Sunday, February 9, 2014

Plausible Rackets 2 ~ Diluting Securities

Succeeding Part 1.

So, you make a few bucks. Time to invest it, right? It's wrong somehow to have money just "sitting around" in a safe or a savings account. That feeling is accurate, based upon the consistent use of elites of "inflation" to dilute the money supply and destroy the savings of the unconnected. Certain equities, more specifically corporate stocks, are the only way to "beat" inflation--without the capital gains and the dividend stream provided by a faux-diversified investment in stocks, any savings accumulated by a clever peon will be watered down to nothingness before a generation or two has gone by, ensuring no unapproved additions to the elite caste.

Stocks, then, are mandatory for those looking beyond a single lifetime, and frequently similarly so for those looking only inside one, or those without phenomenal means and savvy to begin with--ergo they're necessarily the first stop for the many few junior investors lucky enough to exceed basic food and shelter, and begin thinking about a minor caste adjustment. This financial shift, inevitable under the current illusion of fiscal freedom, presents a major problem for elites: not only does lots of peon savings mean more food and shelter security for later generations of non-elite spawn, but lots of peon corporate investment means that non-elites could potentially gain control of powerful corporations through the accumulated ownership of enough stock, producing actual world-changing power.

Yet, with every problem comes a planning opportunity. Setbacks to elite rule benefit elites in the long run, provided they're managed so as to create the appearance of a dynamic, responsive society. Preventing the masses from electing rich imperialist Al Gore in 2000 by judicial coup, for example, seems like proof that the American vote is worthless, doesn't it? And yet, by galvanizing popular resistance to rich imperialist George Bush (why should we have to add initials every time, to make up for their terribly sad, utterly brainless lack of creative child nomenclature?), the coup itself became almost completely ignored, and Americans voted excitedly for a different rich imperialist in 2008, believing not that their votes were worthless, but that they were, in fact, more important than ever. Truth is stranger than fiction, right? Remember? Remember how Antonin Scalia got to override the voters of the supposed greatest democratic republic in human history?

But anyway, the point here is the stock market. People buy stocks--invest in corporations--in attempts to protect themselves from elite inflation. Vain attempts, as it were, but we'll get there. How do we dilute the power of commoner investment in important securities? Securities are important because they are what justified imperialism under the flag of freedom to begin with. Economic freedom, post-Magna Carta, and the approval of the masses to the slave trade and colonialism, was defended on the grounds that everyone would have the ability to freely transfer money and invest it as they chose. The modern world is as wholly based upon this idea as on any other. The merchant "middle class" that was starting to accumulate wealth to rival the landholdings of the nobility invested that extra bullion in slave ships, spice ships, triangular trade, and all that other bullshit, and the "corporation" was created as a vehicle to shield investors from the dirty results of their investments--e.g., villages of slaughtered Africans, and holds full of living cargo headed to chop cane in the new world. We all know that part, right? So now, we've got this idea that "stock," like "currency" and "Form 1040s," is a magical device that allows people to further butchery and rapine without being responsible for it in any meaningful sense.

How do we keep all of those yuppies, idly buying stock, from gaining power over the great corporations? Let's go through it piece by piece.

Shareholder voting

Holders of a corporation's common stock, per share owned, have the right to vote for members of the company's board of directors. Technically speaking, a board of directors has total power over a company. For example, the board of directors for McDonald's could decide to hire only company officers who would purchase solely organic food, or solely non-Monsanto food, or could print war- or food-supply-related facts on the backs of all of its menu sheets. That's a lot of power, considering the total resources of McDonald's. The "shareholder vote" is, like the "citizen vote" in the U.S., a bastion of the free market--and just as illusory.

American Votes--Plan A

The first, easiest way to dilute shareholder voting power is with the normal kind of democratic chicanery that you're probably already familiar with in the "political" realm. Through the spending of corporate dollars on director (i.e., "board of director") elections, those already in power can almost wholly control the perceptions of shareholder voters, leading to the election results they want.

This is a comparatively "soft" way of controlling boards--misleading shareholders in general--and isn't very striking to hear about. Yeah, yeah, so elites keep corporate boards from running they way they want by tricking people. In theory, though, this could be combated by educating shareholders, just like normal voter fraud could be combated by educating normal voters. There, we run into all the normal problems with education, imagination, want, and despair, that keep normal American elections so remarkably peaceable. Still un-shocking, though. When the problem is "dummies voting the wrong way," we're not as offended by the scope of things, because many people are willing to concede that "the dummies deserve what they get. They could've chosen better if they'd wanted to."

