Remember GameStop’s short squeeze? It’s easy to forget after months and months of a news cycle fraught with endless crises and internal feuds in Washington. But in January, as newly-appointed president Joe Biden prepared to launch his campaign for an unprecedented domestic spending program in living memory, neoliberalism found itself pushed by an unknown neighborhood: his own acolytes.
It all started when a group of small retail investors (“stupid money” in Wall Street parlance) gathered on Reddit in an attempt to drive up the price of stocks that institutional investors had bet against, or ” shorted â. Most notable was brick-and-mortar video game retailer GameStop, whose business model has been rendered largely obsolete by digital distribution.
As unlikely as it is, a large number of amateur investors piled up, causing GameStop and other heavily shorted stocks to soar, dismaying news for asset managers who had bet against them. Although the moment was short-lived, the bizarre episode was characterized as some sort of popular uprising against the financial powers that be. A sort of Occupy Wall Street, but from a very different perspective.
The GameStop saga, including the initial amazement of institutional investors at the gall of these amateurs and the eventual return to domination of asset managers, illustrated a key dynamic of the neoliberal market model. Whatever its theoretical conception, the lightly regulated âfree marketâ tends to become an insider’s game in practice, where institutional actors set the rules of the game in a way that is intentionally obscure to ordinary investors and consumers.
But this game has deadly consequences. The great disparity in resources between the well-oiled financial industry lobby and the few public interest advocates existing in this space has been one of the main reasons markets have been allowed to collapse so badly. in 2008. And that gap remains a key structural factor in the divide between the wealthy elites and ordinary Americans. We have seen the results: an uneven recovery from the crisis, be it the 2008 recession or the COVID crisis, in which the investor class thrives while the working class struggles to get back on its feet. .
One would expect philanthropy to be deeply invested in this issue. Helping the less fortunate has been an age-old charitable goal, and funders these days are said to be always looking for the most “strategic” ways to do it. But despite the declared wishes of many donors to fight poverty and deprivation, financial reform is an often overlooked and still underfunded cause.
In 2019, we heard as much from Michael Masters and Dennis Kelleher, who co-founded the public interest watchdog Better Markets in the aftermath of the 2008 crash. In a Washington, DC, overflowing with lobbyists for the financial industry and the politicians they court, Better Markets has been one of the few insider groups to lobby to preserve elements of the Dodd-Frank Act on Wall Street reform and consumer protection, which are continually in danger of being chipped away, including in the obscure arena of federal rule-making.
Masters, himself a hedge fund manager, was one of the few philanthropists to support Better Markets in any meaningful way. And the same situation of scarcity of funding applies to the handful of other nonprofit groups focused on this space. Among them are Americans for Financial Reform (AFR), a loose coalition of progressive organizations interested in Wall Street accountability, and the Center for Responsible Lending (CRL), a think tank and advocacy group focused on lending practices. abusive and unfair financial products.
AFR’s 501 (c) (3) education fund received money from a few large liberal funders like Ford, OSF, Kellogg, and the Amalgamated Charitable Foundation. And CRL is one of many progressive organizations funded by the late Herb and Marion Sandler, with additional support from a similar group of progressive foundations.
Besides these three groups and a few other left-wing organizations that devote some of their time to financial reform, the nonprofit sector is surprisingly devoid of advocates fending off the torrent of money being spent to advance the interests of financiers. For example, AFR estimated that Wall Street spent $ 1.9 billion on campaigns and lobbying in the 2017-18 election cycle alone. Meanwhile, Better Markets, AFR, and CRL’s combined annual revenues are around $ 10 million. As Kelleher told us last year, “What we really need are 10 better markets or 10 more AFRs.”
So why isn’t philanthropy doing more to close the gap? One reason is that some donors fear that this work is too âpoliticalâ – a strange refrain, given that the structural drivers of poverty will always be linked to power and politics. Then there is the fact that many donors may tacitly avoid financial reform to avoid harming their own endowments and results. The cultural dynamics of the elite may also be at play: the tendency of wealthy philanthropists and well-paid philanthropists to feel little personal instinct for financial reform.
The end result is that by ignoring this space, philanthropy ignores an essential lever in the fight against wealth inequalities and all its associated ills. This jeopardizes hard-earned local gains, increasing the risk that financial calamity will wipe out what little wealth lower and middle class households manage to accumulate, especially households headed by groups that many donors do. favor, like women and people of color.
As we live in hope, this state of affairs is unlikely to change anytime soon. But the good news is that in the longer term, philanthropy, as well as American society as a whole, is becoming increasingly critical of neoliberal dogma.
Whatever the fate of the remaining elements of Biden’s ambitious legislative agenda, public spending in the COVID era is already marking the start of a new era – perhaps a post-neoliberal era – in which it is less taboo to face social crises with the muscular application of public action. dollars. It’s still unclear whether a similar momentum will develop for things like worker power, antitrust regulation and financial reform. But we’ve seen some funders dig into this conversation, and not just traditionally progressive foundations.
The Hewlett Foundation, a clever funder that often seeks a trans-ideological path, has tackled the decline of the neoliberal paradigm with its Beyond Neoliberalism program and its successor, the Economy and Society Initiative. And the Omidyar Network, a former bastion of ‘philanthrocapitalism’, has made a foray into both worker power and financial reform as eBay’s founder joins the small handful of billionaires willing to finance against their corporate interests. class.
With late 20th-century free market dogma increasingly old-fashioned, we’ll likely see more funders dig their toes into the more secure theoretical side of post-neoliberal political economy. But as Kelleher of Better Markets and others have pointed out, defenders of the financial industry are not content to operate at the level of theory or “narrative.” They pull the levers of power as best they can. If progressive donors are to mount an effective defense, they will have to do the same.