Sunday, August 23, 2015

The stock market and the Daily Bread Food Bank

"Feed their hopes, but give them only just enough to keep them from despair," Maxims and Reflections of Francesco Guicciardini (1483-1540).

Wal-Mart stock dropped 3 percent after the company announced wage increases for their U.S. employees. An hourly salary of  $8.78 will increase to $10 sometime next year. No word if this largesse will be shared with Canadians.  Even if it does, it will not keep Wal-Mart employees from visiting the Daily Bread Food Bank.

It's ironic that certain Wal-Mart outlets contain drop boxes for the Food Bank. Ironic because it is Wal-Mart employees who are forced to use that service. Customers who  donate to those boxes are in effect subsidizing Wal-Mart starvation wages, and if the donated food was purchased at Wal-Mart, to  improving the company's profit margin.

All this inspired the revival a blog post of June 9, 2008: "Stock market promotes class warfare." Here it is:

Several years ago, the error-prone Canadian Imperial Bank of Canada (CIBC) negotiated a financial arrangement with the ill-fated Enron Corporation. "In order to extract itself from an Enron-related class-action suit, CIBC would concede a US$2.4-million settlement, the largest one-time charge ever taken by a Canadian bank, " according to The Financial Post of June 2006. CIBC maintained this in no way admitted any wrong-doing. (Do they enjoy giving away their money?)

This news was delivered to CIBC shareholders by Gerald McCaughey to whom had just been passed the CEO's mantle "from the singed fingertips of John Hunkin" who signed the Enron deal while enjoying a salary of $29.5-million (Report on Business, October 2006). To help re-coup some of this loss, McCaughey "took the axe to 950 managers, including 50 executives." This contribution to the unemployed garnered shareholder praise.

McCaughey's action threw 950 breadwinners on the job market, while Hunkin retired "with approximately $52 million in stock and securities" (The Globe and Mail, August 5, 2005).

On one side of the financial divide, we have the bank shareholders demanding even more bloodletting in order to enhance share value. On the other side, we have almost a thousand newly unemployed, one of whom may be you or your neighbour. In one house, we see a shareholder cheering while next door the family of a former banker worries about the mortgage and the cost of the children's education.

On the national scene, we see share value increasing as unemployment increases. It signals to employers greater competition among the unemployed for the jobs they offer. The temptation to take advantage of the situation is too great in the face of shareholder demands for greater profits. It means lower wages, fewer benefits, and worse working conditions for employees.

Internationally, we see large corporations moving offshore in order to realize lower costs and lower taxes. Again shareholders cheer as their own domestic economic base disintegrates.

Hedge fund investors speculate on the price of oil in the hope that tropical storms will strike the oil rigs in the Gulf of Mexico thus reducing oil availability. They cheer unrest in the Middle East. That too increases oil prices. [2015 note: Current low oil prices are due to Saudi Arabia politics, not economics.]

Much of the stock market is based on harm to a large segment of society for the benefit of the minority of investors who profit from injury to their fellow citizens.

As these scenarios multiply across our economy, we have the seeds of class warfare. The very nature of the stock market pits one element of society against the other.

"Modern societies are conflictual: class against class, interest against interest, men against women, workers against employers. In this, Marx was deeply right."  -- Michael Ignatieff, The Rights Revolution.

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