Wall Street's Roller Coaster

At first, a market plunge is apt to resemble a spectator sport -- far more exciting and consequential than the World Series and the Super Bowl put together. News accounts are filled with dramatic numbers and breathless profiles of key players. We see photos and footage of crowds -- often panicky traders soaked with sweat in a stock-exchange pit.

Within hours, the emphasis shifts to reassurance. When the last week of October began with a 554-point drop of the Dow Jones industrial average, a lot of editorials quickly offered soothing messages. Yet many readers must have scratched their heads and wished for a decoder.

One observer who's notably adept at cracking the code of media econospeak is Doug Henwood, author of a new book titled "Wall Street: How It Works and For Whom." He's not a conventional pundit. Instead of repeating the standard euphemisms, he debunks them.

So, I asked Henwood to help interpret the Oct. 28 New York Times editorial headlined "The Plunging Dow."

"There is reason to believe that a resilient economy and Federal Reserve intervention can prevent avalanche selling on Wall Street from burying jobs and income on Main Street," the editorial declared.

The clear message was "Don't worry, don't sell, don't panic. Everything's going to be all right."

But the editorial had a less obvious subtext. Henwood summarized it this way: "Government policy-makers have shredded the safety net for the penniless and the sick, but it's still there for financiers." The era of dependency might be over for welfare recipients but not for investors.

"Stock crashes create problems for banks, securities firms and mutual funds that are hit by a rush of investors redeeming shares and demanding cash," the Times editorialized. "But the Fed has the luxury of working with a banking system that is flush with reserves and the leeway to pump money into an economy that is almost inflation-free."

Henwood's translation of that passage: "There's good inflation, which is rising stock prices. And there's bad inflation, which is rising wages."

In fact, the day after the big Oct. 27 plunge, the stock market was heartened by release of a new report on the Employment Cost Index, which showed that worker pay has barely risen in the United States. Not exactly good news on Main Street -- but great news on Wall Street, where wages for you and me are viewed as onerous "costs."

"The economy's vital signs are strong, which reflects many years of solid monetary and fiscal policies that should now serve Americans well," the Times editorial concluded.

The phrase "solid monetary and fiscal policies" referred to tight money and federal budget balancing -- measures that have long been showered with media praise. But, according to Henwood, "there's no evidence that they serve the bottom three-quarters (of the public) well in terms of income distribution." He added: "The top 5 percent of the population has captured almost all of the economic growth of the past two decades."

While Wall Streeters hung on during a wild-ride week, Time magazine was telling millions of readers: "We live in an unusual period of low inflation, achieved in a big way by companies cutting costs to the bone to keep prices down." However, back in the real world, firms aren't cutting costs "to keep prices down" -- they're doing it to boost profit margins as high as possible.

"Cutting costs" wouldn't sound so laudable if the details were mentioned -- such as using more temporary labor, slashing benefits, suppressing unions, closing plants and relocating. As Henwood points out, companies "have been getting pressure, from their shareholders and Wall Street, to increase profits by cutting costs -- squeezing labor, moving production abroad, the usual array of corporate austerity policies."

Doug Henwood is not invited onto the TV networks to discuss economic issues. Overall, there's little room in the mass media for someone with his outlook -- whether Wall Street is a roller coaster or a smooth ride.