Let the Dow die

(Astromario image: Pink Floyd Wish You Were Here album cover.)

My friend Sharif Abdullah argues that the financial markets– the “red market”– is overrated.  It’s neither the largest nor is it the most important of the five markets he identifies.

THE BLACK MARKET: Illegal, immoral and destructive. Drug sales; armed robbery; trading in stolen goods; cops taking kickbacks; counterfeiters; illegal weapons sales; dumping toxic chemicals for profit. The Black Market is completely intertwined in all of the other markets, as George Bush the First found out when, as Vice President, he tried to block the flow of drug money into US banks. Within weeks, banks in Florida almost went under. The anti-money laundering laws were relaxed, so that the drug dealers and the banks could go back to doing business. The Black Market thrives on despair and depression; it breeds immorality and social ruin.

THE GRAY MARKET: Dubious legality and at times negative effects. “Survival economics”. Neighborhood junkyards; unregistered child care centers and food preparation. Unlicensed street-corner vendors and musicians. Illegal tree cutting in most parts of the world. People who paint themselves and act like statues for tips. The guy trying to squeegee your windshield during a traffic stop. While the Gray Market is largely ignored by the mainstream, it is the LARGEST of the five different markets, comprising the majority of people on our planet. Ignored by entities like the World Bank and the IMF, the Gray Market is how people LIVE. Over half of the humans on this planet, over THREE BILLION HUMANS, live on $2.00 per day or less. This is the Gray Market.

THE WHITE MARKET: Legal and largely neutral. Restaurants, offices, taxis, manual laborers, managers… What most of us think about (and work in) when we think about “the economy”.

THE RED MARKET: Super-legal (they own the system and make the rules); Industrial Age wastefulness of resources; inefficient, unbalanced, poisonous. Buckminster Fuller called this “the global casino”. Incomprehensible buying, selling and trading of largely fictitious “assets”, with little or no regulation. The Red Market, based on greed and corruption, feeds off of the White and Gray Markets. The Red Market, exemplified by the Dow Jones Averages, is endangered and soon to become extinct. Those who created the Mess cannot even understand the problem, let alone fix it.

THE GREEN MARKET: Ecological, positive, adaptive, responsive, decentralized, healing, worker-owned and community-owned businesses. Examples include green energy; organic and sustainable food production; bio-damage remediation and the entire emerging sustainable, “green” business sector. This is the market of the future. Our collective future lies in moving the billions (of people and dollars) currently in the Gray Market into the Green Market.

The vast majority of the world survives in the Gray Market with little or no contact with the Red Market at all. These are subsistence farmers, small businesses, and scavengers. If they need a loan, they don’t go to a bank (Red Market). They go to a money-lender (Black Market). When their quality of life improves, the improvements often come not from corporate investment (Red Market), but from investment by forward-thinking small companies, individuals, and NGOs (the Green Market).

Says Sharif,

Those who are the proponents of Red Market economics have done a great job in convincing you that the Red Market is the only market, and that its demise means that you will die, your retirement is on the line, and the entire world will come to an end if you don’t pump your hard-earned tax dollars into CPR for dinosaurs.

You have choices. You can choose to react out of fear and panic. You can believe that the same people who told you that Iraq would be a breeze can be trusted when it comes to the Red Market economy. Or, you can do something different.

Here in the U.S., many of us have our fortunes tied more closely to the Red Market than most people in the world. But not that closely. If the Red Market collapsed, my IRA and my mutual funds could become worthless. That would eliminate about 10% of my net worth, most of which is in local real estate, primarily our home. Few Americans have much of our wealth tied up in the Red Market. But those who do are very vocal.

On the other hand, roughly half the people in this country rely on the Red Market for their livelihood. It’s hard to pin down a number because it’s not clear where the Red Market ends and the other markets begin.  But according to the Census Bureau, 3/4 of U.S. businesses have no payroll.  Are they holding companies or sole proprietorships, or some of both?  There’s not enough data to know for sure, but this figure likely represents a huge number of self-employed persons.

Of companies that have payroll, the vast majority, again about 3/4, have fewer than ten employees.  These companies employ about 10% of the U.S. workforce.  Companies with fewer than 100 employees employ about 1/3 of the workforce.

Likewise, about 2/3 of all U.S. employers have gross receipts of less than $500,000 per year, accounting for only 3% of total gross receipts.  Half of all gross receipts are received by the handful of companies (fewer than 2,000, or 1/10% of all employers) that gross $1 billion or more.

About half of U.S. employees work for major corporations– corporations with 500 employees or more.  Many of them don’t know how to do anything else. Sadly, the Red Market has instilled in many of us the fear that we cannot survive on our own. Entrepreneurship, something 90% of the country engaged in as little as 130 years ago, has been stamped out of the consciousness of about half our population. And many of them don’t even recognize that the other half exists.

But we do exist. What would happen to my business if the Red Market failed? Some of my clients would lose significant amounts of income that originates in the Red Market. But on the whole, my clients dwell elsewhere: in the White, Gray, or Green markets. Homes will still need to be built and maintained, though on a lesser scale. Groceries will still get sold, and restaurants will still serve food. Horses will need shoeing. People will still wear clothes. Movies will still get made, at least to some degree, employing producers, editors, and special effects labs.

That half of the population who only knows how to punch a clock for a living would get a rude awakening– but an awakening it would be, nonetheless.  True, tens of millions of people out of work and trying hard to learn to survive in the new economy is not a pretty picture.  But how far is that from what we already face?

Sharif suggests,

It is time for us to divest ourselves from mutual funds, investment banks, hedge funds… Our mantra must be: if (personally) you can’t control it and you don’t understand it, you shouldn’t be invested in it. Period.

It is time to invest in your community. Invest in your bio-region. Invest in your continent. Invest in your planet. You have a choice: you can invest in Red Market “Dow Jones” companies that make money (correction: made money in the past), or you can invest in companies pledged to make a better world (and hopefully make money, too).

So, have you had enough of the Red Market yet?

  • This one’ll take a while to digest, but at first brush I’d say we’re still at square one – we’ve identified the problem, but no solution.

    The Grey Market strikes me as Rational Anarchy, the “don’t mess with me I won’t mess with you” free-wheeling every socially conscious man for himself that in many ways epitomizes Adam Smith’s Capitalism. The predominant form of government across much of Robert Heinlein’s future histories, histories proving eerily prescient as time unfolds, Rational Anarchy, the Grey Market, is what we who would survive these crisis’ need embrace – it’s the way of the foreseeable future as whatever is to evolve out of the failures of nineteen and twentyth century politics evolves.

    Or, to co-opt a popular topic matter ’round here, Fourth Generation Politics.

  • DJ

    I think the gray market is far bigger, far older, and far less noble than you give it credit for. Gray market is surivival economics. It’s been around since the dawn of trade in one form or another. It’s serfs finding ways to scam a little bit more grain from the lord, untouchables scavenging plastic bottles and cloth from the trash heap, ex-slaves in the south eaking out a living on somewhat less than 40 acres (with no mule), homeless people raiding recycling bins for cash-generating commodities, nomadic herders, and subsistence farmers.

    I suspect Smith would have been more inclined toward the White Market– that’s where the real trading takes place, and that’s where the concept of self-interest and social consciousness are most likely to intersect.

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