Chapter 2: It Takes Money to Make Money - How the Stock Market Strongly Favors the Ultra Rich

The Oxford English Dictionary defines Capitalism as: "An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state."

Merriam-Webster defines Capitalism as: "An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market."

This gives us only a superficial description but defines the recipe for the creation of an emerging modern feudalism that is at this moment unfolding in the Capitalist world at an ever-accelerating rate. It is ironic that this system has been represented to the world as synonymous with freedom, human rights, democracy, and enlightened civilization – as the opposite of dictatorship and despotism.

Merriam-Webster defines Feudalism as:

"Definition of feudalism 1: “The system of political organization prevailing in Europe from the 9th to about the 15th centuries having as its basis the relation of lord to vassal (tenant who owes the lord homage and obedience) with all land held in fee (in exchange for service to the lord) and as chief characteristics homage, the service of tenants under arms and in court, wardship, and forfeiture.”

2: “Any of various political or social systems similar to medieval feudalism”

The Oxford English Dictionary defines Feudalism as:

"The dominant social system in medieval Europe, in which the nobility held lands from the Crown in exchange for military service, and vassals were in turn tenants of the nobles, while the peasants (villeins or serfs) were obliged to live on their lord's land and give him homage, labour, and a share of the produce, notionally in exchange for military protection."

In the world around us, we can easily see that Capitalism is rapidly reconfiguring societies to closer and closer resemble the Feudal paradigm.

Under Feudalism there was the Crown, the Kings and Queens who owned and controlled everything. Under them were Lords who owned all land and enforced their ownership with violent force of arms. Vassals were permitted to live on the Lords' lands in exchange for serving the Lords' needs and whims. Serfs were forced to live on the Lord's lands in exchange for labor, obedience, and however much of the Serfs' produce, goods, and belongings as the Lords chose to take.

Under modern Capitalism, almost all the land and other resources are owned by a tiny segment of the population, including "Corporate Persons." That tiny segment owns a steadily growing majority of the land and all resources. These are our modern day Kings and Queens. Under these billionaire royals are their Lords, those who are close to them who defend them and implement or enforce their agendas. (Remember that if you are paying a mortgage on your home, you do not own it, the lender does.)

There are another slightly larger but still small segment of the population who serve these Lords and are afforded a greater than average amount of rights, authority and standard of living. These are often the landlords we pay rent to and the regional or local managers of our workplaces. These are the modern day Vassals. They serve the Lords who serve the Crown, the billionaires.

The vast, ever-growing majority of the people are the modern day serfs. The parallel is becoming more strikingly clear every year.

Two things typical in Capitalist societies are private ownership of resources and production facilities and the employer-employee-consumer relationship. Keep in mind that the term “private,” which has cultural emotional connotations that imply the sovereignty and personal space of the individual, has a completely different meaning in this context. Under both Feudalism and Capitalism, all or most lands and resources are the “private” property of the Crown, Lords or ultra-wealthy/corporations, which in practice means that for the typical individual, little or nothing is theirs. If all rights belong to the owner of “private” property and one person owns the land that others live on, then these others have no property and no rights. In Feudalism, the serfs on the property of the Lords are themselves the property of the Lords; under Capitalism the same is true in practical terms, even though the legal definitions are framed differently.

Feudalism is essentially no different from Capitalism. Under Capitalism, an ultra-wealthy few come to control and own more and more land and resources, leaving less and less for the rest of the people. In a society where possession and wealth confer rights, respect, deference and power, this means that all but a very few have few or no rights because wherever they go is the "private" property of a corporation or a more wealthy person. Under Feudalism, all or most land and resources are the private property of the Crown and nobility. All other persons have few or no rights. The end results of the two systems are virtually indistinguishable. Capitalism is actually more insidious since in many Capitalist countries such as the United States, the underlying reality is disguised with a thin but very well-crafted veneer of illusions of democracy and freedom. In Feudal Europe in the Middle Ages, religion, intimidation, starvation and brute force were used very effectively to keep the population compliant. In Feudal China, Confucianism, intimidation, starvation and brute force were similarly employed. Under Capitalist paradigms of the modern age, illusions of democracy, religion at times, and a plethora of distractions serve these same ends. But make no mistake about it, the dynamics are the same. Brute force and intimidation will be applied to any who do not comply.

