Most readers will have been following the frantic speculation in the price of GameStop shares. It’s all very exciting, even for those of us without a dog in the fight, as small investors use the new found power of the internet to ambush the bigger boys who are apparently trying to short out the company. We’ve got two Guardian stories for you today, but it’s well covered in all the media. And one day it will all go into the “do you remember….?” file along with Lehman Brothers, Enron and 1987.
The point for the Ordinary Joe is “does it matter?” Shouldn’t people be doing better things with their time and money? It has always been a criticism from the the Left that speculative bubbles distort investment. Writ small it means sexy bubble share companies draw funds away from those concerned in the real economy who do dull things like making pharmaceuticals and producing food. Writ large, a financialised economy produces massive inequalities in wealth and power, corrupting information and education, and undermining the very markets that created them. Like all good criticism, much of it is valid; but it suffers from one very real drawback.
No alternative to alternative to capitalism has ever been able to get around the audit power of a price mechanism, which measures close to people’s real needs, not what they say that they want. The old style civil service was a classic example of a market- free institution. It had its virtues. But all too often whole departments could be captured by a few toxic individuals. They were then able to divert the resources to their own ends, awarding themselves perks and pay rises, while the stated purpose of the department was at best secondary. With no competitors and a guaranteed supply of taxpayers’ money, the situation could persist for years. So if you have free trading, the buying and selling of resources according to price, you well get some odd behaviours, like speculation, shorting, arbitraging-and they are just the legal ones. Until someone comes up with a better idea, we believe that they are inefficiencies of the lesser sort
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