| Harrison Neuhaus |
If you’ve been paying attention to the stock market over the past two months, it would be hard to avoid the incredible saga of video game retailer GameStop, which in early February became a flashpoint for a “very-online” revolt against hedge funds.
Doug Henwood summarizes the situation well, but the gist of the story goes like this: GameStop, a brick-and-mortar video game retailer, was being heavily shorted by a number of hedge funds due to the overall decline in brick-and-mortar retail even before the pandemic (as well as the gaming economy moving more and more online). GameStop got some good news with a few new investments and signals that it was beginning to move to e-commerce, which led to mild skepticism about the short positions. What really matters here is that a number of users on the reddit forum “Wall Street Bets” got wind of the short positions, realized that the shorts were oversold (113% of the company’s outstanding shares were being shorted), and started to take advantage of the situation by effectively pumping the stock. Overnight, GameStop stock skyrocketed as small individual investors motivated by the reddit board (and goaded on by each other) poured their money into the stock — not only driving up GameStop stock price by orders of magnitude, but also decimating the hedge fund short-sellers in the process.
Almost immediately, Wall Street cried foul with sudden (and extremely out of character) demands for regulation. And their calls were heeded — a number of trading platforms like Robinhood halted all purchases of GameStop stock for days, only allowing holders to cash out. This, of course, only strengthened the resolve of the reddit investors, who have been firmly committed to holding the stock at any cost. Now the saga has evolved from a classic short squeeze by a new type of trader, to what a lot of the GameStop investors perceive as an existential fight to destabilize the system and screw over hedge funds using their own methods — even if they lose their entire investment doing it.
At this point, GameStop stock is a classic bubble ready to burst at any moment, held back only by the sheer will of reddit traders to hold their stocks and drive institutional short-sellers deeper into crisis. We already saw this when GameStop’s stock price fell by 40% on February 2nd. And while it rose back up to $348.50 per share earlier today (a sudden 40% increase), it fell back under $200 per share within 25 minutes, in an incredible rollercoaster of volatility. What makes this bubble unique, though, is the deliberate effort to create these conditions (led by small independent traders) simply to wreak chaos. It’s a microcosm of class war on the terrain of capital, and while GameStop itself is insignificant, the whole spectacle points to the deeper realities of our political economy — and a rising desire to burn it down.
It would be a mistake to read this story as the righteous revolt of the working class against the capitalist class — many of the influential reddit users driving this short squeeze are clearly insiders that have access to Bloomberg Terminals and thousands (sometimes tens of thousands) of dollars to spare to play on the stock market. And while many working people have gotten in on the action (and even shared stories of how cashing out enabled them to pay off their medical debt, buy a home, or take the pressure off providing for their families), this is not a mass working class movement. At the same time, the short squeezers are clearly motivated in some way by a deep anti-corporate sentiment, delight in using Wall Street’s own tools against them, and for many of them even small gains (compared to Wall Street norms, anyway) have been life-changing.
But beyond all the spectacle and the trickle of positive stories, the real importance of this whole saga is what it demonstrates about our economic system. The GameStop bubble is a) clarifying the irrelevance of the stock market to the real economy and real people’s lives, and b) exposing the real way that Wall Street is a rigged game for the ruling class, which will immediately turn on its hegemonic principles as soon as money starts flowing in the “wrong” direction. It’s vital that the Left tap into both of these phenomena and channel them into efforts that can actuallychallenge corporate hegemony.
The first point does not come as a surprise — Americans have long understood that what is good for the stock market does not always translate into the mainstream (especially during the pandemic, when capitalist fortunes have skyrocketed amid misery and death for most working people). But what makes the GameStop situation unique is that it exposes the process by which the stock market works, and how absolutely crazy it is. The concept of short-selling alone is nearly incomprehensible to many. Value here is not created by actually producing anything, but by pure speculation and conscious manipulation of markets. It’s obvious to most consumers that a niche brick-and-mortar retailer like GameStop cannot actually be worth more than Delta Air Lines or Kellogg’s — and yet for all intents and purposes, the stock market has no choice but to treat it as such. The fraud and speculation is palpable, and yet the rules of the system make it so.