Proponents of Capitalism like to say that it empowers the common person to be an owner and make money from investments in the stock market. You or I can theoretically buy shares of companies. This is technically true, just as is the statement that "anybody can make it" or "anybody can win big in the casino." But in reality, as is commonly said in Capitalist societies, "it takes money to make money." In practice, only the ultra-wealthy neo-Feudal Lords can effectively take advantage of this in a Capitalist paradigm. According to multiple sources as of 2017 the richest one percent owned 50% of all stock in the United States and the richest 90%-99% percent owned another 42% of all the stock in the U.S. The 50%-90% owned only 7.75% of stock, while the bottom 50% of the economic pyramid controlled just 0.25% of all stock.

The average yearly increase in the stock market is around 10%, while the average growth rate of the U.S. economy is around 2.16%-3% annually, which is less than inflation. In other words, if you are not making money in the stock market in a big way, then you are steadily losing ground.

It is well known that stock markets go up and down more or less unpredictably in the short term but tend to go up on average over long periods of time, like decades. A person who has a large sum of money well-invested will most likely make a profit if they can leave it on a diverse collection of stocks for a long enough time.

A person living on a sub-living, barely living or a little over living wage does not have large sums of money that they can afford to invest in a diverse portfolio and leave there for 10-30 years. Such a person might occasionally be able to buy a minimal amount of stock; but most likely they will need to access that money, even if it means taking a loss, long before a decade passes because of immediate survival needs.

Imagine that you buy a share of stock that costs $100 because you got some money back from your taxes. If that stock earns an average of 12% a year, which at the time of this writing would be considered extraordinarily good earnings, that means that if you sell that stock after one year, will get back $112 ($12 profit), but really less because you pay a fee for the transaction and capital gains tax, so you might get back less than you invested. If you sell that same share after 10 years and it averaged 12% over that time, you would get back $311 before fees and taxes. If you take into consideration an average inflation rate of 2.5% over that time, its purchasing power will be closer to $243 before fees and taxes. That is hardly a nest-egg. If you invested $10,000 then you would get back $31,100, which would have the purchasing power of $24,300. That would be a meaningful amount but not quite enough for a single person to live on for a year while trying to replace a lost job, assuming no expenses beyond normal daily living costs. In order to attain a return of truly significant magnitude, one would need to be able to invest at least $100,000. Do you have that much on hand to invest for a decade? How many of your friends and family do?

If on the other hand you invested a million dollars, that 12% returns $1,120,000 or $120,000 profit if you sell it after one year. Even after inflation, fees and taxes, that is more than double the U.S. median income from wages or salary. If you were to leave that million dollars invested for 10 years earning an average return of 12%, you would take home $3,105,848 before inflation, fees, and taxes. You can easily see that if you were able to invest a billion dollars at 12% return, then your growth in wealth would dwarf that of the millionaire. People in that situation are also easily able to hire attorneys and top tax professionals to find ways to make sure they don't pay as high a percentage in tax as the typical person would who does not have those resources. Thus we see that investment in the Capitalist paradigm is only practical for those at the top of the pyramid or at least very near to it.

Investors, stockholders/shareholders of a company do have some voting rights in some decisions affecting the company. But the weight of your vote is in direct proportion to the size of your investment. If you have only 10 shares, your vote will never be heard or make any difference at all against the votes of the major stockholders, who usually include the CEO and other company Board officers. It is not democracy in any practical sense of the word, but rather a caricature of democracy.

There are other aspects of stock markets that consistently favor those at the top of the pyramid. Many investments have a minimum. One cannot invest less than $10,000 or $100,000. This effectively bars the vast majority of people from access to these kinds of investments.

In a barter or truly free-market economy where businesses are small and all at the same scale, where all individuals own their dwelling and business, all parties in a transaction meet as equals to arrive at an exchange that all will find acceptable. In a Capitalist economy, the party bringing big sums of money to the table - usually the employer or large investor – is implicitly assigned an advantage, a superior bargaining position, the right to dictate terms, and greater respect and power than the person bringing their knowledge, labor, expertise, or time to the table.

Employers often require new hires to sign an employment agreement which gives the company the right to terminate the employee at any time for any reason or no reason at all, and which also often includes provisions that give the employer ownership over any inventions, processes, innovations, etc. that the employee comes up with while employed at that company, sometimes going so far as to include non-work-related inventions that the employee comes up with at home. If the employee does not sign it, they don't get the job. There is no possibility for negotiating over the terms of the employment agreement. The employer dictates the terms, unless of course you have been offered the position of CEO, in which case you dictate the terms, because you are effectively a Lord of the ruling class; the president and senior vice president and so on are your Vassals seeking a Lord to command them and maximize profits and stock prices.

