For the latter half of the twentieth century and the beginning of the twenty-first, finance capitalism was pretty much ascendant. More and more exotic investment vehicles and high-tech tools for instant trades have brought the market more and more under the influence of Big Money that throws its weight around in the market and causes all kinds of mischief.

We have come to the point [ According to a recent article in Forbes:] where the wealthy classes that have the assets to invest in stocks are running away from the market - and not just those who manage their own portfolios, I suspect. This is supposedly a reaction to the series of market-crushing events that have occurred beginning with the dot-com bust [see article for details].

The uncertainty that has been belaboring the laboring classes is now belaboring the moneyed classes due to these "catastrophic" events and the growing lack of trust between them and the movers and shakers of Wall St..


I do not wish to speak in terms of class warfare; don't want to sound like Karl Marx. But the reality is that there are two extremes on the wealth curve that most households falls into - actually most fall in the bottom one, and very, very few in the top extreme. I probably don't have the latest or the exact figures which are subject to manipulation, reporting problems, and lying parties that know how to manipulate statistics, so do a little research, if need be. The problem is that the erosion of income due to housing market crash and unemployment begins to erode the life-style of less affluent households much more quickly and severely than those with deep pockets. Those with the deep pockets have been doing just fine, thank you very much, as long as the stock market kept rising; there was much faith that the status quo would continue in that respect.

With poor stock performance, those who create income through investments that appreciate or pay dividends [i.e. stocks and bonds] see their income dry up and their principal dwindling - heaven forbid. So in the last week the market saw many taking money out of equities and putting it into "money-market" funds that pay little or virtually no interest, but will preserve capital [are they under FDIC insurance?]

Why are equities doing so poorly?

This question is certainly very complicated. Many corporations are sitting on a small mountain of cash. According to [someone's] doctrine, they should be investing like hell in all kinds of projects with future potential. They seem to be using their retained earnings as a store of wealth, rather than a mover of the economy. Are there no investment opportunities in America? The investment opps that corporations are looking for are mostly huge in scale [e.g. Alaskan or off-shore oil exploration], and they don't want to be bothered with small stuff. Perhaps retained earnings should be taxed at a certain percentage annually in order to keep these funds moving - either into the pockets of shareholders where it might help boost consumer demand or into concrete investments [not hedge funds]. The tax could fund small promising companies like venture capital firms do. [Yes, the government would have to pick "potential" winners.]

The situation suggests that, at the root, American corporations have lost their focus on providing good products and service. The corporation exists for only one thing - to create profit. This incentive once meant that efficiencies found and exploited were rewarding to corporations. But efficiency gains have become harder and harder to find as society as a whole has gained more experience and capabilities using technology, logistics, and computers. I suspect that running a business at a profit has become harder and harder as corporations have captured much of the consumer market by using an efficient distribution chain. People may say that "competition won out" when Home Depot and Lowe's provided product choice and attractive pricing. Now that a hardware store is difficult to find in much of the country, the corporations are much closer to being in control of that market.

Recent increases in profit have mostly come through finding cheaper sources for materials and labor; this has meant outsourcing and utilizing foreign labor on one hand, and probably more intense wrangling on the ground for vital metals and other commodities, primarily in foreign countries but with much U.S. involvement. Automation is another strong influence that allows further substitution of capital for labor.

In the past, capital availability has been the key to many advancements, providing R&D funds, marketing funds to get products into wide use, building organizations that are efficient to minimize overhead.

There seems to be less and less effective use for the "capital" we have stored up in our corporations and our wealthy citizens. There is little confidence that anything productive can be achieved through investment, if we go by stock market behavior and the non-investment behavior of corporations.

It's my belief that the owners of capital no longer recognize the linkage and symbiotic nature of capital and labor. They seem to believe that avoiding labor costs and commitments is a key strategic goal for them. They do not seem to understand that if they eliminate enough labor, the capital is going to be of less and less use.