Facebook’s Mid-May “Initial Public Offering” was a bubble that never really got inflated enough for an ugly burst … yet somehow everyone still managed to come out of it covered in icky goo. The stock opened at (an apparently inflated) $38 per share, and now looks set to stabilize in the mid $20s. Shareholder lawsuits and SEC investigations are already in process.
Well, folks, you were warned — by, among others, my friend Neal Reynolds, who wrote as the IPO rolled out that “likely within a few days the stock will settle down far below whatever peak it hits today — especially since GM just pulled all their advertising from Facebook” … hold that thought, will ya?
And I’m viscerally sympathetic to the opinion of e.g. columnist Tibor Machan, that a stock falling after its introduction is just the market at work, versus which “[a]ll this pining for a sure thing just gives the politicians an excuse to butt in.”
But the real problem, I think, is that the politicians already had butted in, in many ways, both structurally and at, so to speak, “point of sale.”
I’m surprised that more people haven’t commented on General Motors’ decision to pull millions of dollars worth of Facebook advertising mere days before the IPO. The punditry seems to be generally treating that decision as a market act … but the timing looks less related to advertising efficacy than to a desire to tank the stock price. While it could have been routine (if large-scale) gamesmanship on the part of higher-ups at GM who wanted to short the stock, I seem to recall that GM’s single largest shareholder is the government of the United States.
Could there be a political dimension here? Why would the Obama regime lean on a company it owns 3/5ths of to help torpedo Facebook’s IPO? Possible reasons range from the petty (to punish Facebook co-founder Eduardo Saverin for renouncing his US citizenship to keep the taxman’s grubby hands off his new fortune) to the sinister (not wanting a new tech bubble, with possible gooey explosion, playing out over a contentious election cycle to unknown effect; or perhaps just getting some leverage on Facebook by creating a “situation” that could then be made to “go away” given cooperation on things like user surveillance).
Even absent the GM hijinks, one can’t help but notice that the IPO’s backers were the usual suspects — Goldman Sachs, Morgan Stanley, Bank of America, et. al, the state-privileged players whose collective motto is “privatized profits, socialized risks, anything goes, and Uncle Sugar will save us if we need him to” — or that those usual suspects acted in the usual way, doing their damnedest to deceive investors into buying or holding shares not on the basis of their real value, but by propping up the stock price with massive buys as it began to sink.
And finally, there’s Facebook itself, now “under investigation” by the Securities and Exchange Commission … the government bureaucracy whose paperwork requirements theoretically protect investors, but which somehow always seems to do exactly the opposite. Did Facebook present one set of information to the public and another to “select investors” (the usual suspects named above)? If so, does that information differential (and/or the actions taken based on the “select investor” information) constitute fraud?
Can’t keep track of the players without a scorecard. Can’t trust the numbers ON the scorecard. But to the extent that skulduggery is playing out in the Facebook saga, one can’t help but notice that the politicians seem to be looking over every major player’s shoulder and whispering instructions into those players’ ears.
Nor can one reasonably write off that set of facts as mere coincidence. This, my friends, is actually existing capitalism. And if you think that’s the same thing as a free market, I’ve got some shares in a bridge I’d like to sell you. At $38 a pop.
Citations to this article:
- Thomas L. Knapp, Facebook Facepalm, Las Cruces, New Mexico Sun-News, 06/09/12
- Thomas L. Knapp, Facebook Facepalm, Deming, New Mexico Headlight, 06/09/12
- Thomas L. Knapp, Facebook Facepalm, Orangeburg, South Carolina Times and Democrat, 05/31/12
Except that it's not "capitalism". It's corporatism or fascism as the correct terminology.
David,
The term "capitalism" was coined by Thackeray and popularized by Marx (as a transitional period following mercantilism and preceding the revolution and the dictatorship of the proletariat in his theory of historical evolution) to denote a "mixed" state-regulated industrial economy … and that's what it continues to mean to the vast majority of those who hear it and/or use it.
"Capitalism" not only does not imply free markets, it implies the opposite of free markets.
Because I support free markets, I oppose capitalism.
Consider the following.
In a market economy, there are three basic factors of production: capital, land, and labor. A free market is presumably one where none of three factors are in anyway privileged. I'm sure you'd be the first to acknowledge that there are many forms of capitalism (state capitalism, corporate capitalism, crony capitalism, etc). But, if capital is just one factor of production, why is it treated as the name for the whole system that one would like to call a 'free market'?
