‘Try to persuade your friends, monsieur … not to force the people into the streets,’ George Sand told Alexis de Tocqueville at dinner in June 1848. ‘For if it comes to a fight, believe me, you will all be killed.’ He didn’t want to hear it, especially coming from her. ‘I was strongly prejudiced against Madame Sand,’ he wrote in his Recollections, ‘for I loathe women who write.’ She told him that workers were angry, hungry and well-mobilised, describing ‘their numbers, their arms, their preparations’. He wasn’t convinced – ‘I thought the picture overloaded’ – but later admitted he was wrong: ‘It was not, as subsequent events clearly proved.’
After the June revolt was suppressed and Napoleon III took power, Tocqueville appraised the uprising with the benefit of hindsight. Of course, he realised, the workers had ‘their numbers, their arms, their preparations’. Why? He pauses dramatically: because we taught them! ‘Half of the Paris workmen have served in our armies, and they are always glad to take up arms again.’ It’s an enduring problem of any dominant power: to protect itself, it needs to arm low-ranking soldiers with the weapons and skills that could prove to be its undoing.
Tocqueville’s present-day heirs can take some comfort from the fact that modern armies need far fewer recruits. There has been a lot of talk about the military background of some of the insurrectionists at the US Capitol on 6 January, but overall numbers of military personnel have been declining for decades.
Since the United States moved in 1973 to an all-voluntary force, the number of active-duty soldiers has shrunk to less than 0.5 per cent of the population (it’s even lower in the UK). This figure discounts the country’s increasingly militarised police forces (half as many again), but even combined, police and military are still nowhere close to the ‘half of Paris workmen’ who, Tocqueville estimates, served in the French army. And the would-be insurrectionists among them tend to be on the far right, not the left.
So if young workers in an advanced capitalist nation wanted to launch a revolution, what skills do they have? Millennials and Generation Z are routinely disparaged as ‘soft’. No matter how hard they toil in underpaid, insecure service and care jobs, they seem to strike many older people as far less tough than their forebears. But war has many theatres. And today, finance is one of them.
Adam McKay’s movie The Big Short, based on Michael Lewis’s book of the same name, tells the story of Michael Burry, an investor who realised that subprime mortgage markets were the tip of a toxic iceberg of overexposure to worthless stock. He made a fortune in 2008 betting against the housing bubble and catching out others who preferred rosy news over Burry’s own dire predictions of impending market failure.
The GameStop saga that’s been headline news for more than a week is a similar story of smart market shorting. GameStop is a video-game retailer based in the US. In itself, the company is not particularly distinctive: simply another midsized company that was once pegged for demise by large hedge funds such as Melvin Capital, which specialise in short selling – selling borrowed stock then buying it back at a lower value to return to the lender, and pocketing the difference.
This obviously depends on the price going down. The risk with short selling is being caught in a ‘short squeeze’: if, against expectations, the stock price soars, the borrower must take the financial hit. This happened with GameStop. Many large hedge funds had a short position. Then, like a leaking roof that trickles then suddenly gushes, its price began to surge. The surge was hype-based and had little to do with GameStop’s underlying value (but then, market rollercoasters often have very little to do with ‘real’ company value). The share price was driven sky-high by wallstreetbets, a Reddit forum with over two million individual subscribers, who began mass-buying shares and rallying GameStop up – and up and up.
In a few weeks, the stock’s value rose more than 1000 per cent – leading to billions in losses for large hedge funds. Meanwhile, many small-scale Redditors have made small fortunes, enough to pay off student loans many times over.
It may sound like a classic case of David v. Goliath, but that’s not the whole story. The WSB players on Reddit are not all small-scale. One post noted drily that one of the moderators of the forum used to be Martin Shkreli, a notorious ‘pharma bro’ who has drawn rage over the years for price-gouging on lifesaving medicines. According to this version, it isn’t exactly a good guys v. bad guys story. It’s more about less bad guys ripping off worse guys – all the while exposing the most naive investors to heavy losses which they can’t afford.
Yes and no. Behind Shkreli, there are legions of other men and women with different and even noble agendas.
We don’t yet know what the regulatory ramifications of GameStop will be. Nor do we know its emancipatory potential, its capacity to level the market aristocracy. Years ago, old-guard leftists would scoff at the idea of ‘socialist hedge fund’, dedicated to buying up distressed debt and cancelling it, or using the profits for a strike fund. Now such ideas are on the table, embraced by a new generation who know all too well how powerful and rigged the market really is.
When it comes to the great financial ‘casino’, as Susan Strange dubbed it in 1986, today’s young are tired of being manhandled like plastic chips, scattered by ‘invisible hands’ that may be hard to see, but are clearly good at hoarding. It would be prudent not to underestimate the young. The chips have eyes, they can see the market is rigged, and they are taking notes on its vulnerabilities.
For decades, powerful hedge funds have derailed post-Depression financial reforms, while private equity buccaneers dodge the levels of income tax that any mid-level office or health worker pays. The market is not a democracy, it’s feudalism, and the lords expect subservience from well-pampered regulators.
With GameStop, we don’t know, and will probably never know, who threw the first stone. Maybe it was someone like Shkreli, or maybe it was a young girl, pulling an even faster one. And why not?
In 2011, a Kazakh woman in her twenties named Alexandra Elbakyan founded Sci-Hub, a pirate website that springs academic articles from behind proprietary paywalls. She notes offhand on its website: ‘I was able to quickly in three days start Sci-Hub.’ The new online warriors have no singular face, gender or nationality, just open eyes and advanced tech skills.
After Tocqueville spent an evening trying and failing to block out Sand’s warnings, he realised something else about the socialist revolutionaries of 1848: ‘Women took part in it as well as men … and when at last the time had come to surrender, the women were the last to yield.’