What about non-dummies, though? When it comes to corporate voting, we're not talking about a bunch of dirt-poor morons. Often, we're talking about an educated professional class, which has spent its entire life serving elite interests, sometimes on the inside, and has learned some of the tricks--and wants to use those tricks to raise itself in rank. What about a savvy group of middle class investors who buys a lot of shares of common stock, gains 51% voting power (or a significant enough bloc with which to negotiate a 51% equivalent), then tries to take control of a major (or at least meaningful) corporation? Worry not about elite mortal fortunes, for they have a way of putting a stop to that.

Corporate Takeovers

You've heard about these, right? Yes, you have. What is a "corporate takeover"? It's a coup on paper--usually, an elite response to a perceived threat to corporate control. When a company sees that its stock ownership is such that it may be threatened with control by non-elites, it looks to a brother or sister company (or just a powerful investor, or a powerful family firm) to "take it over." Clever interpretations of corporate bylaws, shuffling of corporate officers (a "corporate officer" means, generally, a corporate employee with some type of discretionary power over the company's affairs) in or out of jobs, the sudden generation of additional shares of stock to dilute voting power, and other tricks can allow a "corporate raider," or just a different company (one firmly in the control of the right people), to "seize control" of the wayward corporation, and shut out the dissident shareholders.

That's what it is; that's what all the 1980s bullshit about corporate takeovers was, in part: elites mangling the rules to shut out middle class voting interests, which had begun to increase due to a temporary non-recessionary period, and which the 1980s S&L "crisis" and Iraq War/Bush I recession helped to further guard against. The reason many rich people actually read the Wall Street Journal is that all that nuanced bullshit about corporate affairs is like snapshots of angry peasants building catapults outside the gates. If you understand the subtle machinations of stock shares, it's a prognosis for (non) revolution, ergo a pleasant daily affirmation of business as usual.

Best of all, to stupid (read: uninformed) people, the occurrence of "corporate takeovers" lends an appearance of "fierce capitalist competition" to the modern economy. After all, if businesses are literally taking each other over in the pursuit of profit, then that will probably translate to better serving customers, right? And if any American can freely buy stock and have a part in this great game, it's always possible to succeed in this free economy!

Dropping the Floor

This one's really more of an aside before we go on: if real, non-elite shareholders actually gained control of a company, that company could always be eliminated from the market with normal fiscal means. E.g., by removing its market share, which means, "No more customers, no more profits, the company goes out of business." This happened more in the olden days, when it took things like companies completely crashing, in the Great Depression, to shut out commoner Americans' first real romance with the stock market. Well-connected government regulators are able to squeeze unwanted companies out of business, while overlooking well-connected companies, thereby very literally crushing any business that doesn't toe the line.

That looks bad, though. When shareholders see established companies suddenly losing their customers, or selectively-enforced "regulations" popping up on the books just to shut their company down, it's as bluntly identifiable a use of elite power as mass police roundups of white people in suburbia. The potential for actual resistance grows. Elites, therefore, do not like to do this--they prefer to stick with complicated balance-sheet gamesmanship, like corporate takeovers, and the other factors discussed below. Always keep in mind, though, that it's easy for elites to directly crush individual companies, if they have to.

(How? Oh, come on--every large business in this country is violating OSHA and fibbing on office expenses, at the very least. Choosing whom to investigate, just like whose 1040 the IRS chooses to audit, is a strategic choice. Stupid, overblown regulations like "the war on drugs" or "35 MPH speed limits to protect patrons of a nearby shopping mall" or "recording everyone's phone and internet use" or "protecting vulnerable workers from broken step-stools" exist to (1) make elites look like the vigilant guardians of commoners' well-being, and (2) justify bringing the State hammer down on the deviant.)

Continued in Part 3 with "Mutual Interests & Diversity," and "Courts--The Failsafe."

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1 comment:

  1. Elites dislike popular control over corporations, but they (especially they) also dislike inflation. In fact, rapid inflation (not out of control hyper-inflation, of course) is the best thing that could happen to the commoners - the debt melts away, the wages go up, and the consistently rising prices stimulate all sorts of rag-tag economic activity.

    This is also why the tradeoff between inflation and unemployment is a completely false one, and this is also why the Fed entirely gave up on full employment half a century ago, and focused on curbing inflation instead, succeeding in both actually, so cut them some slack.

    And, all this is also why all attempts for local and/or alternative currencies will be squashed harshly.

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