Stock ownership as system-wide exploitation?

 

A prior post made an effort to gain greater analytical clarity concerning the unfairness involved in the separation between the “one percent” economy and the rest of us. In what ways is the wealth owned by the super-billionaires an “unfair” extraction from the rest of US society? How can we account for the very rapid accumulation of wealth in the hands of the richest 1 percent of US wealth holders since 1980? The answer seems to largely turn on the rapid expansion in wealth represented by the US stock market over that period, and the fact that a very small number of wealth holders captured the lion’s share of these gains. The following graph shows a five-fold increase in the value of the US equity market in part of that time, from about $12 trillion in 1998 to $52 trillion in 2024. The wealth owned by the top 1% of households increased at about the same rate, which implies that this class rode the wave to wealth right along with the stock market in those years. “Corporate equities and mutual fund shares” are the largest component by far of the wealth portfolios of the top .1% and 1%, as reflected in the second chart below, produced by the Federal Reserve.

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It was shown in the earlier post that the growth of the super-billionaires’ share of the nation’s wealth cannot be explained in normal “business profit” terms. (For reference, the top twenty billionaires in the US own 2.8 trillion dollars of wealth; link.) Rather, the bulk of the wealth now held by individuals like Mark Zuckerberg, Elon Musk, and Jeff Bezos represents the rapid appreciation of value in capital markets of the companies in which they have large ownership stakes. The companies themselves do not generate billions of dollars in dividends; rather, their total stock value has witnessed billions of dollars in gains over very short periods of time.

So why should we think this is in any way unfair? How is it exploitative? Is it not more like the fortunate visitor to “Antiques Road Show” who finds that the forgotten painting in the closet is in fact an early Picasso and is worth millions on the art market? This is good fortune for the owners of the canvas, but surely these facts don’t suggest “exploitation” of anyone else. Perhaps not in the case of the Antiques Road Show guest; but the majority owner of Amazon, Tesla, or Meta is in a different set of circumstances. Rather, the existence and continuing success of these companies depends on background conditions to which all sectors and components of the US economy contribute: a stable system of law and regulation, a robust education and research sector, a skilled workforce, an infrastructure of roads, ports, rail lines, fiber optic cables, and electricity providers. The value of US companies is at least in part a system effect: it is facilitated and constituted by a vast network of private and public stakeholders, all of whom contribute ultimately to the success of the company and the value it finds within the equity market. So the value of the US company is inseparable from the large and heterogeneous economic and political system in which it operates, and the increase in value over time of the US company reflects the continuing contribution expected by the investing public from the functioning of that system.

It will be said, of course, that the companies and their executives themselves contribute to the value that investors attribute to them: innovative products, good management systems, efficient decision-making, appropriate personnel practices, “entrepreneurship” and risk-taking. This is true. But it is also true that these contributions represent only a portion of the increase in value that the company experiences over time. The system effects described here represent an independent and important component of that substantial increase in value. So we might say that “system-created increase in value” is the uncompensated part of wealth creation in today’s economy. Companies pay little or nothing to cover the cost of these system-level inputs on which they depend; these are the inverse of “externalities”, in that they are benefits taken without compensation from the public (rather than harms imposed without compensation on the public). And these system-created increments in value constitute a very important part of the increase in value that they experience over time.

We might therefore look at “system-created increase in value” as the counterpart to “unpaid labor time” in the classic theory of exploitation. It is the source of wealth (profit) that the owners of wealth derive simply in virtue of their position in the property system and in their opportunity to benefit from the economic system upon which they depend. But now it does not derive from the “surplus value” contributed to profits by each worker, but rather from the synergies created by the socio-economic system as a whole.

It should also be noted that the ability of private companies to “extract” value from system-level inputs without compensation depends on their ability collectively to influence government policy. Therefore owners of private companies and stock wealth have strong incentives to shape the decision-making of elected officials, government policy makers, the fiscal system, and the regulatory process. This reinforces the arguments made by Thomas Volscho and Nathan Kelly in “The Rise of the Super-Rich: Power Resources, Taxes, Financial Markets, and the Dynamics of the Top 1 Percent, 1949 to 2008” (link). It follows, then, that achieving powerful influence on public policy and economic rule-making is not just a hobby for the oligarchy; it is an existential necessity.

