Why the stock market keeps going up

by philg

Americans are out of work.  Factory orders are sluggish.  The economic news is grim yet the U.S. stock market keeps going up.  Can this be consistent?  Sure!  It is possible to believe simultaneously that the American people are getting poorer and that the largest American corporations are going to get ever richer.  How could this happen?  Group A and Group B can get richer if they work together to grow the pie.  Alternatively, Group B can get richer by transferring wealth from Group A.


We’ve discussed this already in this blog in the context of airline CEOs who managed to take $billions in taxpayer money and transfer quite a bit of it into their personal checking accounts as salaries, bonuses, guaranteed pensions, etc.  But there are more subtle ways in which corporations can acquire property formerly held by the public.


For example, movie studios (notably Disney) and other corporate copyright holders recently purchased a federal law that extended copyright out to 100 years (the Founders had it at 14; it was 75 years until recently).  There was no way for them to argue that this law would provide an incentive to authors because it applied to works that were created in the 1920s, i.e., whose authors had been dead for half a century or more.  The effect of this law was to transfer public average-Joe property (public-domain works) into the hands of large corporations, i.e., the companies whose shares are going up.


Disney figures in another corporate property transfer.  Ever since the dawn of aviation it has been held that airspace belongs to the public and is to be regulated for the benefit of all by the FAA.  This is what, for example, prevents the owner of a farm in Missouri from demanding that Delta Airlines pay him a tax every time they fly over his farm.  In May of this year that changed for the first time.  Disney essentially now owns the airspace over Disneyworld and Disneyland and they can exclude anyone from overflying.  They’d been trying for years to exclude planes towing advertising banners but Sept. 11th gave them a security rationale (though neither the TSA or the FAA felt there was a security risk or wanted to transfer the airspace into private hands).  Background story: http://www.aero-news.net/news/sport.cfm?ContentBlockID=9601


Let’s hope the comments section will fill up with other examples of this trend.  But the bottom line is that the time seems ripe to invest in the S&P 500.  Look around you at stuff that you believe to be public property.  Very likely it will soon be given away to America’s largest corporations and consequently their stock will go up even if they don’t innovate.

24 thoughts on “Why the stock market keeps going up”

  1. This is an exciting post; I wish the comment box would fill up, but perhaps people don’t know what to say because what you point to is so big. When I put my old neo-Marxist glasses on, I looks like you’re suggesting a 21st century analogy to 19th century Kapital: from ownership of the means of production to ownership of the means of dissemination. What is to be done? As your examples show, the changes are often practically invisible, and as sentient beings dependent on experiencing the world physically, we’re hampered in our outrage because we can’t see or feel the changes more directly. It becomes all too easy to say, “you’re exaggerating, etc.,” and continue with a “status quo” that’s being restructured under our very noses. Here in British Columbia, the Liberal government is signing away millions of hectares of Crown Lands — supposedly public land — despite public input (on their own BC website) that has been 99% opposed to this legislation. It is changing the status of these lands from inalienably public & held in perpetuity, to being exploitable by private corporations. The latter don’t even have to lift a finger. They don’t need to do anything except harvest the resource. The taxpayers will still own the land just enough so that they’ll be stuck with the environmental clean-up bill. I believe the Bush administration is introducing similar legislation in regard to protected wilderness areas. And like airspace and copyrights to the public domain, wilderness is just far enough away from daily experience as to be invisible.

  2. In addition to grabbing public property some of the companies get rich because of globalization. The short term effect is an improved bottom line, but in the long run there will be reduced wages and increased unemployment in the US and other leading countries. If this trend continues the lower paid workers may have to migrate to the “emerging” countries to survive.

  4. Are you saying that Disney did not want to lose the copyright to Steamboat Willy? No, I guess not.

  5. Electromagnetic spectrum, too, is getting gobbled up — for example, the Amateur Radio Service is constantly having to fight off corporate attempts at appopriation of amateur frequencies.

  8. Phil – I’ve been concerned about the trend towards creation of new synthetic property rights, for years. But connecting it to the rise of the stock market requires evidence that I don’t have.

    If you have any evidence that illustrates this, it would be great to include it.

  10. Disney himself made his greatest successes based on out-of-copyright material: Snow White, Pinocchio, and others.

  11. Corporations have become giant wealth filtering machines that suck the work out of the masses and convert it to wealth. With the twist that most of it never actually gets to the investors. Now with every euphoric rise in the market, the majority of wealth gets taken away from the investors and ends up with mangers. Thas _has to be_ the coup of the century.

    The public needs to take back the airwaves and every other public property that the corps. have taken. Not invest in S&5 and have it looted in the next engineered wipeout of the markets.

