Since the 2007 financial crisis broke, we’ve been hearing a lot about the carelessness and greed of our financial system. The pursuit of corporate profits, we are told, led our economy to ruin and apparently will do so again in a heartbeat. Big corporations and financial institutions are crushing the middle class underfoot and choking the life out of the American dream. These are the sound bites we hear daily
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Corporate malfeasance certainly played a role in the crisis and we are gratified and relieved when we see it punished. But these excoriations of our financial system overlook one important fact: capitalism is a fundamentally democratic institution. All of us reading this blog can—and in most cases, do—participate fully in the capitalism system.
When you purchase shares of stock, those shares represent a unit ownership in a corporation. What’s more, the shares you buy are fundamentally identical to the shares that those “greedy” Wall Street banks and hedge funds are buying, with all the same rights and privileges. They might have more shares but the rewards of ownership are divvied out proportionately. When a corporation pays out dividends every share of the company gets its fair piece; they can’t pay out some owners and not others.
Some of our readers may be thinking, “This is all well and good for the rich people who own stocks, but what about us little folks?” The beauty of this system is that many of us little folks also own stocks. Many of us contribute money out of our paycheck towards a retirement or pension plan, through which we are beneficial owners of stock market investments. That makes us capitalists.
And it’s a good thing, too. Through our collective investments, millions of modest savers are pooling their money to create capital. Our investments and retirement savings turn into factories, datacenters, and hospitals—all of the machinery of modern life. Whether you realize it or not, if you have any investments you may very well own a tiny slice of many of those things. So when you feel you’re being gouged by an overly greedy corporation, just remember that their “unfair profits” are also funding the retirements of millions of regular workers just like you—and possibly you, yourself.
We know the system isn’t perfect. We can’t guarantee that corporations will always act wisely or ethically, and it’s important to remain vigilant. We believe the best and surest way to make sure that our interests are represented by the system is to participate in it. If you want to get involved, call or email us.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Stock investing involves risk including loss of principal.