This analysis of “system-input exploitation” has important consequences for distributive justice. If the whole of society contributes to the creation of the system-level properties that generate a significant fraction of the new wealth created in the past forty years, then surely fairness requires that all participants should receive some part of the gains. It would seem logical for the non-wealth-holding stakeholders — workers, farmers, and uncompensated contributors to social reproduction — to demand economic reforms that direct a fair share of that new wealth to the benefit of the whole population.

The previous post suggested one possible mechanism that would do this. The post discusses a hypothetical “public investment fund” that “would be automatically vested with ownership shares of businesses and corporations as they are created and grow, and that would function as a ‘wealth reserve’ for all citizens”. This would constitute a large and growing asset to be used for the benefit of the whole of society. In that discussion a distribution of gains resulting in public ownership of 1/3 of all capital was considered. Such a division would reduce (though not eliminate) the most extreme inequalities of wealth that currently exist, and would provide a financial basis for a more genuine “free community of equals” through the secure establishment of a high level of the resources most needed — healthcare, education and training, environmental protection, and provisioning of basic human needs for children, the disabled, the elderly, and the unemployed.

This idea of a public investment fund corresponding to the “systemic value creation” of the economy might go a long way towards the securing political values embodied in John Rawls’s concept of a “property-owning democracy” (link). Rawls argues that “the equal worth of liberty” is incompatible with a society in which political influence is proportional to wealth and where wealth is extremely unequally distributed. Wealth inequality of this magnitude means that the oligarch’s liberty and worth are magnified many times relative to the ordinary citizen’s situation. The creation of a substantial public investment fund representing the value created by our social, economic, and political system of cooperation would reduce the total proportion of the total value of the economy that the multi-billionaire class is able to expropriate. It would create real property entitlements for the great majority of society, and it would redress the current horrendous inequality of political influence that exists between the super-rich and the ordinary citizen.

A new form of exploitation

 

Much thinking about economic justice for working people has been framed by the nineteenth-century concept of “capitalism”: owners of enterprises constitute a minority of the population; they hire workers who represent the majority of the population; wages and profits define the distribution of income throughout the whole population. This picture still works well enough for a range of economic activities in the advanced capitalist economies when it comes to manufacturing, agriculture, and service industries. According to recent tabulations by the US Bureau of Labor Statistics (link), there were 158 million workers in wage and salary employment in 2023. Manufacturing represented 8.2%, retail and wholesale trade 13.7%, information 1.9%, financial services 5.8%, leisure and hospitality 10.5%, and federal and state government 14.4%. This adds up to 54.5% of the US labor force, and these workers and firms can be thought of in roughly the framework offered by the traditional idea of “capitalism”. Many of these workplaces are amenable to union representation (though relatively few are in fact unionized). But improving access to union rights and workplace consultation would significantly improve the conditions of life for this segment of the US population.

Marx’s view of the unfairness of capitalism, then, comes down to workplace exploitation — the capture of “surplus value” by the firm’s owner from the workers whom he or she employs. Profits derive solely from surplus value, so wealth accumulation is fundamentally limited by the size of an enterprise.

However, current realities seem to suggest that this classical Marxist account is no longer sufficient. To see this point it is crucial to look at the details of the distribution of wealth and income in the U.S. Consider the graph of median US income by quintile above in constant 2018 dollars. Since 1989 only the top quintile of household income has demonstrated significant growth (in a timeframe of more than thirty years); and the top 5% of households shows the greatest increase of any group. 80% of US households are barely better off today than they were in 1967; whereas the top 5% of households have increased their incomes by almost 250% in real terms. The bottom 80% range in household income from “poor”, the bottom 20% at an average household income of about $14,000, to the second quintile (60%-80%) of about $102,000. But virtually all of these households — 80% of all households — earn their livings through wage and salary income, in “capitalist” workplaces.

Further, only a very small fraction of these households are in a position to accumulate significant savings or investments. As the second graph shows, the bottom 50% of households have only 2.6% of all U.S. wealth, and the 50%-90% segment owns only another 30.8%. The top 0.1% owns 13.9% of all wealth, and the remainder of the top 1% owns 16.6%. That amounts to 30.5% of all wealth, held by 1% of households — and almost incomprehensible figure.