In any human social undertaking such as a business, all participants together make its functioning possible. But under Capitalism, this is not acknowledged in practice. The largest percentage of employees are serfs, required to live on lands owned by the Lords who determine both how much they will be paid, and how much protection money they must pay for the privilege of being permitted to continue to exist and occupy space... to serve the profitability of the Lords and Stockholders. The difference between Capitalism and Feudalism is hard to find except in the trappings and terminology that clothe it.

As previously mentioned, from 1970 to 2017, the typical salaries of CEO's have increased an estimated 800 - 1,200% while the salaries of employees have increased only 11 - 12% and the cost of living has gone up approximately 500%.

By reinforcing individual acquisition of wealth while failing to reinforce mutuality, symbiosis, cooperation and respect among individuals and groups, Capitalist society creates a human environment where the majority of people will experience strong reinforcement to strive individually to acquire wealth most of the time, just to survive. This behavior is strongly reinforced. If one gains enough wealth to do more than survive, the strong reinforcers favor continuing to do so without limit. Joint mutual effort, cooperation and sharing are selected against and difficult or perilous to sustain.

While wages increase incrementally, linearly and very slowly, wealth increases geometrically. For those who depend for survival on pay that is barely or not quite enough meet expenses, wealth is out of reach. They must constantly struggle to make ends meet, and any interruption in such efforts is catastrophic and possibly irrecoverable. For those with massive amounts of wealth, wages are unnecessary and irrelevant. Their wealth rapidly and increasingly generates more wealth with no effort, work or productivity needed.

By configuring the economy in a pyramidal hierarchical structure, Capitalism ensures chronic scarcity in the lower to middle portions of the economic pyramid, which along with ever-present strong reinforcements for wealth acquisition, creates an adversarial environment of cutthroat competition among the vast majority of people who occupy the middle to lower segments. This has the added effect of marginalizing and diffusing any potential concerted action to combat the hegemony of the Corporatocracy and create non-Capitalist paradigms in practice. Maintaining the overwhelming majority of the people in a state of constant stress, depletion, exhaustion, and discouragement further dissipates social energy that could potentially focus on questioning and challenging the status quo.

By making it literally illegal to live outside the Capitalist paradigm (Yes, in practical terms this is true. More on this later in this writing.) and painting Capitalism as synonymous with Democracy and Freedom, those in power are able to portray those who oppose, challenge or question it as criminals, subversives or terrorists who are then easy to demonize in the eyes of most of the populace. Furthermore, by teaching each generation of children that they are a free and prosperous society envied by all the world, that there is endless opportunity and that anybody can make it, and by promoting and popularizing anecdotal "rags to riches" stories, prevailing cultural attitudes are cast in a mold of acceptance of, and even pride in, the economic system and its conditioned but inaccurate association with the concept of “democracy” and “freedom”.

One area in which there is abundance and wide access for every segment of the pyramid in Capitalist societies is distractions: entertainments, gadgets, status symbols, drugs, alcohol and more, many of which have versions that are within the budgets of sub-living wage earners if they stretch or use credit, which in turn ensures their entanglement and indebtedness within the system while further dissipating social energy that might otherwise become focused on challenging the economic system and the ones at the top, the modern Feudal Lords. If such an economy were an internal combustion engine, these distractions would be the cooling system, keeping the people from heating up to the point of seizing up the engine.

Like any system or organism, the Capitalist system will fight to protect its existence. We cannot afford to be deterred by this. The American, Chinese, and Soviet Revolutions as well as the U.S. Civil Rights Movement, Gandhi's movement to kick the British out of India, the Israeli Zionist movement and the anti-Apartheid movement in South Africa are all examples of fundamental change that was brought about in the face of overwhelming odds and opposition against opponents who were vastly better armed, equipped, trained and supported.

We must learn to always keep in mind that the economic pyramid is not a force or phenomenon of nature that exists in its own right independent of us. It is created, driven and sustained by the cooperation and participation of all of us. It depends on us playing the game by the rules that keep the pyramid in place. That pyramid, and those at the top of it, stands on the backs of hundreds of millions of employees and consumers (human beings) who keep producing, delivering, repairing, selling, buying, consuming and paying. If we remove our backs and choose, millions of us and more, to create a different socio-economic construct, to change the operating principles of the “game” and how it is played from the ground up (not the top down), the pyramid will collapse due to lack of participants. Violence may very well not be necessary.

Those who are attached and addicted to the pyramidal Capitalist paradigm will try to force it upon the Transitionaries, the change-bringers; but if we are numerous enough, focused enough, dedicated and ubiquitous enough and we quietly claim control over the processes of production and distribution, ignoring the hierarchy as irrelevant and keeping vital goods and services functioning, there will be little that the Lords of the Capitalist Feudal state will be able to do to stop the change.