This is, of course, no surprise to socialists. You couldn’t ask for a better demonstration of Marx’s concept of fictitious capital — that is, “money that is thrown into circulation as capital without any material basis in commodities or productive activity” as David Harvey puts it. This form of capital has no substantive relation to material production, resources, or assets — it’s wealth that exists only on paper, that is based on abstract claims to future wealth, but for all intents and purposes is treated as real and current. What GameStop demonstrates to the general public is that these forms of value (stocks) are disconnected from real production, and are mainly driven by speculation (rather than productive investment) that does not feed back into the real economy.
Is it any wonder, then, why the GameStop story gained such traction and why participants are styling themselves as anti-corporate crusaders? More and more, it would seem that Americans are realizing that working class people, on the one hand, must participate in the real economy and are subject to the discipline of the market, while the owning class, on the other hand, largely deals in a fictitious economy that can be easily manipulated and gamed precisely because it does not correspond to the real economy. And in the Post Industrial Society that we’ve built since the stagflation crisis of the 1970s, this divide is only growing as profit rates fall and workers are squeezed harder, while finance giants increasingly hold the power to shape global markets. It’s as though the financial economy — where most of our collective economic gains are flowing — exists above and independent of the real economy, inaccessible to the average worker because it does not have a physical site of production and is not materially beholden to labor. “All that is solid melts into air,” indeed.
But while many of the reddit short squeezers have embraced a nihilistic drive to “just burn it all down,” it’s important for the Left to highlight the opportunities here. We must go beyond the simple anti-corporate sentiment and demonstrate that this reality is not simply a “corporate” problem, but a systemic problem of capitalism. And if we accept that so much of our economy is based on fictitious capital, created at the stroke of a pen (or keyboard) and existing independently of real assets and production, we can also ask what we could do if we were able to use that to actually benefit working people instead of the owning class. This is the key insight of Modern Monetary Theory (MMT), after all — in a world where the economy largely exists on balance sheets rather than bank deposits, the government could simply create more money for new programs and national projects whose benefits would flow to the public; if markets can be manipulated, we could instead manipulate them better ends; and in such a world, what possible justification could there ever be for austerity? We can’t content ourselves with mocking the absurdity of the status quo; we have to use this moment of clarification to posit new ways of organizing our economy that resonate with people’s needs.
Just as significant as the absurdity of the market itself is the way that Wall Street has responded to it. Even on top of exposing (once again) the utter shadiness of our financial economy, the GameStop saga is also reigniting the class war in increasingly transparent ways. The short squeeze is, of course, nothing new to hedge funds — they pioneered the tactic in the 1980s and have used it ruthlessly, to great effect. What’s different now is that, for once, someone else is doing the squeezing and some of them are getting the raw end of it. This has them up in arms. They whined — without any self-awareness — about how reddit users are “manipulating the market” and were quickly able to shut down Robinhood. These swift, unprecedented steps to “correct” the market in these last few weeks over this trivial squeeze have been a slap in the face to anyone with a memory of the 2008 financial collapse. It’s been a “mask off” moment that clearly demonstrates the fundamental class antagonism between the interests of Wall Street and the interests of ordinary people. They all but admit that the game is rigged, and that therefore it must be unfair (or even illegal!) for them to lose. What the Left needs in this moment is to take this understanding further to help people recognize how these class interests are always taking action like this — they just hide it behind the scenes a little bit better. The analysis, of course, can’t end there and must ultimately point to mass movements against the capitalist mode of production as a whole, but the GameStop saga can be an important point of reference for the threat we all pose to the ruling class when we organize.
Ultimately, the GameStop saga has not amounted to much and is likely to end up as a historical footnote, if that. It’s a bubble that is already bursting, and ordinary people will be left holding the bag. And Wall Street ultimately won’t feel the hit, outside of a few hedge funds — most of GameStop stock is owned by institutional giants like BlackRock, so the majority of the gains from this bubble are going to stay within the hands of the wealthy, anyway. But what we can take advantage of is what the situation reveals about our political economy, and connect that to the real squeeze that working people are facing every day in neoliberal America. And if we do this well, perhaps we can also begin to imagine new ways of seizing finance power for the collective good.