These two graphs have a very clear, unmistakable implication: that working people, including service workers, industrial workers, and most professionals have received a declining share of the economic product of the nation over the past 40 years. (Amazon warehouse workers fall in the 2nd-lowest quintile (poorest 21-40%).) Further, the vast majority of U.S. residents have only a tiny share of all property in the U.S. According to the Federal Reserve 2022 Survey of Consumer Finances, median household net worth in 2022 was $192,700, including private savings, retirement savings, and personal property and home value (link). And, of course, this implies that the median household net worth of the bottom 80% of the U.S. population is significantly lower.

It seems apparent, then, that capitalist exploitation is no longer the primary mechanism through which wealth is accumulated by the top 10%, 1%, and .1% of wealth holders. The top group gains income at a rapid rate and increases its share of the national wealth comparably; whereas the bottom 80% have almost stagnant incomes and negligible wealth. And this accumulation occurs almost entirely through rising value of the stock issued on behalf of private companies. The national economy generates all of this wealth; but the vast preponderance of the fruits of this production flow to the top 10% and 1% of wealth holders. This is a different kind of exploitation: not exploitation of a specific group of workers (employees of General Motors, for example); but exploitation of the whole of the U.S. economy for the benefit of a tiny minority of wealth holders.

Essentially it seems fair to say that the contemporary U.S. system involves two economies — one that includes 60%-80% of all people, and who depend on wages and salaried income to earn their livings; and a second economy that is itself steeply stratified, involving only the top 10%-20% of households. This second economy includes highly paid professionals, executives, and individuals who derive a substantial income from investments, financial assets, and other capital assets. The distribution of income and wealth in this second economy depends on ownership of capital (including human capital) of increasing value in a “knowledge” economy.

It appears, then, that the gross advancement of wealth inequalities in the past three decades has little to do with traditional “exploitation” – an unfavorable wage relationship between owners and workers. Instead, the sudden explosion of tech-oligarchy in the US seems to have to do with financial markets, the stock value of private companies, and the environment of business and tax policy in which they operate. The super-wealthy class in the US came into multi-billionaire status through the rapid acceleration of market value of companies like Amazon, Tesla, and Facebook/Meta. And this process reflected a macro-level mechanism that we might describe as “exploitation of the US economy as a whole” rather than “exploitation of a specified group of workers employed by these companies.

Thomas Volscho and Nathan Kelly provide a careful analysis of the dynamics of income inequality in the US economy over time in “The Rise of the Super-Rich: Power Resources, Taxes, Financial Markets, and the Dynamics of the Top 1 Percent, 1949 to 2008” (link). They note that there was considerable variation in the share of income flowing to the top one percent between 1900 and 2020, with a rapid rise beginning in about 1980. And they attribute much of this variation to facts about political power, public policy, and fiscal legislation. (This bundle of hypotheses is referred to as “Power Resources Theory”.) And a key finding in this literature is that the relative levels of political power and influence held by economic elites versus working people have a very large effect on the degree and direction of change in inequality at the top.

Consider the short history of Facebook. Mark Zuckerberg’s wealth increased from 2008 from $1.5 billion to $236 billion in 2025. The employee count of Facebook/Meta increased comparably during that period, from 85 employees in 2008 to 76,800 employees in 2025. But Zuckerberg’s wealth does not reflect the “surplus value” created by these workers, but rather the perceived value of the company in the eyes of private and institutional investors. And critically, it is difficult to imagine institutional changes within Facebook/Meta that would lead to greater overall societal equity simply by providing the company’s workers more input into the management of the company. The median income for a Facebook/Meta worker is $257K – hardly an exploitative wage. It is the rest of society that is disadvantaged by Zuckerberg’s $236 billion, not the direct employees. The same seems to be true for Tesla and the wealth accumulated by Elon Musk and for Amazon and the wealth of Jeff Bezos. Amazon’s business operations have many of the same features of domination and exploitation identified by Engels in Manchester; but these operations do not constitute the fundament of Bezos’s wealth except perhaps for the “performative” of a company single-mindedly devoted to efficiency and speed of operations.

