Two examples have come to light this week of social parasites making money from the Covid-19 pandemic.
It was reported in the US on Friday that a Republican Senator, Richard Burr, of North Carolina, had sold up to $1.6m worth of shares in mid-February. Whilst he was offering bland reassurance to the US republic, as the chairman of the powerful House Intelligence Committee, he had access to sensitive information, including projections about the likely impact of coronavirus on the economy. He co-wrote an article in early February in which he suggested that “the United States today is better prepared than ever before to face emerging public health threats like the coronavirus”. But in private he must have realised that the ramshackle response of the Trump administration and one of the worst health-care systems in the advanced capitalist world were, in fact, going to spell disaster.
Among the shares Burr sold off were up to $250,000-worth in hotels and resorts companies. On Twitter, Democratic Representative has called on him to resign. “Burr got private briefings about Coronavirus a week ago.” She wrote. “Burr knew how bad it would be. He told the truth to his wealthy donors, while assuring the public that we were fine…” The stock market has fallen by 30 per cent since Burr’s share sell-off. Three other senators sold major holdings around the same time including both Democrats and Republicans.
Short-selling makes £50m profit
In the Financial Mail last Sunday, (March 14) there was a report on British Hedge-fund managers making £50m. Sir Paul Marshall and Ian Wace made more than £50m on the collapse of leisure stocks. Their company, Marshall-Wace, places ‘bets’ on that share prices will fall. This is called ‘shorting’ or ‘short-selling’ stock.
How does short-selling work? It is a market device that allows traders to ‘bet’ on a share fall. Suppose a company, let’s call it Big Company has shares worth £20 each. Suppose a hedge-fund company borrows a million shares – as they can do – with a promise to give them back in, say, a month, plus a small fee, of course. Then the hedge-fund sells the shares at the current price and pockets the £20m. If in the following month Big Company shares fall – let’s say to £5 each – then the hedge fund only needs to lay out £5m to buy enough shares to hand them back to the original lender. There is a tidy profit of £15m in this instance, for adding nothing at all productive to the economy.
Shorting can contribute to a company’s decline
It is thought that ‘short-selling’ often adds to the atmosphere of doom and pessimism that surrounds a company in difficulties and may well contribute to a firm’s eventual collapse. When companies really do fold, and often end up laying off thousands of workers, you can be sure that during their period of terminal decline, some financial companies have made an easy profit. ‘Shorting’ can also be a means of betting on the decline of a currency and more that one Tory Brexiteer MP made money on the decline of the pound sterling after the 2016 referendum result.
Decline of leisure stocks
Marshall-Wace has made an obscene profit from the decline of leisure stocks, but they aren’t finished yet. The Sunday Mail suggests that the firm is also ‘targetting’ travel firm Tui and the hotel group Intercontinental, as well as Cineworld. In some countries, ‘shorting’ is illegal, but it is a normal part of the stock market processes in London and the USA. It is a financial activity that is completely parasitic, in that it adds absolutely nothing to the value of goods or services within society. It is literally making money from money. Somewhere in the process, their enrichment must come at the expense of others, and that often means at the expense of the jobs and pensions of workers in struggling companies. In any rational world, this kind of parasitic financial activity just wouldn’t be allowed to happen.
When the coronavirus pandemic is over – and at some point it will be over – there needs to be a reckoning with all those profiteering from the misery of the mass of the population.
March 20, 2020
