If you still don’t understand the populist fury that fueled the rise of Trump (and would have earned Bernie the nomination in 2016 and 2020 if he had been allowed to win), just look at what’s happening with GameStop right now.
Could I have explained to you what a short sale is just twenty-four hours ago? No. But here’s the long and short of it (pun intended), as best as I understand it:
Hedge funds like Melvin Capital make money by betting against companies they see as likely to fail. But through media manipulation, this very speculation – betting against Company X – can actually cause Company X to fail. All it takes is for one or more big wig hedge fund managers like Paul Singer of Elliott Management Corp. to start voicing his “doubts” about the market’s prospects to start driving prices down (Elliot enjoyed a 12.7% return on its investments in 2020).
Some Redditors got wind that the hedge funds had massively overstretched themselves by short-selling GameStop, to the point where they would not be able to buy back enough stock to cover their losses if the price started to rise. So the Redditors started to buy, and GameStop’s stock price went through the roof. A few Redditors became overnight millionaires, while the hedge funds lost billions of dollars in a matter of days.
Millions of average Americans are understandably jubilant over this turn of events, whether they own GameStop or not. It’s hard to dream up a bigger villain than notoriously “evil” hedge fund managers. However, a few points of caution are in order:
- It is possible – and even likely – that these “evil” hedge funds were managing the money of perfectly not-evil charities and pension funds, who may find themselves in hot water, and
- It is also possible – and highly likely – that there is institutional money on both sides of GameStop. It’s not just retailers who stand to gain from GameStop’s rise; many “suits” are likely happily amplifying the Robin Hood narrative while laughing all the way to the bank.
But I’m going to ignore points 1 and 2 for a second and simply say… serves them right. Hedge funds, banks, and insurance companies played a big role in the subprime mortgage crisis that triggered the 2008 financial crisis, and they never paid for it. Sure, government mismanagement was also a factor, but Wall Street was eager to exploit what they must have known to be a precarious position as long as they expected to make it out in the black. And many did.
The Big Banks got a Big Bailout, while 2.6 million Americans lost their jobs and 10 million lost their homes.
You don’t need an MBA or degree in Finance to sense that much of the game is rigged, and saying as much does not make one a socialist or a communist. A lingering sense of unfairness and hatred of Wall Street gave rise to the Occupy Wall Street movement circa 2011. But as the GameStop story shows, why pitch a tent on Wall Street and disrupt traffic, when you can beat the big investors at their own game?
The populism revealed by the GameStop saga has nothing to do with race. It has nothing to do with sex, sexual orientation, or gender identity. It’s just a matter of average people who are tired of being treated like peasants while the elites play by a different set of rules (or, in the age of COVID, break the rules they set for us).
Now the Empire is striking back. Robinhood has restricted the trading of GameStop, and Discord has restricted the WallStreetBets sub-Reddit due to “hate speech.” The Biden administration is said to be monitoring the situation.
It’s easy to see that “too big to fail” has become “too small to succeed.”
What is fascinating is how GameStop populism is uniting disenchanted observers on the left and the right. It’s not often that Alexandra Ocasio-Cortez and Republican Trump supporters find themselves on the same side.
This may be the future of bipartisan, centrist or – dare I say apolitical – populism.
While real in many ways, the culture wars may also be a clever distraction to keep the bottom 99% of Americans divided by race and largely irrelevant matters like what bathrooms transgender people should use. If more blue-haired, LGBT-affirming, BLM-supporting liberals were to speak honestly with gun-toting, socially conservative, MAGA-supporters, they might realize they have more in common than the economic establishment or cultural elites would prefer them to know.
In this rapidly evolving situation, much remains to be seen. Populism always carries certain dangers, whether it comes from the left or the right. It is similar to revolution in this sense – a simmering pot of righteous anger that can either fuel a movement or burn the whole place down. But when elitism and corruption run this deep, when the law is applied in unfair or malicious ways… well, what do you expect?
If you don’t want the pitchforks to come out, you had better respect the peasantry.
Follow me on twitter @FPphilosopher
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