  12. For more examples of public to private transfer consider the new professional sports facilities. Funded by public monies but essentially all proceeds and future franchise value go into private hands.
    Also, in my city of Nashville, as an inducement to locate an assembly outpost here, Dell computers was given the public land they put their facility on plus .

  14. Professional sports teams are such a joke. They are neither professional nor embody the sportsman spirit (or should I say sport persons’s ethereal essence?) These are freakshows where the “atheletes” are traded like cattle. Ironically, the black players don’t mind being auctioned off anymore, as long as the price is right. The teams draw on a the old sentiments of the city dwellers by calling
    themselves New York this and San Fran That.. and the IDIOTIC fans actually buy this. (sorry idiotic fans). Shouldn’t these teams have some kind of rules that the players have to be from the city that they represent?

    sports have become the opium of the nort-american masses. Stalin would have pissed his pants at the brilliance of the american elite.. They keep the drones satisfied, suck more money out of them and get subsidies from them.. wow!

    time for my latte!

  15. I’ve been considering running for office, my platform: move Sports into the public sector. We’ll still find a nice cushy spot for the owners so they musn’t cry. We’ll make all the players Federal employees (that out to hold wages) and drop the average ticket price. Then the opiate of the masses will belong to the masses.

  16. Somehow this seems like a new discovery?

    The natural environment has always been shadely transfered from public to private hands. Our air, water, fish, critters and greenspace are raped at the hands of private corporations with full government support.

    If folks don’t get upset with the trade off of life support systems are we really to expect outrage over cartoons and flying rights?

    I would broaded your investment advise to the greedy to include investing in any company that can externalize true production costs onto the public.

    OR….maybe You can focus investments into companies that are sustainable and socially responsible. Social Responsible funds seem to be holding reasonable returns.

    http://www.socialfunds.com/media/funds.cgi#mc_rank_5yr

  17. There are some good examples of moving public resources into private hands here. Many of them remind me of this story on Corporatism, here.

  18. The enclosure of the commons is an old story — see Karl Polanyi’s The Great Transformation for a history. Surely someone has compared the current copyright landgrab to this earlier phase in the growth of capitalism? Yes.

  22. Slate’s economist, Daniel Gross, discusses economic research showing that America has changed, and the rich do get richer, namely, by having found a way to get the Federal Government to work on their behalf. But he says it much better than I do, here.

    To borrow another phrase from Schumpeter, our bias in recent years has switched from creative destruction toward creative preservation. The rich have figured out how to use the federal government to help them stay that way.

  23. Issuing dumb patents for the obvious is another grant of common sense to entities that can afford lawyers….

    Netflix recent patent for apparently changing rental rates from f(movie) to f(t) is an example. If you’ve ever been charged for a library card (maybe an alumni granted semester access to a school library), then you’ve previously undergone a real world version of the Netflix innovation. Or had an unlimited calling plan for a flat rate.

    I have been developing a voice enabled website. How to pay for it? VoiceXML hosters want a bundle of money, on the order of $150-$1500 per month for a few (1000) limited minutes. The media is almost certainly too expensive to pay for with advertising. Using a 900 number would pay for it, but I think would keep a lot of people away for fear of falling to a 900 number scam. Up until this morning, I had considered a bundled time with rates and usage based on things like bell curve distributions. Sell people so many minutes per month, or so many calls per month for one flat rate, but also sell others a flat rate for unlimited numbers of calls for one phone number.

    I can do that knowing that the vast majority of people will only be making 5-10 calls per month max. (And in fact how is Netflix’s innovation any different than how unlimited calling plans work now?)

    Now I worry that if I try this latter price scheme, it will conflict with Netflix’s patent. So there’s another example of corporate transfer….

  24. This whole mantra of companies and executives getting rich off the backs of the poor is ridiculous. First of all, I believe people have a right to work and to earn whatever someone is willing to pay them. If in that process they find ways to reduce expenses and taxes I think they should be able to do so – we ALL do that. Secondly, a company cannot make money unless customers knowingly and willingly give it to them. Yes, there are privileged people and less-privileged people, because productivity and creativity equal wealth, and wealth increases freedom, which is quite a wonderful privilege. The only way to rid the world of economic inequity is to rid it of productivity – a move that would throw us all into poverty.

    Let’s stop with the class warfare and focus on encouraging people to make good decisions, produce and compete.

    The only stealing from one group by the other I know is done through the government, where middle and lower class citizens vote to take money from those who are more successful through an aggressively progressive tax system. Federal taxes are almost entirely paid by people in the top 10%.

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