CBOE prick, helpful geek: 75% of the market's value is represented by the S&P 500.

[originalpckelly]

It leads me to wonder how much of this country's economy is controlled by the big corporations. I remember hearing that 75-80% of people are employed by small businesses, but could it be that these big companies do so much business that they dwarf the small businesses that employ most people?

That's a wild thing to hear, how could only 500 businesses represent so much of the economy's overall value? <--Someone pointed out that this is probably the stock market, not the overall market.

It does beg the question:
If you add up the revenues of the S&P 500, how much of GDP is that?

[On the Road]

1. Had Never Thought of It That Way

but that is certainly a good question.

It is worth noting, however, that the small companies that provide most of the jobs are rarely public and thus not part of the market.

[originalpckelly]

2. Yeah, I wonder what he meant.

Did he mean stocks or the larger non-stock market? I guess it would make sense that that is true. There has to be a way to add up all the revenues of the S&P and find how much of the national GDP they comprise.

[On the Road]

3. That Figure of 75% of the Market Being in the S&P

gets bandied about a lot. It refers to the US stock market only. Meaning it would also exclude not only Mom-and-Pop operations, but Mars, Bechtel, Pricewaterhouse, Cox, Enterprise Rent-a-Car, Cargill, and a bunch of other larger companies.

[originalpckelly]

7. Yeah, I've got it now.

Surprisingly, I've never heard it before, despite watching the financial channels quite a lot. I guess they don't talk about it, because it's like talking about 2+2=4 so it's taken to be an axiom amongst investors.

[Hannah Bell]

4. yes. the other half of the oft-cited "small businesses employ most of the people"

is: "large businesses make most of the profits" & "control most of the economic activity."

here's an example:

Top 200: The Rise of Corporate Global Power

Available in PDF
File Size: 203KB


Key Findings

The Top 200 corporations' combined sales are bigger than the combined economies of all countries minus the biggest 10.

While the sales of the Top 200 are the equivalent of 27.5 percent of world economic activity, they employ only 0.78 percent of the world's workforce...


http://www.corpwatch.org/article.php?id=377&printsafe=1


This is global, but the same thing is true at the level of nations. a few corps control a big chunk of economic activity.

Not so different from when the Morgan interests controlled GM, GE, US Steel, the sugar industry...etc. Effectively controlled the entire economics of the US.

I actually believe it's still the case, simply more covert.

[originalpckelly]

12. What I want to know: How much of the money goes to property investors?

:shrug:

That would seem to be the other part of this.

[JDPriestly]

5. You make an excellent point.

Just as much of "private business" relies on government purchases (which buy many products and services from private suppliers -- like the mountains of paper and computers that government offices use), government services (such as the legislature, regulatory agencies that assure the products they buy conform to certain standards, courts and recorder's offices) and, in many cases, direct employment via government contracts to purchase their goods or services (think Lockheed, Boeing, hospitals, construction companies that build schools and roads -- all claiming to be private), so, too, do small companies rely on the big corporations as customers, suppliers and general contractors so to speak.

That is why the Republicans are so silly to claim that instead of the direct government investments to increase employment, we need to give tax breaks to small business owners. The government is better positioned to aim the money directly at the most important target -- increasing the demand for labor in the U.S.

Giving tax cuts to small businesses would take years, and might never work, not if the small business owners decide to invest their tax bonuses in outsourcing their work to China or India.

[originalpckelly]

6. It's not just that, I'm forming a theory here.

DU is a great tool for doing this. So much debate.

I've got a hypothesis:
Corporations act like planned economies, and more planning is involved as they get larger and larger. This constitutes a system of control of the population. Along with small businesses that own property, most people live paycheck to paycheck because of these corporations in a system akin to a giant company town.

A small business is a problem for the overall health and stability of the economy, as it plans labor rather than having an actual labor market.

As it concerns renting, many property owners are small businesses, and wouldn't be a problem if all by themselves conducted their business. As a whole system, however, it serves to prevent people from saving aside money, to buy their large purchases like cars and houses.

