Stock market has become an option of
making quick money but at the same time, it is highly risky. In today’s
lightning speed technology, it has become easier and faster to purchase stocks
directly or through mutual funds in any region of the world.
Here are some of my thoughts why we
should stop stock markets.
1. Stock
market trading is a speculative activity. Companies get funds only when the
shares are issued initially. However, when shares are traded, they change hands
for imaginary value, without real benefit to the company. PROUT advocates
formation of cooperative institutions which will get capital by way of shares
and deposits by local members (persons
of the same socio-economic zone) .These cooperative shares can not be traded
but can be inherited.
2. It
also leads to wealth drain from one socio-economic unit to another. In PROUT’s
concept, wealth of one socio-economic unit should not be drained to other
socio-economic units else that area will start becoming underdeveloped. We have
seen situation of Bihar, which was once a very prosperous state has so much
poverty now. People are investing in companies in different socio-economic
units through stock markets. Many big industries/ companies are in western part
of India and wealth from East of India is flowing to West. Poverty is higher in
eastern part of India. Stopping drainage of wealth from one socio-economic zone
to the other is an important concept of
decentralized economy. Read earlier blog on decentralized economy here.
3.
Dividends and profit go to financial
institutions out of socio-economic zones and country and this also leads
to wealth drain.
4.
Frauds are done by company at
management level to manipulate stock prices and small investors lose their
money. These scams have become frequent now in collusion with political
leaders. Promoters and owners enjoy on small investors wealth.
5.
Many small investors
lose their hard-earned money when big players manipulate markets as per their
will. If the company defaults, these equity investors are big losers.
6.
Unnecessary reasons are given to
explain stock market movements. Can the company earn so much or lose so much in
a single day that its valuation fluctuates so much? Can its single decision
change company value so much? There is not much correlation with foreign
markets of the company and still stock price fluctuates so much.
7. Control
is mainly in the hands of few persons (owners and top management) and not in
the hands of shareholders or actual
workers. So, lower level employees are not much concerned with improving
company’s performance and thinking for its benefit except a few. In case of
cooperative system, everyone will have ownership in company and everyone will
think for its benefit.
8.
Shareholders do not have direct
interest in company affairs, but think for their own profits and benefits and
not of employees. Real hard workers aren’t paid as much as they would have
earned in their company.
9.
We need to learn from
recent support to Brexit and Trump shouting “America first” that they need
localization to give employment to their own people. They want markets in other
countries but want their people should get employment first. Decentralized
economy can give employment in all regions provided they don’t try to exploit
other regions. Shareholders want profit and they are ready to cut jobs or take
any drastic measure. That is why there is so much outsourcing and now China is
making duplicates of all latest technologies.
1. We
also need to learn how China took control of many companies with COVID 19 game
plan if it is true. Now most of the European companies are owned by China and
these people can dictate their terms.
1. The
persons who don’t know company well are given voting rights just because they
are holding shares. They think in their own benefit.
1. Prices
are illogical. They trade so high as compared to their Price to Earnings ratio
or their price to book values. Small investors invest to make quick money
rather than actual interest in company.
To
conclude, I will say we need to come out of our biased mindset in favor of
stock market. We need to understand that companies should be owned by actual
workers as they can think better for their companies. Finance should be in
terms of debt by regional banks.
