by Karen Ho

On May 25, 2020, George Floyd was murdered in Minneapolis, his life brutally taken in what has become an all-too-routinized, state-sanctioned police ritual whereupon misplaced, racist, and stereotypical anxieties are resolved through the exercise of power over the lives (and deaths) of Black people. About two weeks later, the Washington Post reported that the socio-economic divide between Black and White household wealth was “as wide as it was in 1968.” Meanwhile, the US stock market, as measured by the Dow Jones Industrial Average (DJIA), the Standard and Poor’s (S&P) 500 Index, and the Nasdaq Composite, has been steadily climbing from its March 2020 lows, and has risen markedly throughout the summer of 2020. As of early September 2020, the Dow was barely 5% below its all-time high of 29,551 in February 2020, and the S&P 500 and Nasdaq had actually reached new all-time highs.

Two key questions thus come to mind. First, how could the stock market possibly be “up,” much less surpassing its all-time high, despite a ravaging pandemic? And second, how is it that socio-economic inequality, especially the sustained gap between Black and White people, has not budged in the intervening fifty-two years? Instead of seeing these two queries as unrelated or disconnected, it is crucial to read the rising stock market as absolutely central to understanding the persistence and widening of racialized inequality as well as the intensification of socio-economic precarity and downward mobility for most.

Of course, many social observers and commentators have also noticed these jarring juxtapositions and, in their puzzlement, have raised these prescient societal predicaments across multiple media platforms, from the business news to late night television broadcasting. In fact, on Friday, June 5, 2020, Stephen Colbert, host of “The Late Night,” brought in a key commentator on Wall Street and corporate America, the New York Times columnist Andrew Ross Sorkin, to ask precisely these questions.

Stephen Colbert and Andrew Ross Sorkin discuss the rising stock market amidst the Covid-19 pandemic (USA)

Colbert began the interview with a quandary. With so many in economic distress, in the midst of “massive unemployment,” “civil unrest,” and “shuttered businesses,” how is it possible that the stock market is rising? Before Ross answered, Colbert inserted a follow-up: “I know Wall Street isn’t the economy, but shouldn’t they pretend to have some relationship to the economy? Or else, just go down and just saw off the bottom of Manhattan and push it into the Atlantic Ocean.”

Before we get to Sorkin’s response, it is important to recognize Colbert’s confusion about the relationship between the stock market and the economy, not to mention employment, because it points to a structural issue and ongoing misrecognition. Why does the stock market not reflect most people’s experiences of the economy, especially given that stock prices (which are still, in fact, shares of existing institutions) are supposed to represent “the performance” of corporate America? To get at these conundrums, a counterintuitive response to the leftish conventional wisdom (that the stock market has nothing to do with the economy or jobs) is necessary1. So bear with me as I attempt to put the pieces of the puzzle together; making sense of the changes in the relationship between the stock market and economy is crucial to understanding increased socio-economic inequality and contemporary racialized inequality.

As I turn to Andrew Ross Sorkin’s response, hold on to the quandaries raised by the normative trope that the stock market is simply divorced from the reality of a recession, since Ross’s answer does not directly address the source of this confusion. In fact, he largely reproduces the problematic logic that the stock market is disconnected from the economy, as he does not take the opportunity to explicate the outsized influence of the stock market and how it actually does represent and measure the economy. Treading within the confines of this logic, Sorkin begins his reply as follows:

The honest answer is…there is something perverse… about the market and investors because…they are not really looking at the economy today…today is like already in the rearview mirror to them. The investment community is looking at what the world looks like…Twelve months from now, so when you see the stock market up, what the stock market is trying to do is bet or guess what the world is gonna be then, and I think what the hope is….that there is going to be a vaccine, or a therapeutic, and that unemployment doesn’t look anything like it looks like today.

To be fair, Sorkin importantly follows on with two additional points that better showcase the ways in which finance is continually buttressed and bailed out by government (through Congress, the US Treasury, the Federal Reserve, and/or international financial institutions such as the IMF). He states that the stock market is up because the federal government is printing money (by literally pressing buttons on a computer) in a frenzy, and in a crisis, Trump – seeing the stock market as the bellwether of his presidency, and replicating the precedent set by the no-holds-barred federal and taxpayer bailout of Wall Street financial institutions in 2008 – will do anything to subsidize Wall Street. Let me discuss the first part of his answer, and then come back to some crucial points about bailout later on.