It would be well within reason to save aside enough money to buy a super cheap, spartan condo whilst living with one's parents. The problem is that most people move out and into rental units, which sap the capital of people every month, and prevent them from saving up enough money within a reasonable time frame to purchase an actual house outright or a car outright. It's far more important in the overall scheme of things than even corporations. As a majority of one's income goes to pay for mortgages and rents than anything else, for most normal people.

I also think that housing is more expensive, because people are paying for the profit margins of the homebuilder, as well as the companies that subcontract, and the companies that make the materials in a house. People also make less because some of their productivity goes to the top.

So this whole system apparently prevents all but the wealthiest individuals from owning outright the things that make life possible.

Refusal to participate in the system results in homelessness and starvation. If you think we can't feed, clothe and house the homeless for free, keep in mind that before the most recent downturn and years prior, the number of homeless was less than 1/3% of the population. We also provide those things to all people who in jail, and there are twice as many people in jail than are homeless.

[Hannah Bell]

8. ding!

[originalpckelly]

9. What we need is a logic, not passion, based revolution.

Look at how compelling that rational argument is. It's so plain and easy to see. Pleas to emotion like most other people have tried to use to overthrow this system, make it seem as if this isn't as precise as science. This is a science, however, and it can have proofs and facts that are indisputable. I think the power of being able to prove this with logic will basically cause a massive worldwide revolution.

I want the same equal wealth distribution as the communists do, but I think it can be achieved through breaking up the system that sucks wealth from the people. In theory there should be equilibrium, or homeostasis (since the economy is an open system) in this economy, and that should equate to an equal distribution of wealth. Our gini coefficient has been increasing, if this system is following the laws of physics, that simply shouldn't be possible, as money is roughly equal to energy. And there's physics out there that suggests as time goes on, the equilibrium state of energy in a system has the highest probability of existing, and therefore is more like to actually happen. Something is amiss, something isn't working out right. And it's the system that sucks up capital from the people who create it.

I think past movements have taken the wrong direction. They get mad, instead of getting even.

My goal is to create an economic equilibrium, or something very close to it, so that people rise and fall based upon the content of their character, rather than the content of their master's character.

[readmoreoften]

13. I like the use of homeostasis to define the economic goal.

I'd rather call my self an egalitarianist than a communist in that the goal isn't to "collective" a people (in fact, I'm pretty anti-communitarian if said community has a predicate of any sort.) One structural problem of capitalism is that it is unsustainable: "I use you to get you+profit." "I use x commodity to obtain x-plus-profit." "I use profit to obtain profit-plus-profit." "I use cake to obtain cake-plus-eat-it." Everything always has to obtain a +1. And a +1 to cover it's +1. So capitalism requires exponential growth. It's not only the environment that has a limit, but people's suffering in relation to productivity.

[originalpckelly]

15. Interesting.

I'm glad you agree with me on homeostasis, I think that's where my thought process of late is leading.

The structural problem is just that, structural. I'm working on ways of fixing that structure.

The structure I'm working on is actually quite similar to vanilla Marxism, workers would own the means of production, but instead of collectively owning it, they would individually own it.

Capitalism is the existence of private capital in an economy, I think the particular structure of our economy is derived not from the natural consequences of capitalism, but the natural consequences of a country/world that once owned slaves. Modern day corporations and property owners operate, whether knowingly or not, a system which bears strong resemblance to a worldwide/nationwide company town, and that system of doing things is the logical conclusion of labor after the slavery period.

It's nice that you're a good person who obviously has an egalitarian spirit, the problem is that we cannot create systems of checking power that are solely based upon good behavior. Each prison must contain both good and bad inmates. A system of checking power is sort of like a system of constraints on what each person could possibly get/do in the way of power.

The only industries which could gain lots of money in my form of capitalism would be intellectual property professions. There is, however, a massive check on the overreach of this class of profession: piracy.

