While the drama between Reddit, GameStop, and Wall Street was both exciting and hilarious, it's important to look beyond the memes and realize that no matter who's buying and selling, the stock market is based on exploitation.
One of the most upvoted comments on the now infamous subreddit /r/wallstreetbets reads “This is easily one of the greatest things to happen during our lives.” Another commenter said, “It already made me burst out in tears multiple times. This is so important to me … my psyche is done for due to work and my whole family was f— over in the 2008 crisis when the big guys stuffed their bags.” The users were reacting to their subreddit’s role in the dramatic short squeeze of GameStop’s stock in January.
Unfortunately, their understanding of the day’s events was totally wrong.
The story goes like this: a ragtag group of meme-fueled retail investors on Reddit decided to buy as many GameStop shares (GME) as their savings would let them, in order to bankrupt the evil hedge funds who had shorted the stock. In a true David versus Goliath story, the retail investors drove the stock’s price to the moon, made hedge fund executives cry, put CNBC in its place and became heroes of the people.
At least that’s how /r/wallstreetbets would tell it, minus a lot of slurs and rocket emojis.
In reality, the short squeeze was probably driven by institutional investors instead of retail ones. GME wasn’t even in the top ten stocks traded by retail traders that week, and the hedge fund Senvest Management made $700 million off of the excitement.
However, the most interesting part of this story isn’t in the financial details, but in the way the retail traders saw themselves and their impact on the market.
There was a real sense in the /r/wallstreetbets “community” that the short squeeze was revenge for Wall Street’s culpability in the 2008 financial crash and housing crisis and all the finance industry’s other misdeeds. By taking control of GME, they argued, the short squeeze represented a shift in the market away from big-time investors to regular people.
Aside from the fact Wall Street firms might have been the biggest beneficiaries from the squeeze, this is a fundamental misunderstanding of how to address the problem of Wall Street and Big Finance.
Despite what one /r/wallstreetbets user wrote, it’s not actually possible to “occupy Wall Street from the toilet.” This is because of two reasons: the first is that you can’t actually beat Wall Street at its own game.
As was demonstrated on the week of the squeeze, Wall Street is a fundamentally conservative institution. It exists to benefit the people – or more appropriately the class – who it already benefits. Whenever this dynamic is threatened, its constituents close ranks.
Look at how Robinhood and other online brokers prohibited people from buying GameStop and other meme stocks. They claimed their decision was due to “recent volatility,” but traders and politicians across the aisle criticized it for helping the firms who were hurt by the squeeze.
The second reason is that even if it was possible to beat Wall Street at its own game, it wouldn’t matter. Making the stock market more accessible doesn’t change the fact it is part of an inherently exploitative system.
Say somebody buys a stock, and then sells it a week later for a higher price, that person made money, but they didn’t actually do anything to get it — they just bought something and sold it later.
Nothing within that process improves society. Sure, the stock initially came onto market because a company wanted to open itself up for investment, but that investment only matters if it's used by a company's workers to do something useful.
The financial sector — investment banks, hedge funds, etc. — doesn’t actually produce anything. Actual production is done by workers, who sell their labor-power to a capitalist in exchange for a wage.
This system of wage labor is inherently exploitative, because in order to make a profit, capitalist employers pay their workers less than their labor is worth. What's traded on the stock market is just shares of the ability to benefit from that exploitation.
If only abolishing capitalism was as easy as opening a Robinhood account.