Setting aside the devastating fact that not having to pay attention to what is going on today is an astounding privilege and raises the question of what world investors are living in, much less imagining, it is telling that investors, and their expectations, parameters, and worldviews, are the key shapers of the stock market. Now, Sorkin’s explanation focuses on the divergent timeframes between the stock market and the economy, which inadvertently highlights the stock market’s perversity (even its oddness and disconnection), without addressing the singular importance of the role of investors in today’s economy. He does not explain that the stock market rise shows how corporations have been structurally realigned away from employees (and from any commitment to employment as a general practice) and singularly toward investors. It is precisely this underlying problem that Colbert’s query points towards: why is the stock market, as a collective expression of company share prices, seemingly divorced from the concerns and material needs of most Americans, such as living wages, employment security, and upward mobility?

Moreover, understanding the relationship between the stock market, jobs, and the larger social economy is made even more difficult given the obfuscating and contradictory information from multiple social critics and commentators. For example, Paul Krugman, Nobel Prize-winning economist, notable liberal critic of socioeconomic inequality, and New York Times columnist, has regularly weighed in on the quandary in opinion pieces titled “Crashing Economy, Rising Stocks: What’s Going On?” and “Stocks Are Soaring. So Is Misery.” In the former article, he argues, “Well, whenever you consider the economic implications of stock prices, you want to remember three rules. First, the stock market is not the economy. Second, the stock market is not the economy. Third, the stock market is not the economy.” Sticking with the standard explanation that the stock market mainly moves because of greed, fear, future expectations, or interest rate policies, Krugman asserts that the answer is simply that the stock market is either loosely connected to or completely disconnected from “real economic growth.” He ends with, “Pay no attention to the Dow; keep your eyes on those disappearing jobs.” In the second article, he doubles down on the same theme, asking, “How can there be such a disconnect between rising stocks and growing misery,” and answering with tautological responses that rephrase the question: “The truth is that stock prices have never been closely tied to the state of the economy,” and “These days, the disconnect is even greater than usual.” He ends with the same quandary, leaving the reader exactly where they began, with no further insight: “Oh, and stocks are up. Why, exactly, should we care?”

The key issue with Sorkin and Krugman’s explanations is that they re-assert either disconnection or separate spheres/parameters, when the socially observant usually recognize that the stock market and the economy are somehow connected. In other words, does not a rising stock market in the middle of mass unemployment signal that the wealthy are somehow protected and that the rise or stability of corporate share prices is oddly antithetical to job security? This relationship is not distant at all. In fact, the stock market and the economy are deeply and intimately connected, and any attempt to assert disconnection not only misreads the room, but also overlooks the cultural decisions that both produced an inverse relationship between stock prices and employment, and a direct connection between stock prices and corporate profits and outlooks.

As it turns out, one of the most radical but still under-recognized shifts in the financialization of the larger social economy in the past forty years has been the active severing of the positive correlation between corporate “growth” (“performance” and profit) and employment. Employees and workers are no longer a key concern for corporations, neither in how they are measure health and performance, nor in how they imagine their constituencies. Employees and the responsibility for employment and job security have been thoroughly excised from the corporation’s main concerns, written almost completely out of the discursive and material practices and representations of the mainstream corporation, supplanted by singular concern for shareholders, investors, and those (i.e., financiers) who advise in their name. It continues to surprise almost everyone, from Colbert to journalists to academics, that corporations understand themselves as collections of assets maintained solely for the benefit and profit of large investors, and more specifically, for the financiers who enact these corporate transformations and restructurings in the name of the shareholder. The downsizing of the corporation and corresponding redistribution of former stakeholder claims to investors and shareholders have caused those resources that were previously invested in job growth and employment stability to be captured by financial interests and disbursed as stock price appreciation. Financialization, in other words, has wrought the explicit linking of companies (and the larger economy) to the stock market, not a disconnection from it. To fully apprehend how corporations and the economy have been re-aligned towards the stock market, and how employment and jobs were eliminated as key concerns of corporations, it is crucial to take a brief tour of the role of financialization and the reorientation of corporate America before we come back to the confusion surrounding the skyrocketing pandemic stock market and the problematic of disconnection.