Why should Marxists care about GameStop?
Something fishy is going on with GameStop’s stock price, and there’s been a variety of reactions on left Twitter and elsewhere online. There’s been a tremendous amount of leftists alternatively dunking on liberals who want to ‘reform’ the stock-market, and on conservatives who can’t accept the stock-market is just a casino. Dour lefties scold us for having too much fun laughing at sad hedge-fund managers, because the stock market is, in fact, a bad thing. And the militant among us helpfully remind us that retail investors are not the revolutionary proletariat.
But what should Marxists and our fellow travelers think about all this? What is actually going on with r/WallStreetBets? And what does the GameStop standoff tell us about the state of capitalism at this moment?
In the beginning, there was r/WallStreetBets (WSB). Members of this subreddit have been accused of many things in recent days, but the truth is simple. WSB is a subreddit for nihilistic, high-risk gambling on the stock market, and memeing that selfsame activity. It has no leaders, no hierarchy, and no organization, other than the standard reddit moderating system. It is of course subject to influence and manipulation, but it has no representatives or media liaisons — whatever some might claim (as members of the subreddit like to say, no one speaks for WSB). Some members have a lot of capital to invest, such as u/DeepFuckingValue, WSB’s pioneer of GameStop investing and current patron saint. Other members max out their credit cards, use their student loans, steal cash from their parents, or simply scrounge what they can. As a result, WSB participants do not fit into a neat demographic, and therefore there aren’t easy conclusions to be gained from demography. The denizens of the sub are not an emerging proletariat gaining class consciousness due to their recent dustup with big bourgeoisie, nor are they all moneyed petit-bourgeoisie and professionals. The fact is, the advent of investment apps like Robinhood have made it easy for even working-class people to buy shares of stock. There are no fees, no minimum deposits, and you can trade in partial shares, granting access to pieces of even pricey stocks. The members of WSB are a patchwork of different backgrounds (some patches bigger than others) who share a love of gambling on the stock market, memeing offensively, and steamrolling anyone who gets in the way of those pursuits.
WSB targeted GameStop, starting with WSB user u/DeepFuckingValue, as an investment opportunity for arguably rational reasons. It was not because it was a penny stock that they could pump and dump. It was also not just for memes, as some outlets seem to suggest. Rather, it was just regular runaway stock-market speculation amplified by social media. The now well-trod story is basically this: investment firms had bet that its stock would continue to decrease in value. So they borrowed stocks from current share-holders, signing a contract that they would return the shares and pay them interest on the loaned stock. They then immediately sold these stocks, and pocketed the money. Once GameStop’s stocks reached zero, or near enough, they would return the worthless stock to the lender and get to keep the profits. This is known as short-selling. But then GameStop had some good investment news — Ryan Cohen, the founder of Chewy.com disclosed that he had purchased a huge stake in GameStop. The incentive to bet on GameStop was further compounded by just how heavily shorted GameStop was. Hedge-funds had somehow borrowed more shares of GameStop than were actually tradeable, probably through nefarious means known as ‘naked shorting.’ So now these big funds had to buy back all of the GameStop shares in circulation, and then some, at whatever their cost, or continue to pay interest on the shares they borrowed. And GameStop wasn’t going bankrupt anytime soon. So WSB pounced and began promoting the opportunity via memes and shitposts, placing huge bets on GameStop. News spread to the main page of Reddit and outward, and the stock price cycled out of control.
Now that the stock price has skyrocketed, stockholders and short-sellers are seeing who will blink first. If too many of the stockholders sell, they will let the short-sellers off easy, allowing them to buy back stocks at a cheaper price. If the short-sellers start buying and stockholders hang onto their shares, the price skyrockets, causing what is known as a short squeeze — something that could have devastating effects for the short-sellers and massive gains for (some of) the stockholders, including the members of WSB. As the short squeeze started to take hold on Thursday morning, as if by kismet, Robinhood banned users from buying GameStop (and other heavily shorted stocks), which effectively blocked the majority of retail investors from buying more stock and increasing the squeeze further. Other retail investing apps shortly followed suit, all of whom cited market volatility as the reasoning. Then everyone went nuts.
So what do we make of this mess? Should we just ignore it, since fights on the stock market are inherently capitalist? By no means: the GameStop phenomenon shows that capitalism is (still) a mass of contradictions and some of those contradictions led to a crisis that required intervention by the capitalist class, and that is noteworthy. Capital (with an uppercase ‘C’) has its own peculiar laws of motion that guide its course. It is a mindless thing that lumbers from meal to meal, accumulating surplus-value by exploiting labor. And even though (as Marx pointed out) individual capitalists embody the soul of Capital in the flesh, they themselves will only survive as capitalists as long as they move with it. And as a result of its endless need for growth and profit, capitalists, embodying Capital, sometimes paint themselves into a corner: they act in ways that maximize profit in the short-term, but in the longer-term create crises that the enemies of capitalism can exploit.
The exact nature of the crisis that led to Robinhood and other apps to stop the buying of GameStop is unclear. It doesn’t really matter if it was a crisis of volatility, liquidity, or whatever. What matters is that it was in the short-term interest of Capital to provide retail investors incredibly easy access to the stock market and to make all of us, in some sense, little capitalists. In the longer-term, though, retail investors are now able to collectively cause crises using the very tools of Capital. This is an important development. But it is not to say that the road to socialism is through retail investing, or that retail investors are revolutionary. That’s idiotic. The path to socialism is still through revolutionary class struggle, and you can’t struggle against capitalism with Robinhood (despite its name). But when capitalism wounds itself, the organized left must bleed the beast, and not let the contradiction be managed by politicians and non-profits. Exactly how the organized left can use social-media driven financial crises remains to be seen, but we can’t dismiss it as beneath us to take note and act appropriately. The capitalist class certainly hasn’t.
