I’ve been asked several times since last week’s stock market correction whether the selloff might not be just about the COVID-19 virus outbreak. Might the emergence of Bernie Sanders as the Democratic party’s frontrunner—and the possibility that it will be a “democratic socialist” running against Donald Trump in the general election—in part explain the stock market rout? The S&P 500 peaked at a record high of 3386.15 on Wednesday, February 19. It plunged 12.8% to 2954.22 on Friday, February 28. There were lots of headlines about the spreading virus that coincided with the plunge in stock prices. However, also coincidently, Bernie won the New Hampshire primary on Tuesday, February 11. Sanders took New Hampshire with the support of a majority of the voters aged 18 to 29, winning 51% of
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Sanders took New Hampshire with the support of a majority of the voters aged 18 to 29, winning 51% of their votes. Former South Bend, Indiana, Mayor Pete Buttigieg trailed him with 20% of the youth vote, followed by Massachusetts Senator Elizabeth Warren at 6%. On Saturday, February 22, Sanders had another big win in the Nevada primary. Last week, Sanders had the momentum, and the market plunged.
But then on Sunday, March 1, Joe Biden handily beat Sanders and the other contenders in the South Carolina primary, with lots of support from black voters. CNN enthusiastically reported: “Former Vice President Joe Biden’s blowout South Carolina win reshaped the Democratic presidential campaign and positions him as the surging moderate alternative to Vermont Sen. Bernie Sanders in a 48-hour sprint to Super Tuesday.”
On Monday, March 2, Joe Biden welcomed former rivals Pete Buttigieg, Amy Klobuchar, and Beto O’Rourke into his camp in a show of force by the Democratic party’s establishment against frontrunner Bernie Sanders the night before Super Tuesday. Buttigieg and Klobuchar dropped out of the race and threw their support behind Biden, whose decisive win in South Carolina on Saturday appears to have cemented his status as the moderate alternative to Sanders’s democratic socialism.
On Monday, March 2, the S&P 500 jumped 4.6%. The DJIA soared 5.1%, the biggest such gain since March 23, 2009. The Dow’s 1,293.96-point gain was its largest one-day gain ever.
Is it possible that stock market investors may fear Bernie Sanders almost as much as they fear the coronavirus?! Yes, it’s possible. After all, the widespread view is that the virus pandemic will probably abate in coming months. Monday’s stock market rally might also have been fueled by news reports—such as Reuters’ March 1 report—that China’s efforts to halt the spread of the virus are paying off.
Socialism, on the other hand, is a virus that won’t go away even though extreme versions of it have immiserated and killed millions of people since it started to spread after infecting the French during the French Revolution. The philosophical founding father of socialism was Jean-Jacques Rousseau. He inspired Maximilien Robespierre, literally the first politician to execute socialist principles. He headed the Jacobin terrorist group that led the French Revolution during the eighteenth century. He was a big fan of the guillotine. Rousseau said lots of crazy things, but here is my personal favorite:
“There is therefore a purely civil profession of faith of which the Sovereign should fix the articles, not exactly as religious dogmas, but as social sentiments without which a man cannot be a good citizen or a faithful subject. While it can compel no one to believe them, it can banish from the State whoever does not believe them—it can banish him, not for impiety, but as an anti-social being, incapable of truly loving the laws and justice, and of sacrificing, at need, his life to his duty. If anyone, after publicly recognizing these dogmas, behaves as if he does not believe them, let him be punished by death: he has committed the worst of all crimes, that of lying before the law.”
Look it up; it’s in his seminal book The Social Contract (1762), which is appropriately posted on the Marxist Internet Archive. (Hat tip to Mark Melcher and Steve Soukup, my friends at The Political Forum. Read their excellent and provocative book, Know Thine Enemy: A History of the Left, Volume 1, 2018.)
Investors fear Bernie because he wants to cut off the head of capitalism by raising taxes significantly on the rich and using the funds to provide free everything to everybody else. He also wants to regulate everyone. On his website, he promises college for all. He will cancel all student debt and medical debt. He’ll expand Social Security. Medicare will be for all. His program includes housing for all and universal childcare and pre-K. He will embrace the Green New Deal: “Reaching 100 percent renewable energy for electricity and transportation by no later than 2030 and complete decarbonization of the economy by 2050 at latest.” In effect, he will either privatize or destroy the health care and fossil-fuel energy sectors. He will break up any company he deems to be a monopoly.
All we need to know is that Sanders is a fan of Fidel Castro. He said so in a town hall meeting on Monday, February 24:
“[W]hen Fidel Castro first came into power ... you know what he did? He initiated a major literacy program. It was a lot of folks in Cuba at that point who were illiterate. And he formed a literacy brigade ... [they] went out and they helped people learn to read and write. You know what? I think teaching people to read and write is a good thing.
“I have been extremely consistent and critical of all authoritarian regimes all over the world including Cuba, including Nicaragua, including Saudi Arabia, including China, including Russia. I happen to believe in democracy, not authoritarianism. ... China is an authoritarian country ... But can anyone deny—I mean the facts are clear—that they have taken more people out of extreme poverty than any country in history? Do I get criticized because I say that? That’s the truth. So that is the fact. End of discussion.”
Getting everything for free trumps freedom, according to Bernie. No wonder investors are reacting to him as though he is going to infect us all with the virus of socialism.
No wonder that stocks soared on Wednesday as Biden’s major victories during Super Tuesday sparked a massive rally led by the health-care sector