A free supplement in The Independent today is all about spread betting: what it is, what the pitfalls are. It was pretty clear: there are potentially huge rewards, but because you can bet whatever money you like on each share, you can actually be exposed to huge losses too.
Fine, whatever.
But what disgusted me about the articles in the supplement was the total absence of any mention of what buying a share in a company might mean. The old fashioned view of acquiring a ‘share’ was precisely that: one bought into a company because you wanted to invest in what it did. You believed in it, so put some of your money into it.
That view has clearly been eroded, and over the years ownership of shares has less and less had anything to do with a relationship with a company or what its practices were. It became purely about profit: your money came back to you, and then some.
What depresses me about spread betting is that this alienation of the investor from the company they are investing in has been exaggerated to the maximum. A spread better may only hold a position in a company for a matter of minutes. They have no concern for the employees, for the environment policies, for the conditions the cleaners work in… Their only concern is a very quick transformation of their capital into…more capital.
In Marx’ Capital he outlines the development of money, and the exchanges that typically occur with a market: a man might bring some linen to sell, take £12 for it, and use this £12 to buy a bible. The linen and the bible have equivalent value – the money has simply facilitated the exchange between a number of individuals. Marx denotes this a ‘C-M-C’ transation: Commodity (into) Money (then back into) Commodity.
Extrapolating this exchange sequence, we can see that the seller of the bible now has £12, so we could look further and see C-M-C-M-C-M-C…. going on ad infinitum.
All well and good. But Marx’s insight was to see that this chain could be read a different way through a simple phase-shift and become M-C-M-… Money is exchanged for a Commodity, which is then exchanged again for Money.
The question he poses is this: why would anyone exchange their money for a commodity, if they were simply going to get the same money back? The parity only works for the C-M-C exchange of commodities. For M-C-M the parity looks absurd… until the idea of profit comes in.
And this is the insanity of spread betting – and all share dealing to some extent. It is totally uninterested in the commodities the facilitate the profit. What does this mean in practice? Abuses of human rights as workers are exploited, and abuses of our environment as the planet’s resources are exploited. Those spread betting have no material interest in these things – only profit can be of interest to them.
The romantic ‘old’ view of buying a ‘share’ in a company is not so old and romantic, as it happens. And stake-holder ownership of companies by workers is one of the key recommendations of The Spirit Level in the battle to reduce income inequality and thus improve life outcomes for everyone in society. Conversely, spread betting increases inequality and instability in society.
It seems to me – given the current financial climate – grossly irresponsibly of The Independent to write a supplement without considering the wider issues at all. The only negative they considered was personal loss of capital. The deeper problems of economic instability and widening inequality wer totally ignored.
And so I’d say this: no one with an interest in human rights or the environment, certainly no Christian, should be involved in spread betting. It’s an unethical way of making money. Period.
Comments
6 responses to “Selling Short: No Christian Should be involved in Spread Betting”
Yes, sadly we have got to the point now that we don’t question the morality of these layered financial transactions anymore.
I remember being at work in the late 80’s/ealry 90’s when the mission statement of the (large) company I was working for had ‘shareholder value’ added to it. I pointed out to my colleagues at the time the fundamentally opposing values of the pre-existing ‘we value our people’ and ‘shareholder value’. Already, you could see that money was starting to be valued equally to humans, and it wouldn’t be long before the balance tipped the other way of course.
Business used to be about trade and employment. Now it is about money… and unemployment.
A financial expert I know once said to me that we can’t do xyz because ‘the markets won’t allow us to’. Some people would even laugh if you suggested doing something so stupid as to question ‘the markets’.
Yes, we (as a society) are now fully assimilated so we largely don’t even consider asking the question anymore, no matter look for an answer. (Generally speaking of course).
Ian.
thanks for your article. I question all shareholders if they are purely in it for making a financial profit. The ‘market’ is played by boys who are eager to boast their ego and make quick money for themselves and the shareholders and have no concern for the company, employees or the environment. I think Ghandi got it right with his seven deadly social sins in which one was ‘wealth without work’. I find it difficult to find anything good in the ‘market’ and shareholding on the FTSE period!
I’ve not read the Independents articles on this, and I’m not fully up to speed on spread betting, but isn’t it the case that people who spread bet are effectively placing a wager with the spread betting company with regards to price movements – they are not actually involved in the market so no actual shares are bought, sold or owned. That being the case then I can’t see how the practice of spread betting could have any influence at all over actual share prices and therefore have any effect on the companies in the market and contribute to the social ills you speak of? Am I missing something?
Spread betting exists for all kinds of things, like the outcome of sporting events etc, but has no bear on the outcomes of the games themselves.
Haven’t you seen any cricket news recently?! The outcomes are always affected by money placed against them, even if the levers are small and removed by a number of positions. So while spread bets may not have a direct influence on share prices, they do end up increasing pressure on markets, and increasing the whole nervous energy within the system too.
But beyond that, the attitude of wealth-creation through these mechanisms does have a harmful impact on society, as income inequality is exacerbated.
‘The outcomes are always affected by money placed against them’ – Seriously? Always? I think that is a blatant and gross exaggeration.
Also, how does spread betting ‘increase pressure on markets and increase the whole nervous energy within the system’? Again, I may be missing something, but I thought spread betting is designed such that a given spread creates an equal number of wagers on each side? The bookmaker makes their profit from commissions, not the actual outcome of the events.
I think the casualties are the spread betters who get in to difficulties like many gamblers of other types, not the companies within the markets that are being wagered on. That would be a more convincing argument against spread betting in my opinion.
Spread betting aside, thinking about income inequality: even if there were greater income equality, the world always has been and always will be organised around people looking out for their own interests, whether individually or as part of organised collectives of varying types. There is nothing new under the Sun. That my friend is human nature, and there is no escaping it. Inequality, in various forms (including income) is always going to exist and there will always be corruption and abuses of power to go with it, both individually and corporately/institutionally.
Challenges and problems to face there are indeed, but this smells to me like yearning back to simpler, more innocent times. Those times never existed.
I totally disagree. Read The Spirit Level if you haven’t – it’s not romantic or innocent, but a hard look at the huge problem of inequality, and how we might practically do something about it. And spread betting, and the current wider system of disinterested speculation on shares works against everything that they recommend.