Stock Ownership and Capitalism
Introduction
In the podcast entitled, Who Makes Cents?: A History of Capitalism, released in June 2014, Julia Ott discusses the issues associated with stock ownership. She does so in the wake of mass workers turnout at a Macdonald shareholders meeting (Ott, 2014). They take advantage of the meeting to voice out their grievances. This is due to the fact that shareholders and stock owners have become more influential in corporations across America.
Main Issues Addressed
The majority of American households today are stock owners, which has come a long way. Stock owners were seen as parasites to the economy in the 19th century, and were regarded as a nuisance to the economy (Ott, 2014). Stock ownership was not taken seriously in the early 19th century, but as the economy expanded, people started saving and saw the stock market as a good saving and investment channel.
Americans started to invest in the stock market in the 19th and 20th century. Only the wealthy people invested the stock market in the 19th century. Stocks were seen to be investments reserved for the rich, and it is during this time that the economy was growing fast and people had extra money to save and invest. The government encouraged the growing middle class to invest in stocks since stocks were as good investments as land and other investment vehicles.
American households (especially the middle class) started to invest in the stock market. As a result, the saving and investment habits of the majority of Americans were changing. There was a shift in attitude towards the capital markets, as it was seen as a good investment channel. This led to a boom until 1928 crisis that affected several investments sectors (Ott, 2014).
Lessons Learned
The management of companies have a responsibility of maximizing shareholders value. They do so by ensuring the company performs better in the economy and the stock market. When companies raise additional capital through initial public offerings, they sell part of their shares to others. It is the responsibility of the management to ensure that the company’s stock price keep increasing even if it means laying off some of its workers. Shareholders value is critical to the management, and this has led to the increase in number of people who own shares of companies.
Capital markets have become more consistent with the national economy. This has led to the uptake of shares despite the fact that Americans now understand the capital market is a market between investors and not necessarily between investors and the companies.
The financial crisis of 2008 effected the stock market and directly affected the daily lives of millions of Americans. This has led to change of attitudes towards capital markets. Ordinary people have invested in the stock market a through retirement account, buying of bonds and stocks.
There was a rise in individual stock ownership in the 20th century, and more Americans invested in the stock market individually. They are known as the lambs in capital markets. The lambs are individual small investors who generally buy few number of shares. The lamb was of central focus in this century. There was an increase in small-scale stock owners during this period due to factors such as globalization and political temperatures that led to the First and Second World War. Politicians encouraged the middle class to lend the government through bonds and buying shares of corporations.
Investor democracy has grown due to the fact that many Americans view an investment in stock as good investment as any other good investment. In addition, the capital markets have introduced cheaply priced saving vehicles that enable anyone to own shares. Corporate ownership by management and executives makes them feel they are part of the company. This has led buying of shares by many members of the management of the companies they work for. There is an aspect of increasing power of shareholder and owners of shares in corporations over the years that has enticed many people to own shares. The U.S. corporations shareholders are widely distributed thus leading to widespread share ownership. Ownership of equity by households has remained high over the years due to these factors.
Conclusion
There is an increase in economic democracy and investor due to wealth distribution across the country as well as other factors such as cultural and political legacy. Americans believe in investing in their economy; they believe by investing in their companies, they create wealth and employment within the country. They also believe that by investing in their corporations, they attract the best talents in the world. Money being the key motivator in investing in their corporations has enabled them to reap great earnings through the stock exchange. Investor democracy ensures that all stakeholders benefit from the capital markets. The regulator or the government sells its bonds through the capital markets. It is able to borrow from its citizens. The owners of shares derive real value and earnings through the capital markets. Capitalism has enabled all the stakeholders in the capital markets derive the needed objectives. The corporations are able to raise capital through the stock market. The government borrows through the capital markets. Investors gain their earnings through the capital markets. Ordinary citizens are able to access ownership of big corporations through the same market.
Reference
Ott, J. (2014). Who Makes Cents?: A History of Capitalism Podcast. [podcast] podcastchart.
Available at: http://www.podcastchart.com/podcasts/who-makes-cents-a-history-of-capitalism-podcast/episodes/julia-ott-on-the-history-of-widespread-stock-ownership/pop [Accessed 3 Feb. 2017].