Perhaps it is because free markets & capitalism are different categories. What, then, is capitalism? It is a specific pattern of ownership where a division between ownership and use of the means of production takes place. In the abstract, this seem innocuous, but tell me: how could something like this happen? Working for someone is, all things being equal, no-one's first choice. Owning one's own land and one's own tools confers independence. That sort of autonomy is not something any sane person would trade away for a wage.
But, let us leave the rarefied realms of abstract theory. I'd reccomend reading some books on what individualists, mutualists, & left-libertarians call (to borrow a phrase from Karl Marx) 'primitive accumulation'. A good place to start is "Historical Capitalism", which is published by Verso. I myself am reading Jim Goad's "The Redneck Manifesto". I myself do not care for Goad or all his views, but in it he describes the coercive origins of wage labor, the similarity of indentured servitude to slavery, and how this came about.
It isn't just the state that is the problem. It is a whole system of power that has existed around it since time immemorial. Try going through the 'Suggested Readings' section of mutualist.org. You will have to put some things through the Way Back Machine, just so you know.
Another thing: It is not wise to apply free market analysis to the economy as it presently exists. While no formal school exists, the framework constructed by John Kenneth Galbraith & his son James has a lot of descriptive power. The work of C Wright Mills is also good. Check them out.
Excellent article! I'm kind of embarrased to admit that I hadn't thought of any of this — but now that you point it out it makes a lot of sense. (And thanks for the shout-out and link to my article.)Excellent article! I'm kind of embarrased to admit that I hadn't thought of any of this — but now that you point it out it makes a lot of sense. (And thanks for the shout-out and link to my article.)
Sorry, Thomas, but you're wrong on this one: the term "capitalism" predates Thackeray by two centuries and has always meant the private ownership of capital, in CONTRAST to the feudalist/mercantilist standard of the day.
Shane,
The Oxford English dictionary says you're wrong (it attributes the first publication of the word "capitalism" to Thackeray in 1854).
While Marx didn't use the word "capitalism" — it didn't really enter economics until the early 20th century with Sombart's and Weber's usage — his descriptions generally attached to it.
Absent some actual evidence that "capitalism" was used two centuries before Thackeray to mean something it's never meant in modern history except as abstracted from Austrian economics and turned into a fetish of the tiny "anarcho-capitalist" [sic] cult, I'm not going to buy the claim.
On the historic use of the terms capital, capitalist, capitalism, etc.: http://en.wikipedia.org/wiki/Capitalism#Etymology…
"Working for someone is, all things being equal, no-one's first choice."
Unless you're totally self-sufficient you're *always* working for someone else. If not an employer than customers.
"Owning one's own land and one's own tools confers independence."
Unless you're totally self-sufficient you will depend on other people either an employer or customers.
"That sort of autonomy is not something any sane person would trade away for a wage."
Why not if the wage is better than what you can make otherwise? Or if you just don't want the hassle of finding customers for your product?
Just three mainstream definitions:
Wikipedia:
"Capitalism is generally considered to be an economic system that is based on private ownership of the means of production and the creation of goods or services for profit or income by individuals or corporations."
Dictionary.com:
"an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth."
Merriam-webster.com:
"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"
So no matter how Thackeray and Marx defined it back in their time, *today* it's in general defined pretty much the way most libertarians (Austrian or otherwise) define it.
But even your account of what Marx meant by capitalism (capitalist mode of production) doesn't seem to be accurate, because according to wikipedia:
"Marx's notion of the capitalist mode of production is characterised as a system of primarily private ownership of the means of production in a mainly market economy, with a legal framework on commerce and a physical infrastructure provided by the state."
Now although this does contain state involvement, the state involvement hardly seems essential.
A strawman. I am not talking about hermitage. Of course, one must interact with others. But, there is that one thing; working for others is not the only possible option. Working with others is also on the table. And then there is the bias of seeking customers for a product. Perhaps I simply want to make a product on my own, which of course requires the use of other people's knowhow.
Self-sufficiency is a matter of degrees. A person who owns their own land still may, in very indirect ways, benefit from other people. Also, people vary in their temperments. Some want to live in isolation. Others cannot do without other people. A situation that allows for the unfolding of all parties desires, without interfering with others, is preferable.
These are not semantic issues.
Words, due to many factors (outright dishonesty being part of it), change their meanings over time. Instead of just reading one 'mainstream' source, try doing an entymological study of the origins of words and word coinages. Don't take anyone's word for anything.
Even so, the word 'private' here is ambiguous. Very much so. Again, not a mere semantic issue.
One more thing: how is the Oxford dictionary not a 'mainstream' source?