es in stock market participation by workers
nationwide sales forces to encourage popular
changed their behaviors and attitudes?
ownership of public debt. Those forces
The answer to these questions is yes.
formed the financial base from which a hith-
The active involvement of tens of mil-
erto minimalist government equipped the
lions of Americans in capital markets has
mightiest army of its time.
affected their retirement planning, produc-
The sales force thus created could market
tivity, and attitudes toward capital and free
private stocks and bonds, too. From the Civil
markets. The growth of investment has
War onward, American workers invested
rewarded, and appears to have thus encour-
more in financial assets than their European
aged, an orientation toward the future--the
counterparts. The growth of that investment
investor's own and his family's. Sharehold-
was measurable by the growth of the sales
ing workers support policies that cut taxes
force that serviced it, from 4,000 in 1900 to
on savings for important life-cycle events,
11,000 in 1920 to 22,000 in 1930. But a
such as education, health care, and retire-
decline set in with the Great Depression,
ment. Conversely, workers who have invest-
reducing the number of brokers to 18,000 in
1940 and 11,000 in 1950.1
ments exhibit rising skepticism toward gov-
ernment-run entitlements.
The earliest scientific polling of market
Portfolio owners
Portfolio owners are shown to be likelier
participation, by The Gallup Organization,
are likelier than
than nonowners to support a capital-gains
occurred during the Depression. In 1935, 21.5
tax reduction. This effect is found in almost
percent of adults polled owned securities (i.e.,
nonowners to
stocks or bonds).2 That figure remained sta-
every demographic group, suggesting that
support a capital-
investment influences opinion indepen-
ble throughout the Great Depression. A June
gains tax reduc-
dently of the income, race, or other charac-
1938 poll reported Americans' investment
teristics of the investor. The growth of share
preferences: 12 percent held government
tion.
bonds, 10 percent stocks.3
ownership, in other words, is changing the
perceived political interests and values of
After the General Agreements on Tariffs
voters--increasing the electorate's support
and Trade reopened international markets,
for investor-friendly, pro-growth policies.
stocks began their long postwar rise. By 1960,
Given these salutary efforts of a rising
29,000 stock and bond salesmen were servic-
investor class, Congress should enact poli-
ing Americans' increased desire for financial
assets.4 In 1962, when the U.S. Bureau of the
cies that expand worker ownership and
financial self-sufficiency. Expansions of
Census first measured corporate equity own-
IRAs and 401(k)s and individual invest-
ership among American households, 18 per-
cent of them held stocks.5 But shareholding
ment of Social Security funds would help
achieve the goal of spreading wealth to larg-
was stagnant for the next two decades. In
er segments of the population.
1983, 19 percent of American households
owned stocks.6
Since then, however, the percentage of
Breadth of Stock Ownership
households owning corporate shares has exploded:
to 31.6 percent in 1989, 36.6 percent in 1992,
and 40.3 percent in 1995.7 Shareholders con-
America is the homeland of worker capi-
talism. Indeed, the widespread participation
stituted 29 percent of adult citizens in 1989
in capital markets spread from the New
and 37 percent in 1995. Stockowners as a pro-
World to the Old. The Lincoln administra-
portion of total population rose from 4 percent
tion financed the Civil War by mass market-
in 1952 to 26 percent in 1995.
ing national debt in small denominations--a
The raw number of shareholders rose
financial innovation whose military signifi-
from 52.3 million in 1989 to 69.3 million in
cance paralleled the income tax. Jay Cooke &
1995--a 32.5 percent increase over six years.
Company, and then other brokers, created
"If the trend for the six years ending in 1995
3