In 1976, Peter Drucker published The Unseen Revolution: How Pension Fund Socialism Came to America. The book opened with a sentence that would have seemed astonishing at the time, and looks vaguely amusing today: “If socialism is defined as ‘ownership of the means of production by the workers’ . . . then the United States is the first truly ‘Socialist’ country.”
Pension fund socialism is based on a very appealing idea: that social change can happen slowly, iteratively, and without much overt conflict. Rather than fighting against their bosses on the factory floor, or against the capitalist state that exists to defend their bosses in the streets, workers could use their power as owners to pressure businesses into acting more responsibly.
And when you add it all up, this power is quite substantial. According to the Office for National Statistics wealth and assets survey, total private pension fund wealth in the UK is £6.1 trillion — 42 percent of total wealth, and much more than double the UK’s annual output. A substantial portion of this pot is, in one way or another, invested in the stock market. In theory, workers could use their power as shareholders to force companies to raise wages, improve conditions, and reduce their carbon footprint.
Unfortunately, Drucker’s Unseen Revolution failed to translate into the kind of movement that might have really posed a threat to capitalist social relations. Partly, this is because of the large costs that would be associated with collective action among those with private pension wealth.
More important, it results from the fact that pension wealth is highly unequally distributed. The wealthy have a lot, the middle classes have a little, and many have almost nothing. In other words, “people with pension wealth” are not a class — they do not have a shared set of common interests that could bring them together to agitate for social change.
Enter: Redditors with stimulus checks. Over the last few months millions of ordinary people, armed with the cash distributed by America’s successive COVID-19 stimulus programs, developed a plan to bankrupt hedge funds that were shorting a set of stocks — including GameStop, a video game retailer.
To briefly summarize what happened, a few users of the Reddit forum r/WallStreetBets noticed that a couple of hedge funds had significant short positions in stocks such as GameStop — to put it in simple terms, the funds had made big bets that the prices of these shares would fall.
What made these positions dangerous is that the funds were liable to cover the difference between the price of the share when they made the bet and its price at some point in the future — and while a stock’s price can only go down a certain amount (until it hits zero), it can go up forever, leaving the fund exposed to potentially unlimited losses.
The Redditors realized that they could screw the hedge funds if they all banded together and executed a “short squeeze,” pushing up the price of stocks like GameStop and leaving the short sellers liable to cover the difference.
In ordinary times, such a strategy would have been unlikely to work: retail investors aren’t usually big or coordinated enough to have a significant impact on prices. But we’re not in ordinary times.
First, there’s no way of knowing what the real “value” of any one share is because a decade of central bank asset purchasing programs have blown equity prices out of the water. On the face of it, almost all US stocks are overvalued. And if they’re all overvalued, then none of them are overvalued.
Second, we’re living through hugely uncertain times characterized by substantial volatility in financial markets. In essence, everyone is making bets in a context where no one really understands what’s happening or has any good reason to expect they can predict what is going to happen tomorrow. In this context, perceptions of what’s “safe” and what’s “risky” become skewed.
Third, the United States — as the foremost imperial power with the capacity to print the world’s reserve currency — is seen as a safe harbor in a world full of uncertainty (the flip side of this has been mass capital flight out of the world’s poorest states, in some cases leading to severe debt distress).
Finally, there are now millions of retail investors with extra cash lying around thanks both to stimulus checks and the extra savings that many better-off consumers have been able to build up over the course of the pandemic.
The combination of all these factors is creating the perfect conditions for bubbles — or, as some have argued, one giant bubble. In these conditions, a coordinated short squeeze by a large enough group of wealthy enough retail investors has the potential to significantly impact the market. And it did — the Redditors almost bankrupted one hedge fund.
On the face of it, the Redditor Revolution couldn’t be more different from Drucker’s Unseen Revolution. These investors are directly investing their own cash, they’re coordinated and organized, and they’re intent on creating as much havoc within financial markets as possible — not gently nudging companies to be more socially responsible.
But in reality, both rest on the same misguided logic: the idea that workers can’t exercise any real power as workers, so they should try to exercise it as owners instead.
To understand why this kind of “organizing” is never going to pose a threat to financial markets, let alone capitalism as a whole, we should consider what the aims of organizing should be. Generally, organizing should try to achieve three goals: disrupting capital accumulation, highlighting a central social antagonism, and giving people a sense of their own power and agency.
On the first point, the Redditors haven’t disrupted capital accumulation — they’ve supported it. Sure, they’ve gone after the hedge funds and therefore reduced the wealth of a few rentiers who were making money by betting against other capitalists.
But they’ve done so by raising the stock price of another corporation, boosting the wealth of its other shareholders — including, apparently, a number of other large financial institutions — and strengthening the owners and managers of that company both relative to other capitalists and relative to the workers at every point in its supply chain.
On the second point, the action has failed to highlight a central antagonism within capitalist social relations. The labor/capital divide is completely absent — but so is the owner/nonowner divide that has added another dimension to the division between workers and capitalists under conditions of financialization.
There’s a reason that politicians like Margaret Thatcher and Ronald Reagan were so keen to encourage people to buy shares and build up private pension pots: they wanted to create a class of mini-capitalists to disguise the fundamental antagonism between labor and capital.
The more middle-class shareholders there are, the easier it is for the wealthy to convince everyone else it is in their interests to constantly inflate asset prices.
Everyone, the argument goes, can be an owner if they just save hard enough. Of course, this isn’t true. Some people in the rich world remain trapped in a cycle of low pay and debt out of which they may never escape. And a significant portion of the profits distributed through stock exchanges in the Global North come from the extreme exploitation of impoverished workers in the Global South.
On the final point, the GameStop saga has been more of a success. The Redditors have realized the power of collective action. In a world that teaches most people they are utterly powerless to change anything, that is no small feat.
And thanks to the swift action by the gatekeepers of financial capitalism to prevent trading in shares such as GameStop, they’ve also revealed to huge numbers of people that the system is rigged: that a “mini-capitalist” really isn’t any kind of capitalist at all. Instead, they’re the silent partner in an alliance against workers all over the world.
If anything good comes out of this episode (other than some funny memes), it could be that the Redditors use their newfound collective consciousness — however limited it may be — in their workplaces, in the polling booth, and on the streets.