If an IP professional charges too much money to license their designs/art/etc. they will suffer from piracy because it's really easy to steal IP.

[readmoreoften]

20. I think we're operating under different definitions of capitalism here.

Global company town is an astute observation.

Capitalism to me isn't "individual" ownership or "corporate" ownership. It is ownership of the fruits of dead labor (ex. what slaves produced, money stolen from widows, and the 'surplus value' collected by labor)--particularly by a class of people who protect one another to maintain power.

If you look at that "money as debt" video all over DU, you'll see that all the money that exists in the world is principle, but the money needed is principle+interest (P+I/P) what money is, is the hoarding of the means of other people to pay their debts. Capitalism is basically, in my view, abstracted slavery.

A good example of the collectivization of the means of production is the internet. It cannot be individually owned. That doesn't mean I can't individually own my computer.

I think intellectual property would actually be the least difficult to check. My wager is that people want recognition more than more stuff than others. If your designs (I do design as well, so I get it) are used as a mural, wall paper form, web design, CD design, you'd get credit from it, and if you really pushed your art form forward, you'd get accolades, public recognition, and "more stuff" as a gifts from other people (I also like gift economics). Academics cites one another all the time without a fee.

Certainly every system has to have carrots and sticks. I don't fine "greed" to be the problem, because if you look at specific problems of the communist situation, greed was never really an issue.

There would have to be sticks, but the people would decide what they should be. The fact that Norway lets its prisoners go home during the week, shows that the need for punishment is highly contextual. The biggest problem would be dealing with nationalist violence and fascism (white supremacy, homophobia, anti-semitism, anti-arab sentiment) and crimes of passion. Economic crimes and crimes of desperation (robbery for drug habits, distributing heroin and cocaine) would be greatly reduced and few would have "bleeding heart sympathy" for the perpetrators because the motivations would be different. If you have everything you need in life, you're a real asshole if you're dealing coke. Those with *disruptive* drug habits, would be given free and non-judgmental/supportive services. If they did not accept these services, they'd be sent to a mental health center for treatment. Mental illness is a reality. The goal should be to get the person healthy. Hopefully there would be less prisons, less prisoners.

*Note: I stayed in eastern Nicaragua for a bit and in a city of 35K-70K (flucuation based on routine migration for work on cruise ships) and there was only one jail "cell" (it wasn't like a cell, more like a temporary port-a-can for drunks) and one murder in 1969. Of course there was revolutionary and counterrevolutionary violence, but no murder. No theft either--despite the poverty. I was there to explain to people what cocaine was because bags were washing up on the shore and people thought it was baking powder and a bunch of kids died. Columbians were dropping coke on the shores in hopes of getting people hooked so that they'd carry packages up through Honduras and into Mexico towards the US. The "crackheads" there didn't steal. They were polite. People let them stay under their houses because they were concerned for their health. Anyway! I think criminals in such environments become gangs who seek money from the US government to form rightist paramilitary groups. In these societies it really becomes clear that once you get the sociopathic right wing freak problem under control, everything else is cake. We're the global funders of sociopathic right wing freaks.

I think most artists, writers, filmmakers and actors would kill to get to do what they love all day (except for 4) and not have to give up their dreams because they can't afford competitive equipment or have to work 3 jobs. Those who were really successful would be supported by society. Even in a country as rigid as North Korea, there are famous pop stars who are given gifts from their fans.

I don't think people are dehumanized from belonging to a larger effort, but actually humanized by it. Alone in my room, I'm no one to anyone, depersonalized. But in my political groups, people know me, they know my problems, they value me, I value them. We share, we argue, we tolerate one another. It's almost like when you're in a group you're forced to face yourself, what people think of you, and you don't get to indulge in fantasies about who you'd like to imagine yourself to be.

[JDPriestly]

16. You are so right, which is why my money savvy daughter lived with

us for some time after graduating from college -- to our great joy.

