I remember the day the stock market exceeded 10,000 points for the first time. It was spring of my senior year in high school, in March of 1999. Our economics and government teacher, Mr. Willard, told us why that was significant.
I don't remember the specifics, but I do remember the general message: the future was smooth sailing for everyone in the room, all of us about to become adults in a time of unprecedented prosperity.
Then came the 21st century.
We've had terrorist attacks, the longest war in American history (Afghanistan), one of the two most controversial wars in American history (Iraq), increasing political polarization, a housing crisis, a recession, and one of the most traumatic elections since Lincoln debated Douglas.
There have been bright spots, but by and large, the world didn't turn out the way Mr. Willard said it would.
And it wasn't just Mr. Willard.
Bill Clinton's 2001 farewell address is striking for its optimism, its sense that we have confronted and conquered the issues that divide us. In the speech Clinton says the following:
"At this remarkable moment in history, more people live in freedom than ever before. Our alliances are stronger than ever. People all around the world look to America to be a force for peace and prosperity, freedom and security. The global economy is giving more of our own people, and billions around the world, the chance to work and live and raise their families with dignity."
Whether those words are still true (or were even true then) is up for debate--but it is clear that many people aren't sharing in widespread prosperity. In the years following 1999 average family income has declined, while housing, education, and healthcare costs have skyrocketed.
Yet the stock market has doubled, hitting another number many thought was once impossible.
How does that happen?
In her book Makers and Takers: The Rise of Finance and the Fall of American Business, writer and economic analyst Rana Foroohar makes the compelling case that the stock market's dramatic growth has nothing to do with innovation or the creation of actual value. Instead, market growth is often the result of share buybacks and cost cutting.
In other words, share value often increases with layoffs and decreases when a company invests in creating new products. Unfortunately, as Foroohar argues, the way Americans now save for retirement invests us in the market--occasionally placing workers in a position where our 401ks can benefit when our jobs are outsourced, automated, or just eliminated.
When the stock market crosses a nice, even milestone for the first time--whether its 10,000, 20,000, or eventually 50,000--it feels good, as though things are on track. It's a nice psychological victory for the economy.
But what does it mean in reality?
Does the market's dramatic growth since early November really reflect a corresponding growth in innovation and actual value?
Is the market where actual value is created?
Or is value created by the small businesses and entrepreneurs of America, men and women who actually make things, provide services people find valuable, and create jobs in communities? And how does a booming market benefit regular workers, small business owners, and entrepreneurs?
Time will tell, but if the past is any indication, a market milestone, the creation of actual value, and a prosperous future have little to do with one another.