NEW YORK – Closing permanently, the New York Stock Exchange yesterday announced that all corporations listed on the exchange had succeeded in buying up all their shares, and hence there was no reason for the NYSE to continue its existence.
Earlier in the day, all exchanges in the rest of the world had done the same, for the same reason.
“This brings to perfection a persistent trend of the last five or six decades,” said Professor Marshall Ballzupp of the Lohengrin School of Economics. “Some people have expressed unhappiness about it, though I don’t see why. As we know, the market is rational, so if all corporations have bought themselves up on the market, doing so must be rational.”
As Professor Ballzupp indicated, the tendency for corporations to boost their share price by buying up some of their shares has been around for a long time. But it is only in the current century that this has really taken off.
Towards the end of the 20th century, as executives’ salaries and bonuses became more and more tied to the share price of the corporation they headed, CEOs began to realize an arithmetical truism. If a number x is divided into 200 parts, each of those parts is equal to x/200. But if x is divided into only 100 parts, each of those parts is worth twice as much as they were worth when the division was by 200.
CEOs had a choice of how to raise their share price: (1) they could increase the company’s value through such things as producing and selling products that broke down frequently, sacking their workforce and subcontracting any work that really had to be done to slave owners, bribing government officials to give them various handouts and exempt them from taxes, and other traditional capitalist practices; (2) they could use company profits or any other money they could get their hands on to buy and retire shares, thus making the remaining shares more valuable even if the company itself hadn’t changed at all (or had declined in value because of borrowing money to buy up its own shares); (3) they could do both.
The brighter CEOs (usually those who hadn’t inherited their position) generally chose option (3). However, it soon became obvious that option (2) was almost always much more efficient than option (1), so option (2) soon came to predominate in corporate strategy generally.
Where would it stop, some people wondered. “But there was no reason for it to stop before it reached its logical conclusion,” Professor Ballzupp explained. “If a million shares in a company are reduced to 500,000, each share is worth double its former value. If they are then reduced to 100,000, each share’s value is multiplied again by five. Why would you stop when it’s so easy to multiply your wealth?”
And so it didn’t stop until the last human stockholders had sold out for astronomical sums.
But people are of course wondering: will an economy composed entirely of corporations that own themselves behave significantly differently from the economy we are used to?
Professor Ballzupp thinks not. “Markets are markets. They don’t know or care who is offering or demanding money for something; they only know and care about how much. It’s always been that way.
“However, there might be a few small changes. With the stock exchange closed, those Occupy people might stop trying to have demonstrations in Wall Street. Or if they want to, we can let them do it.
“And since there’s no longer an exchange on which to inflate stock prices and thus their bonuses, most CEOs and other corporate officers will probably decide it’s time to retire. Come to think of it, since the present market equilibrium has been achieved purely on the basis of buying and selling shares, there doesn’t seem to be a need for any corporation to produce anything. So maybe all the other employees can also be retired.”
While several unions have raised queries and even mild objections about the legality of mass sackings, Professor Ballzupp points out recent history: after the Supreme Court ruled in Citizens United that corporations are persons, when three vacancies unexpectedly opened on the Court in short succession, the President responded appropriately and appointed to the bench three corporations. This composition of the Supreme Court makes it unlikely that the unions’ objections would be upheld.
In law as well as in the economy, it seems that persons of the human variety are increasingly redundant. There is no point in complaining or regretting: the market knows best.
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