[originalpckelly]

18. It's all just common sense.

And if you think about it property taxes are a way of screwing us all.

How many seniors have lost their house, the thing they've worked so hard for for decades, just because they couldn't pay property taxes? How many tax foreclosures do the rich have per year? You want to bet me something, I bet it's probably very few in most normal times.

At the very least property taxes should be progressive, with normal lots/land values not taxed and high value/large ones taxed.

Because if you own outright, you must pay property taxes. Let's remember that the people who own large tracts of land or land that's high value tend to be very wealthy, and most wealth in our system tends to be originated from ill gotten gains.

[JDPriestly]

23. Property tax rises for seniors in California are not very high.

[On the Road]

10. That Is a Surprisingly Difficult Answer to Google

Best I could do was this:

Overall Market Cap of S&P500: $10.6T    Investopedia
* Price/Sales:                  0.75    (Ameritrade SPY Fund)
------------------------------------
Est. Rev of S&P 500:           $7.9T

/ US GDP:                     $13.8T
-------------------------------------
% of US GDP by Rev:           50-60%+

WARNING: These calculations assume that all the info is timed the same. The 0.75 Price-Sales is probably no more than 2-3 months old, and may be daily. Although the Investopedia page has a copyright data of 2009 in the source code, there is no way of telling how recent all the inidivudal numbers are. If they are from a year ago, for example, it pretty much blows the whole ratio.

ON EDIT: Strike those calculations. Market cap should have been divided by Price-to-Sales rather than multiplied. That, however, results in a revenue number greater than the US GDP. Now, S&P companies do business outside the US, so it isn't inconceivable. Just isn't very likely. Back to the drawing board.

[originalpckelly]

11. Well, what you should do is compare it to world GDP.

There's probably no way to know from the top down perspective, however. What we have to do is look at daily life.

The five largest bills for people in life include:
1. Mortgage/rent payment
2. Food
3. Healthcare
4. Car
5. Clothing for work

The mortgage is the property of the people who own banks, food is usually bought from corporate supermarkets, healthcare is bought from either for or non-profit companies (both pay expenses to various suppliers that are usually for profit, and some of the worst offenders) and a car is bought with a loan, from bankers or car producing corporations. And most clothing stores are corporations too.

Then you have the smaller bills which are in the same general region for expenses:
1. Cable
2. Phone
3. Internet
4. Cellphone

One or more may be bundled, as that seems to be the hot new thing.

Most of the bills seem to go to corporations, and anything left over probably goes to corporations as well. There it can be consumed by either stockholders in the form of a profit margin, or management because it plans labor instead of letting labor self-regulate. And what the employees get is spent in much the same way.

The average profit margin over time, as I just heard from one of the CNBC talking heads, is 13%. 13% of one's money goes to profit margins at the company one works for. An unknown amount goes to management.

Then of course, property investors who own rentals suck up all the rest.

It seems pretty easy to see that most people will end up spending away their money on the basics of life, instead being able to save it.

[On the Road]

22. It is True That People Spend Most of Their Income on Necessities

but over time, the economy tends to reflect people's choices. Countries with very high savings rates simply do not spend the same way. For example, Chinese in the US consume much less than their American counterparts. Initially they live spartan lifestyles but eventually get much more financial independence.

As far as measuring S&P revenue, I think it has to be done from the top down. It's just that at the index level, most of the statistics are geared toward stock price and earnings rather than revenue.

[omega minimo]

14. don't need pricks on the title page

[jmowreader]

17. What percent of the American economy is not represented in the market?

It's been posted on this thread already, I am sure, but the CBOE prick's right: 75 percent of the market's value is represented by the S&P 500.

The market is not representative of the economy as a whole. There are a lot of closely-held and non-public companies out there.

[originalpckelly]

19. Very true...

though this really started out as a side thought based upon mis-understanding.

[960]

21. I don't think that the 75% figure is about

the economy, but rather the market.
The small companies that make up the majority of the economy aren't represented in the stock market.