The Stock Market Swindle


If, like me, you are bewildered by the stock market boom in this time of economic downturn and COVID restrictions, you are not alone. You probably don't have spare cash to invest on shares, unlike the top 5% of the population (earning over $280,000 per annum). It is they that are laughing, while we cry. While the pandemic raged, the country’s richest people became vastly richer – due to booming commodity prices, policy failures and sheer luck. In fact, Australian billionaires doubled their wealth during COVID-19.

The year 2020 started off the way it was expected to, and then things went bad fast in late February and March as the pandemic spread and governments around the world shutdown economic activity. The spread of COVID-19 crushed the stock market when it became clear it would cause a rapid and historic drop in economic output. But almost as fast as it nearly crashed the economy bounced back, and the stock market has surged to record highs. This in spite of high unemployment and under-employment and small business bankruptcies. But big business thrived. It said company profits jumped by a massive 14.9 per cent in the first quarter of the year, while the total wages-and-salaries bill for workers (categorised as "compensation of employees") fell by a record 2.5 per cent. That meant the labour share of income has fallen below 50 per cent for the first time in decades, while the profit share hit record levels. Over the last six years in Australia especially, and over the last 20 years in other countries, and over the last 40 years in the United States, there has been a steady shift in the distribution of income from labour to capital. That is reflected in the growing inequality of the peoples of all these developed countries.

The sort of businesses that have thrived because of the pandemic are health supplies, manufacturing (such as hand sanitiser), IT for education, social media platforms, DIY, groceries, online gambling, cleaning, and delivery services. Most of these industries are owned, if not operated, by large corporations. And of course unprecedented iron ore prices meant that the mining sector boomed. This resulted in large superannuation corporations also thriving. Thus the stock market boomed. But, going back to what I wrote earlier, it is only the rich with the capital to purchase stock market shares in the volume that would significantly increase their wealth. Don' be fooled by the often-used phrase "mum and dad investors", the majority of shares are owned by large corporations such as HSBC, JP Morgan, National Nominees, Citicorp and BNP Paribas, who between them dominate industries such as aviation, insurance, telecommunications, mining and retail, often controlling firms that were meant to be competing with each other, meaning that price control was inevitable. In life insurance, HSBC ownsone-quarter of AMP and one-fifth of ANZ. In department stores and supermarkets, it owns one-fifth of Myer, David Jones, Wesfarmers and Woolworths. HSBC, JP Morgan, National Nominees, Citicorp and BNP Paribas between them dominated industries such as aviation, insurance, telecommunications, mining and retail.

In life insurance, HSBC owns one-quarter of AMP and one-fifth of ANZ. "In department stores and supermarkets, it owns one-fifth of Myer, David Jones, Wesfarmers and Woolworths.The United States and United Kingdom are the biggest offshore investors in Australia, followed by Belgium, Japan and Hong Kong (SAR of China). China is our ninth largest foreign investor, with 3.0 per cent of the total.

Of course, the government's Jobkeeper program assisted these big businesses. $4.6bn in JobKeeper went to businesses that increased their turnover at the height of the COVID-19 pandemic. Of the businesses and charities that got JobKeeper from April to June last year, 365,477 had a turnover that did not drop below threshold levels and 157,650 JobKeeper employers had turnover rise during that period, compared to the same time in 2019. New analysis shows that ASX300 companies banked a total of $3.8 billion in government subsidies in 2020, including $2.5 billion in Jobkeeper.

Our economic system is currently designed to advantage the rich and punish the poor. The belief in "trickle down" economics was fully embraced some decades ago, with the belief that making the rich richer would benefit everyone. But clearly this has not been the case. And, interestingly, the first major power to recognise this is China, who have recently passed laws and amended taxation equations so that the wealth they have created is more equally shared. One can only hope that such bravery can be shown by our own politicians who are currently sycophants to big business.

Geoff Mooney