How the GameStop-Robinhood fiasco contributes to democratic decline
Hassan Merali // Contributor
Sharleen Ramos // Illustrator
In early January, a movement to invest in video game company GameStop (GME) started on the /r/wallstreetbets subreddit. They discovered that Wall Street hedge funds were short selling more GME shares than existed. It was a callous example of Wall Street greed, and investing in an underperforming company like GME just to make rich hedge fund investors lose money became a meme. However, it quickly turned from Internet meme to populist movement as Redditors banded together to invest in GME to send its stock price up.
Retail investors started buying shares of GME and other underperforming stocks, especially on the free trading app Robinhood. But when Robinhood restricted trading on so-called “meme stocks” so hedge funds could mitigate their losses, people were outraged. Robinhood billed itself as the platform of the people was saving hedge funds from losing billions. The aftermath revealed that Citadel, a major hedge fund at the centre of the GME saga, pays Robinhood for its users’ trading data. Citadel uses that data to “front-run” trades—basically, discovering what stocks regular investors are trading and then making those trades before them. Citadel and other hedge funds use high-frequency trading algorithms and have terminals on the floors of stock exchanges to get their trades in fractions of a second before regular traders can.
When Wall Street can destroy the economy with no consequences … when Donald Trump and members of Congress can use their offices to make money while people die and businesses close from a deadly pandemic, there is little evidence of the promise of the equal justice promised at America’s founding
This type of legalized corruption is nothing new. After the 2008 financial crisis caused by the Big Banks’ greed and recklessness and their enablers in Congress, there was no accountability for the people who caused it. No Wall Street executives went to jail; instead, they got a taxpayer-funded bailout. From the banking industry’s deregulation, to the revolving door between Wall Street and the United States government, the financial elite in America have been running the show and getting away with blue murder for decades.
The GameStop-Robinhood fiasco is evidence not just of a rigged stock market but a rigged economy and political system in a country that pretends to treat everyone equally. America’s promise is that everyone is created equal and is entitled to equal justice under the law. But when Wall Street can destroy the economy with no consequences; when Amazon can make its founder the richest man in the world and treat its workers like modern-day slaves; when Donald Trump and members of Congress can use their offices to make money while people die and businesses close from a deadly pandemic, there is little evidence of the promise of the equal justice promised at America’s founding. Instead, the rich and powerful benefit from a system they control while those at the bottom toil and suffer.
Canada is not immune from this either—many far-right groups have taken hold in Canada and are peddling their racist conspiracy theories far and wide.
Make no mistake, this kind of double standard is not just stacking the deck favouring the rich economically—it is damaging to democracy. In the wake of the Capitol riot, the ascendancy of QAnon and other conspiracy theories along with the rise of far-right militias like the Proud Boys and the Oath Keepers, this is no longer an abstract threat that only academics and pundits obsess over. Americans have such little faith in the institutions that govern them that they’re turning to people like Donald Trump and conspiracy theories like QAnon in desperation to explain a system that doesn’t care about their wellbeing. Americans would rather believe that Donald Trump is a working-class hero fighting a cabal of deep state child trafficking pedophiles than face the ugly truth of a neoliberal policy consensus favouring Wall Street over Main Street. Canada is not immune from this either—many far-right groups have taken hold in Canada and are peddling their racist conspiracy theories far and wide. The Proud Boys, a prominent group on the far-right, was founded by a Canadian, and Canadians have been found to be the most active in online right-wing extremism.
We are in dangerous territory. The rejection of reality over fantasy, nativism over pluralism, and a lack of faith in public institutions create the conditions for fascism and authoritarianism to take root. The rise to power of strongmen like Trump doesn’t happen in a society where citizens believe that everyone is treated fairly; it happens in societies where regular people feel like there’s another set of rules for the rich and powerful. The GameStop fiasco may not seem like a big deal, but when the lack of accountability for elites leads to resentment among regular people, there is a lot at stake.