In January, the world changed following closely behind the disruption of financial markets at the hand of individual investors.
The invisible hand of free market economics, originally introduced by Adam Smith, was abruptly replaced by a very visible hand – Robinhood. Instead of empowering individual investors to make fee-free stock trades, the company put its thumb on the scales, denied their users the right to buy and sell stock, and in doing so upended hundreds of years of free-market doctrine.
In the days that followed, thousands of retail investors recognized gains beyond their wildest dreams. Far different from 2008, though, because this came about by a group of “Redditors” – participants in the forum hosting website Reddit. They bet against wall street and won, and America watched the free market at work. It was short lived, however, as market makers quickly shut it down. And the market that was previously considered accessible to all became anything but.
Hedge Funds essentially bet that GameStop would fail – they purchased the right to sell shares they did not own, at a fixed price. But then, retail investors purchasing the stock caused a surge in the price, negating any value the Hedge Funds may have realized and forced them to purchase the stocks they previously didn’t own, but bet on. The rich intended to stay rich by betting on destruction.
The “little guy” via Robinhood LLC, a financial services group, fought back. And when they did, Robinhood – marketing itself as the everyman champion of stock market access – changed the rules. They upended the free market and restricted purchases, allegedly forced sales of stock and limited access to features. This action prompted massive backlash and bipartisan agreement that the free market was shackled by the people who have supported it for decades.
Many perceive Robinhood’s actions as an antithesis to their namesake – 33 lawsuits filed at present, all suggest they essentially robbed from the poor, to protect and give to the rich.
As one might guess, these actions against retail investors shook trust in the market to its core. People believed they had a free market, but the market makers proved them wrong. A free and accessible market is simply the best mechanism to foster innovation, growth and stability in an economy. What happened last week, a concerted and organized effort against thousands of retail investors, shows the importance of a free market for all. A free market that is open, accessible and accountable to its participants all the time.
No matter your ideology, beliefs or affiliations, we can all agree a free market is where we are able to economically express ourselves. The capitals of the 50 states is where we protect and foster access to the free market. It works best by virtue of unfettered access and participation, to allow commerce to cultivate and recognize value. If one thing became clear this past election cycle, it is the importance of voting – and nothing votes stronger than the dollar allowed to participate in a free market.
State’s which allow and protect this sort of participation experience gains beyond those more regulated. If nothing else, the concerted effort to prohibit market participation shows the importance of ensuring it remains open and accessible. Coupled with the fact those who won big in the nine states without capital gains tax will enjoy even greater ability to reinvest in an open and free market, and the case becomes clear: ensure everyone can access the market, and experience the benefits that follow when you prioritize the best interest of your people. Your state will be better off for it.
If last week didn’t upset you, it should have.
That’s why now is the best time to push for free market principles and legislation, to ensure that what happened this week – a concerted effort to exclude – doesn’t happen again. For a market to be free, it must be accessible for all, all the time. It is up to the legislators of our states to ensure that occurs, and by adopting sound model policies, they can ensure their constituents are never denied the opportunity to participate again.
Let’s follow the lead of WallStreetBets. Let’s ride this momentum “to the moon.”
Copyright 2021 Lisa B. Nelson, distributed exclusively by Cagle Cartoons newspaper syndicate.
Nelson is the chief executive office of the American Legislative Exchange Council, an organization bringing state legislators and stakeholders together to develop public policy beneficial to the free market and individual liberty.