way less than we think!
Just speaking about the UK (I don't know the US system) - but something like 17 million people, or two thirds of private sector workers, are saving into a DC pension (source: https://ifs.org.uk/publications/adequacy-future-retirement-incomes-new-evidence-private-sector-employees). I would expect these DC pensions to be heavily weighted towards global equities. So a lot of people in UK have long term exposure to stock markets. There's huge variation in amounts saved of course (most people are still expecting/hoping to be able to rely on the state pension in retirement), and no doubt most people are totally unaware that or how their pension money is being invested.
I don't disagree that the media reporting of stock market gyrations is weird and stupid. My point is that, in principle at least, lots of people (in the UK) should out of self interest have some basic awareness and understanding of stock markets but do not. It's an interesting experiment that we're running here!
«speaking about the UK (I don't know the US system) - but something like 17 million people, or two thirds of private sector workers, are saving into a DC pension»
UK "Middle England" voters are far more obsessed with property profits than with their "stakeholder" stock pension accounts, in part because many accounts are tiny and are invested by default in UK stocks that are not as pumped up by the BoE as USA stocks are ballooned by the Fed and Treasury ("Greenspan Put" and "Plunge Protection Team").
https://www.theguardian.com/money/2016/aug/28/property-is-better-bet-than-a-pension-says-bank-of-england-economist
«Haldane believes that property is a better bet for retirement planning than a pension. “It ought to be pension but it’s almost certainly property,” he said.
“As long as we continue not to build anything like as many houses in this country as we need to ... we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.”»
Note: in the UK "pension" no longer means a regular payment during retirement it is currently mostly used to mean "pension pot" that is "stock based retirement investment account", the local equivalents of of a 401k.
Maybe the issue is different. Money is created by people taking loans which are typically only given against assets, such as real estate or shares, bonds, etc. This money is then used by the ones who have taken out loans previously to bay them back with interests. In anemic economic environments, basically all western economies, therefore asset price rises are so to speak last resort sources of economic growth and thus serviceability of existing loans.
One symptom for instance is, that in Australia where two parties, lets call one "Left" and the other one "right", are currently campaigning to for the right to form the next government. The country is in the grip of a severe housing shortage. Both parties run on policies that increase house prices even further, eg. under the guise of "first home buyer support", which simply increases the price the competing first home buyers have to pay by the support they receive.
I enjoyed the article but struggled with the para “ The second argument is that the decline in the stock market precedes further retrenchment of investors because their expectations of future profits decline and consequently investments would be less and ultimately employment will be less too. etc….”
A loss of wealth because of a tax is not equivalent to a loss of wealth because of declines in its valuation. As hinted in the article the latter is a symptom of macroeconomic malaise which will reverberate in employment.
Also, not discussed in the article is the risk of paralysis of the financial system eg 1930 that can follow a stock market crash.
I agree that the loss of wealth due to a tax is not the same as loss of wealth b/c of change in valuation. The latter *may* be more macro-significant, as you indeed mention. However, it is also more fictitious; it is fleeting; it is a "sentiment": sentiments may improve or get worse. On the other hand,. a tax is a clear loss. So one might argue that capitalists could be more discouraged (and thus can "retrench" more) if taxed than when affected by "sentiments".
Yes and no. With taxes there is more predictability. Look what’s happening now with uncertainty brought about by the lack of clarity on the future.
It would be helpful if you were to break out ownership by type of investors. Pension savings are a hugely important segment, along with insurance. The focus on the billionaire and trillionaire class is warranted, but pension funds are suffering from the ridiculous Trump machinations.
My pointy was explicitly not to discuss Trump. The point is larger: are concerns w/ the stockmarket exaggerated compared to the importance it has in people's real lives? And I did include pension funds. They really make very little difference to the % of households (still around 60% in the US) who do not have any link with the stockmarket. The reason is that those who have pension funds tend also to have other financial; assets.
Knowing you are an evidenced based author, I think that it's worth considering that a very significant proportion of the developed world now depends on stock market performance for pension income in retirement. Most are extremely modest, less than £8k per annum, but citizens are automatically enrolled and so, whether they realise it or not, are extremely dependent on Trump's idiotic policy gyrations. The stock market may indeed benefit billionaires (excessively), but citizen shareholders are being hurt, badly. https://www.thinkingaheadinstitute.org/research-papers/global-pension-assets-study-2025/
Stock market crashes don’t obliterate wealth, they just move it elsewhere. The reason stock price declines are referred to as “destroying value,” is because they reflect a diminished belief in the anticipated future value of the company. The sell offs that drive those declines just transforms assets from stock holdings to cash, which are still disproportionately held by the wealthy.
I disagree that leftists should support market crashes per se. Those crashes might create organizing political opportunities, but not because they destroy the wealth of the rich.