That is one reason why the GameStop story has so unnerved people. It reminds Americans how incredibly dependent we all are on markets that can be very, very volatile.
The 40-year shift towards what President George W Bush referred to as an "ownership society" came at a time when the nature of the corporation and the compact between business and society was changing, too. The two phenomenon are of course not unrelated.
The transformation of markets put more short-term pressure on companies, which cut costs by outsourcing, automating, using less union labour and dumping defined benefit pensions for 401k plans, which put responsibility for choosing investments, and the risks of bad outcomes, on individual workers. In 1989, 31 per cent of American families held stock. Today it is nearly half. Now, it seems, we are all day traders.
My 14-year-old recently told me I should "buy the dip," which did nothing to quell my fears that we are in the midst of an epic bubble.
GameStop is the perfect reflection of all of this. The ultimately unsuccessful effort to squeeze short-sellers by pushing up the share price illustrates the risks of the markets. At the same time, the company itself illustrates how the nature of employment has changed. In a 2015 Brookings paper, University of Michigan sociologist and management professor Jerry Davis tracked the job growth linked to every initial public offering from 2000 to 2014 and found that the single largest creator of organic new employment was, amazingly, GameStop. The then-fast growing retail chain had an army of mostly part-time game enthusiasts who generally made just under $8 an hour. They were "the new face of job creation in America, " wrote Davis, whose 2009 book is a wonderful history of the rise of the "ownership" society.
I contacted Davis, who is now at Stanford University working on a new book about the changing nature of the corporation, to ask his thoughts about GameStop and the controversy surrounding it. He sums up the big picture about as well as anyone could: "Rescuing an extremely low-wage employer from short-sellers by pumping up its stock is not exactly storming the Bastille." What's more, he adds, "Robinhood easing access to stock trading does not democratise the stock market any more than Purdue Pharma democratised opioid addiction. Democracy is about voice, not trading."
Video: How the GameStop short-sellers play | Charts that CountI hope that politicians and regulators keep this core truth in mind during the coming hearings about GameStop and Robinhood. I fully expect Treasury secretary Janet Yellen will, based on her recent pledge to staff to address long-term inequality.
While apps and social media have led more people to trade shares, that has not made our system of market-driven capitalism stronger. Our economy is largely based on consumer spending, and that consumption rests on asset price inflation which can now be brewed up by teenagers in their bedrooms. If current employment trends continue, many of the latter will end up working gig economy jobs without a safety net to catch them when their portfolios collapse.
That is neither sustainable nor supportive of liberal democracy. That is why I applaud Joe Biden's core economic promise to move the US economy from one that prioritises "wealth" to one that rewards work.
The details of the GameStop debacle should be parsed and any villains punished. But we must not lose sight of the main lesson: an economy in which individual fortunes are so closely tied to the health of the stock market rather than income growth is fragile. Speculation, no matter how widely shared, isn't democracy.