August 18, 2020; National Public Radio, “Coronavirus Crisis”
Yesterday, the S&P 500 stock index closed at a new all-time high, rising 0.2 percent to close at 3389. Nasdaq, an index heavily concentrated in the tech industry, also reached a new high, gaining 82 points to close at 11,129.73, its 33rd record high on the year.
Meanwhile, the US is also on the path to hitting some other potential records…such as record food insecurity (we used to call that hunger), record evictions, and record small business closures. Recommendation engine site Yelp estimates that 72,842 businesses listed on its site closed for good between March and July.
What is going on here? We know that stock markets can sometimes rise during recessions, but a bull market in the midst of economic devastation not seen in the US since the 1930s seems a little on the nose.
Yes, the Federal Reserve has been pumping up the stock market with trillions in cheap money, but is there more to it?
Yesterday, we pointed out that as many economists were fighting over whether the recession recovery would be shaped like a V, a U, or a W, it was neatly forming itself into the shape of a K. That is, while tens of millions are still out of work and likely to remain so for some time while facing evictions, and as small businesses are failing in droves, the rich just keep getting richer.
Thus, the effects of the pandemic are likely to include a massive wealth transfer from the bottom to the topmost wealth holders, potentially one worse than any we have previously seen. And what is especially frightening is that we seem to be seeing this transfer of wealth occurring in real time.
What if the stock market’s climb is not just because of cheap money, but because corporate America is literally scooping up the assets (and market share) of those disappearing small businesses?
This very prospect was raised up in a tweet by Gary Cohn, who previously headed the National Economic Council during the Trump administration. As Cohn put it, “The stock market continues to reflect big businesses increasing their market share during #COVID19. If a small business closes, a larger business fills the void. We need to contemplate what this means for Main Street USA going forward. Is this really the future we want?”
A line can be drawn between stock market exuberance and devastation for the many. Peter Atwater, an adjunct lecturer in economics at the College of William & Mary, observes, “The biggest and wealthiest have been on a clear path toward recovery. Meanwhile, for most small businesses and those worst off, things have only become worse. The contrast is piercing: One group feels better than ever while the other borders on hopelessness.”
Tragically, our nation’s leaders seem to care more about stock values than people. With stock values high, it appears the millions whose homes and small businesses are at risk can be cast aside, with emergency congressional hearings conspicuous in their absence. It is up to all of us in civil society to force on our leaders a course correction.—Steve Dubb