Aside from getting into the history of corruption of the pharmaceutical industry and its long history of price gouging the public, we can take pride in the speed at which Shkreli came on scene displaying his ego and unethical disregard for the price hike, only to bend to the will of the masses. The problem with this situation -- along with the ignored history of corporations and hedge funds having a history of screwing over the public for the greater means of profits -- is that Shkreli put himself out there as an easy and identifiable target we could blame.
By confronting the public and appearing in interview after interview to explain the necessity of raising the price to make an “actual profit,” Shkreli made himself tangible. It wasn’t just some abstract company name that we could pretend to boycott. It wasn’t some faceless corporation that extends itself into a variety of other public channels that make it impossible to avoid. Shkreli was the face of his company, and when he stepped out to confront the crowds, letting his hubris get the better of him, the public swarmed at the opportunity to enact their justice.
The system in which he was operating under and catered towards was his own individual wealth. He was enacting the laws and spewing the same mathematical reasoning that have led top economists to obsess over the market, admitting it can do no wrong. But the economy isn’t some scientific theory that can be explained through "market," the market is at the whim of human error, political influence, and greed. Many of the neoclassical economist would regard these as reasons why we can only rely on the market and without interference of the government and regulation, it will lead us to justice and a better world.
But we’ve been deregulating the market for decades and things have only gotten worse for the majority and only better for a few, revealing how reliable the market really is in leading everyone to prosperity and justice. And when we look to people like Shkreli as just a bad apple we’re ignoring that’s what the system has been breeding for the last four decades.
The rise of finance capital and the exploitation of hedge funds have helped people like Shrkeli do what they do and believe what they believe. And without acknowledging the systemic issues, Shkreli’s behavior will continue through other corporations and hedge fund groups, as they have. It will just be more difficult to target, because in most cases corporations and hedge funds have remained in the dark, making it impossible for people to target. Knowing where the root of the problem lies can help lead people in the right direction to actually change the system.
The rise of finance has grown exponentially in the last four decades. Until the 1980’’s finance made only 18% of corporate profits and in 2006 it made up 40% of corporate profit. By 2007 financial assets were 10 times the size of GDP.
To fully understand the impact this has on the overall economy we also need to account the increase of income inequality during the same period. As many economist have noted, wages have been stagnate since the 1970’s, only making up for the increased costs of items by depending more on credit and going into debt and having women taking up a bigger part of the workforce. During this time many corporations have shifted their workforce abroad, and moved their profits from production to finance.
Aside from drawing the obvious conclusions that corporations have offset their production abroad for cheaper labor and have since become involved in financial transactions with other companies keeping their company’s profit soaring, we can begin to make the assessment that finance has taken the place of value over real profit. Coastas Lapavitsas, an economist who has been studying the growth of finance before the recession, writes, “Expanding international flows of capital have forced developing countries to hold vast international reserves in recent years. The result has been net lending by the poor to the rich in the world economy, particularly to the USA.”
Gerald Epstein, a professor of economics, in an interview with Dollars & Sense spoke of the “boring banking” period following the regulations on the market after the 1929 crash. Investment banks were separated from finance, and both had to have high capital, higher interest rates, and were to be used for particular things. “Savings and loans primarily housing, commercial banking for business loans, but investment banking could not take deposit of commercial banking.” The two were separate.
Moving into the late 1970’s deregulation began and “‘Boring banking’ could no longer compete, so instead of engaging in one-to-one lending, they started engaging in more activities with the capital markets—bundling up or securitizing loans, selling them off, using derivatives to hedge risks but also to make bets. They kind of became like hedge funds in the sense of doing a lot of trading, buying and selling a lot of derivatives, engaging with the securities and capital markets. But they still had the government guarantees like they were banks.”
Many seem to already understand that banks have been part of the problem, but they still misunderstand that finance doesn’t just extend to banks. Companies have only continued to profit since the recession because of finance and redistributing their profits into their own company, forgoing investment in infrastructure and employment. This only props up their stock -- without actually producing anything -- and therefore providing the illusion the market is great.
That’s the beauty and appeal of finance, it’s a simple way of making tons of money out of nothing. There is no production involved and very little, if any, labor. Companies make money from nothing. Bundling other people’s money into derivatives and selling them off to make money is not producing. It’s not contributing to society, but our politicians continue to convince us otherwise.
You don’t even have to look at the big picture to understand this, it’s common in most households across the US. Every person who goes into debt for school, or is underwater with their mortgage, or uses their mortgage as equity is fulfilling the void of where livable wages used to be. At the same time, everything has gone up from medical expenses, to education, to housing for the consumers, while these same areas are pulling in huge profit for the market. And this is the problem, the system is so intertwined we seem incapable of making the connection.
These things are meant to be complicated for the sake of being complicated. Economist's don’t know what the hell is going on half the time or they play dumb because economics is political and they have an agenda. Consider the time when former Fed chairman Alan Greenspan was dumbfounded to see the housing bubble collapse.
The media is at the center of pushing this agenda. When the media talks about how well the economy is recovering, it’s in reference to the stock market, or how many new jobs were added. They don’t mention that most jobs are in the low-wage sector and they don’t make the connection that the fight for $15 is not about jobs, but is about not receiving a livable wage.
As more articles are focusing on the connection of Shkreli and the nature of Pharmaceuticals companies continues to get more attention, and more roots of problem continue to be exposed, can we begin to actual enact true justice against a truly corrupt and unethical system. But without properly examining the problem and the layers to which these companies bury these issues in, we will continue to chip away at ever growing edifice of corruption.