MIA: History: ETOL: Newspapers & Periodicals: International Socialist Review: Issue 4

International Socialist Review, Spring 1998

Anthony Arnove


Taking stock of their greed

From International Socialist Review, Issue 4, Spring 1998.
Copied with thanks from the ISR Archive.
Marked up by Einde O’Callaghan for the ETOL.

Wall Street: How It Works and For Who
Doug Henwood
Verso, 1997, 374 pages $25

WHILE MUCH of the left has retreated into either celebrating the market (if Mother Jones magazine can any longer be considered left – it recently featured a cover story on how capitalism can save the environment) or accepting that there is no alternative to it, Doug Henwood’s book opens with this statement about the world of greed and inequality in which we live: “If I thought that this cultural pathology would persist forever, I wouldn’t have written this book.”

Henwood, editor of the valuable newsletter Left Business Observer, has made a career of taking on bad thinking about economics and making economic trends and information accessible to those who want to do something about the one-sided class war that has taken place in the U.S. and internationally during the past 20 years. So it is a welcome event that Henwood has undertaken a full-length study of financial markets. He focuses on the Wall Street that experienced a 554-point free fall (or, as the newspapers described it, “correction”) only months after the book hit the stores – underlining his skepticism about the stock market’s “new Golden Age.”

Henwood starts from the view that the market is “comprehensible with a little effort, and even transformable with a little more.” He then demystifies the basic “instruments” (such as stocks, bonds and derivatives) and “players” (mutual funds, government agencies, banks, etc.) that make the market run. Though often less clear than in his shorter pieces in Left Business Observer, Wall Street underlines the basic point: “One thing that markets do very well ... is concentrate wealth.” The richest 0.5 of 1 percent in the U.S., he shows, “claims a larger share of the national wealth than the bottom 90 percent.”

Who owns the stocks?

Henwood also shreds the claim that the market benefits ordinary workers through revenues in their pension funds or through their ownership of stocks and bonds. “Only a minority 40 percent and falling of workers are in pension plans,” writes Henwood. In 1992, “the richest 1 percent of households – about 2 million adults – owned 39 percent of the stock owned by individuals and 42 percent of the bonds ... [and] the top 10 percent owned well over 80 percent of both.”

In a section that is tougher going, Henwood also offers a challenge to the dominant post-Keynesian models of the capitalist market, puncturing the theories of various apologists for capitalism.

Henwood quotes a statement from Britain’s Economist magazine that sums up the contradiction between the rosy theories of capitalism with their promises of prosperity for all and the grim reality of rapidly growing income inequality, declining living standards for workers and the devastating social costs of the world market: “The choice for practitioners and theorists is whether to believe the evidence without the theory, or stick with a theory that, despite the data, is built on impeccable logic.” Not surprisingly, as Henwood shows, they stuck with the theory.

Henwood doesn’t just target defenders of the system and the usual suspects, such as the International Monetary Fund, the World Bank and multinational corporations. Much of his final chapter, “What Is (Not) to Be Done,” tackles fashionable reformist compromises with the market, such as “socially responsible investing” or freeing credit to allow higher growth (a popular idea with liberals associated with the Economic Policy Institute and Robert Kuttner’s American Prospect magazine).

There is a problem with “the desire to accomplish some social goals along with making a return on one’s money,” Henwood argues. “Investment profits originate ultimately, no matter how you dress them up, in the uncompensated labor of workers, and they depend on a social order in which some people have money to spare and others don’t.”

Henwood also shows how “the soulful capitalism crowd” – like Working Assets and Ben & Jerry’s, don’t live up to their PR.

Property is theft

On the idea of making the pie grow faster so that more workers will share in it, Henwood quotes Marx: “The notion of [easy money] ... is only a hypocritical, philistine and anxiety-ridden form of saying: property is theft. Instead of workers taking the capitalists’ capital, the capitalists are supposed to be compelled to give it them.” Henwood adds, “Or in the case of the American populist, compelled to lend it on easy terms.”

For all of his criticisms of reformist approaches to the market, though, Henwood has little in the end to actually say in response to the question raised by the ironic title of his last chapter. He touches only in passing on the crucial fight to restore the welfare state (“a bit boring, perhaps, but essential to any more radical projects”), certainly one of the most immediate tasks that faces workers and the poor today.

After criticizing a model of social investment and arguing that markets always represent social control, Henwood offers what he calls “a few kind things about the Japanese and Germanic models of corporate finance.” Henwood suggests, “The Japanese structure, with its cross holding and monitoring mechanisms, seems like a promising model for a more socialized mode of ownership of larger firms.”

Surely Henwood knows that the Japanese and German economies aren’t exactly models of prosperity today. Japan has experienced non-existent or anemic growth for most of the 1990s, while unemployment in Germany is at the highest level since Hitler came to power in 1933. In both countries – as well as across Europe, where “more socialized models of ownership” are being privatized by conservatives and social democrats alike – workers face a coordinated class attack.

Wall Street shows why capitalism doesn’t work for the vast majority. To change the system, though, we need to have a vision of a society run democratically by workers, not “more socialized modes of ownership of larger firms.”

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