The experience of the reforms of the welfare state after WWII shows that capitalist exploitation can be reformed through measures that improve the public provision of some crucial services (education, healthcare, retirement income, unemployment insurance); improve the ability of workers to represent themselves effectively in the workplace (legislation ensuring unionization rights); and improve conditions of health and safety in the workplace (OSHA protection). These reforms are “redistributive” in the sense that they depend on taxation of income and profits of private individuals and corporations to fund public provisioning. But can reforms like these address the inequalities — economic and political — created by the two economies described here? Can the oligarchy economy be reined in? It would seem that the answer is “no”.

So we are forced to ask, what kinds of fiscal and tax reforms could effectively rein in the wealth inequalities created at the very top of the wealth distribution? The annual wealth taxes proposed by progressive Democrats extend to taxes in the range of 1%. But this would represent a negligible reduction in the oligarch’s portfolio, and does essentially nothing to reduce the steepness of the distribution of wealth in America. A “confiscatory” tax of 33% would have a measurable effect by increasing available public funds for expenditure; but even reducing Elon Musk’s wealth from $368 billion to $245 billion – still results in a staggering inequality relative to 99% of US workers. And this still leaves the wealth-holder with a million-fold advantage in his/her political and media influence relative to almost all other US persons. (As mentioned above, the median net worth of all Americans is currently about $192,000. It is of course striking that three of America’s largest tech-oligarchs privately own a media company: Zuckerberg (Facebook), Musk (X/Twitter), and Bezos (the Washington Post).)

It appears, then, that standard “New Deal” or “welfarist” approaches to greater economic equality have no prospect for success whatsoever when it comes to reducing the overwhelming inequalities of wealth that exist between the two US economies described here. A graduated income tax works to moderate income inequalities (when it works at all); but the rapid accumulation of wealth represented by the emergence of the “tech-oligarchy” and the graph of wealth distribution above do not derive from income inequalities. The richest 1% did not primarily gain their wealth through annual savings from their high salaries; rather, they gained their wealth through stock ownership in companies whose value appreciated exponentially during the time of their ownership. And taxing the holders of wealth on the income generated by their holdings does not materially affect the distribution of wealth across the population and across generations.

Suppose we viewed a national economy as an interconnected and highly complex form of “joint production”, in which the efforts of all parties are instrumental in the creation of the new wealth and prosperity of the economy. And suppose we believe that this system should be organized as a “fair system of cooperation” in which all parties benefit in a fair way. Can the workings of capital markets and financial systems be incorporated into our institutions in ways that would give the working public (the 80%) a fair share of the products of cooperation? Could we imagine a fiscal mechanism that would provide the public with a “fair share” of the U.S. economy as a whole, including the growth of the value of private companies (Caterpillar, General Motors, Krogers, Facebook/Meta, Microsoft, …)?

For example, would it be possible to imagine a public investment agency along the lines of CalPERS that would be automatically vested with ownership shares of businesses and corporations as they are created and grow, and that would function as a “wealth reserve” for all citizens? Suppose the hypothetical “public investment corporation” eventually possessed assets worth about 1/3 of the total value of the US stock market. (The value of stocks listed on the New York Stock Exchange is currently $28.3 trillion, so we are imagining a public wealth fund of about $10 trillion.) On this model, private owners and shareholders would own 2/3 of the capitalized economy, and the public would own 1/3. Would such a system be feasible? Could such a system redress the insupportable economic and material inequalities that exist in our country? Could it redress the gross inequalities of influence and power that exist between a tiny class of oligarchs and the vast majority of democratic citizens? Could the shareholder voting rights that correspond to the public shares created in this way serve to alter corporate priorities?

It seems clear that the photo below taken from Donald Trump’s inauguration represents a horrendous flaw in contemporary democracy. The “tech oligarchs” turned out in force for the new administration, and a group of wholly committed political partisans stand behind them to enact policies in the United States that serve their interests. If this is the best that our democracy can currently offer working people, then we need to work much harder at finding political and economic solutions that can elicit broad support from ordinary citizens, workers, farmers, and Uber drivers to push forward a better agenda for democratic equity.