What if the stock market really IS the economy?

A thought experiment, with apologies to Anne Hutchinson and Max Weber.

I am struggling to recall, from a class I took in the fall of 1976 in Colonial American History, the Antinomian Controversy of the 1630s. It was a conflict between the covenant of works and the covenant of grace, and it had something to do with the founding of Rhode Island. The covenant of works (Arminianism) said you had to make an effort to win God’s grace, and the covenant of grace (Antinomianism) said you could just sit on your fat ass and get it anyway, but you had to be one of the elect. That really pissed off John “City Upon A Hill” Winthrop, who had a Massachusetts Bay Colony to build. So he exiled the Antinomian Anne Hutchinson to what would later become Blossom Dearie’s favorite state. Two centuries later Max Weber said that all Protestants worked their asses off compared to Catholics, and that’s how we got capitalism.

(My apologies for this crude summary, especially to my friend Holly Brewer, who will no doubt be appalled. I can’t promise that I understood any of this much better at the time, because in college I was myself a bit of an Antinomian, which turned out to be a lousy strategy to earn top marks. I absolutely can’t blame the teacher, Stephen Botein, a brilliant scholar who died ten years later at the too-young age of 44.)

These theological musings are prompted this morning by my wondering what exactly is this thing we call an economy. We’re constantly told not to think that the stock market is the economy. It’s a sort of funhouse mirror of the economy, driven by the caprice and wild mood swings of the investor class. Sooner or later the stock market catches up with the economy, but there’s never a direct line from A to B.

But what if that isn’t true? What if the stock market really is the economy? What if Anne Hutchinson was right and John Winthrop and Max Weber were wrong and everything we think of as economic activity doesn’t amount to a hill of beans? What if all other indexes of the economy besides stock prices—wages, unemployment, productivity, GDP—are meaningless? Corporations once bestrode the earth like a mighty colossus. Now they’re sad husks, having yielded their once-considerable power to shareholders, which is to say the banks. Even the real estate market derives its value right now not from demand (there is no demand, for Christ’s sake) but from interest rates. 

Looking at my own experience as a working journalist, I conclude that my economic value as a wage earner ceased growing (after inflation) during the tech boom a quarter century ago. The economy couldn’t be less impressed by my covenant of works. You know what impresses the economy? My covenant of faith, which is to say my 401(k)s. Not that they’re stunningly high or anything, but their increase in value puts my wage growth to shame, even though all I did to make that happen was get older while the Dow Jones Industrial Index bestowed Its grace. Look, I have an excellent professional career and by any reasonable standard I’m quite well off. But Anne Hutchinson was right. My works don’t count. Only my passive investments, set aside and managed by others, contribute to economic growth.

So maybe the stock market really is the economy. My latest, for the New Republic, is an impious thought experiment.

Update, 6 p.m.: Soon after my New Republic piece posted, the stock market started to tank. By the closing bell the Dow had fallen more than 800 points, making it the worst day since June. Is the stock market actually starting to notice the economic suffering all around it? I’m not equipped to say.