Stocks have seen huge gains relative to wages. What then to make of the growth of the Dow? The more-than-fivefold gains for the tech-heavy Nasdaq? Is it a sign of an economic system badly tilted toward the wealthy? Proof that financial markets exist in an alternate universe of capitalism, ever expanding as the prospects for so many millions continue shrinking? ...
Though more than half of American households own stocks, the gains in financial markets are often treated as a prime example of how those with money — and how capital in general — have reaped unfair rewards. The current imbroglio in Congress over how to fund a several-trillion-dollar spending plan has turned to taxing stock market gains at a higher rate, in part because of a conviction that corporations and the very wealthy enjoy privileged tax treatment on those gains relative to wage earners.
It can be simultaneously true that capital has enjoyed an enviable position and that markets going up is not a sign of a rigged system. There are now about 4,000 publicly traded companies on the major exchanges in the United States — 20 years ago, there were around 7,000. Capital markets reward those that excel in eking out double-digit growth in a single-digit world. Only the strongest companies survive.
Those companies reap the rewards of capitalism. Apple, for instance, has had phenomenal growth. But it sells expensive phones to the hundreds of millions of people who can afford them, while many more cannot. The same is true for most public companies: They sell to those who can buy and ignore those that can’t.
Successful companies succeed thanks to a global middle class that continues to expand, albeit dented by a pandemic. Companies that cater to it can hire the best and brightest, and deploy technology to save on labor costs. They are hubs of innovation and creativity.
In the meantime, governments and citizens are saddled with the real costs of being alive. Companies don’t need to concern themselves with public infrastructure, defense, elder care, education and child care. The bulk of these costs is externalized.
In short, public companies are the cream of global capitalism — whether that’s a triumph of the system or an abomination, the price for owning a slice of this system should be at a substantial premium to everything else. And those prices should go up.
The challenge, then, is to broaden the gains of capitalism — not hobble it (emphasis added).
- Congress could draw up innovative laws and nuanced rules to better distribute the gains of capitalism. Rather than hiking taxes, why not use the tax code to nudge companies to give all workers shares in the company so that labor enjoys some of the benefits of capital?
- Or tie wage increases to the profitability of the company rather than indexing them to inflation?
Given the dynamism of public companies and a world awash in capital, it’s a fair bet that we will one day see the Dow at 72,000 or 144,000. Rather than trying to slow that momentum, why not disseminate the rewards to wage earners by bringing them into the fold? That may sound like utopia, but only because we’ve forgotten to strive for it (emphasis added).