“The Democratization of the markets” was a fairly common phrase only a few years ago. It was used by a significant number of businesspersons and economists to describe the ability of anyone to purchase stock in a company. It is was viewed as proof that the US and global economy were truly representative of the economic interests of the American People and many Peoples of the world. It was proof that capitalism and democracy were completely intertwined and indistinguishable. The democratization of the markets meant a “free market,” bolstered with “free trade,” were equitable to a free and open society. In many respects, it was actually a terribly offensive and misleading statement that helped undermine democracy and promote the illiberalizationing of the economy. It was used to legitimatize the policies that favor increased income inequality and the enrichment of wealthy global elites.
That said, the true democratization of the markets is actually needed to address issues like income, wealth, and opportunity inequality. More people need to be able to invest in the markets, so they can increase their personal wealth and secure their financial freedom as the asset class rises. They also need to be able to buy valuables that appreciate in value, such as houses, so they can build wealth. Given the increasingly unattainable cost of housing inside the United States, the ability to achieve financial security and freedom has become little more than an American pipe-dream. Because the ability of people to buy things like houses and invest in stocks is determined by their capacities to earn incomes that exceed their living expenses, income inequality and opportunity inequality, i.e. access to high-income jobs and business opportunities, are interconnected. It is also the reason the markets are not democratizing.
Democratization is the process by which the power to govern is equally dispersed across a population. Due to the fact that those who enjoy greater wealth and larger stakes in institutions possess greater power, the markets can never truly be democratic. Markets are thoroughly undemocratic, because they are based on purchasing power while no real world society has, or probably will, achieve income and wealth equality. Markets can, however, be democratized. Societies can strive for increased wealth and income equality instead of decreased wealth and income equality. Markets can become increasingly democratic through greater investment by the general population. The more stockholders a public company has, the more democratic it is. What the democratization of businesses and the markets does is make companies more responsive to the interests of more people and their communities. It helps them become more socially responsible, which means they are more likely to pay their workers better and respect the environments they operate within.
Businesses exist solely because they serve a purpose in society, yet there are far too many incidences where the interests of big businesses have conflicted with the interests of actual people to the point these institutions have caused harm to their communities and society in general. In the wake of the Great Recession, for example, the America People realized its government was incapable of punishing the harmful practices of businesses. In fact, it had to bail out the largest financial institution due to the systemic risk they posed, i.e. “too big to fail.” This, in part, resulted from the amount of influence corporations gained over the legislative process as well as their increasing economic power. It was also a result of these businesses failing to recognize and consider the economic interests of the general population. They only consider the narrow interests of their investors. If the US economy experienced a democratization of these financial institutions, the interests of the American People would become far more relevant to them.
By focusing on the means by which the economy, versus government, distributes wealth, more Americans would enjoy greater leverage in their economy. Beyond putting more dollars into people’s pockets, so they can have increased purchasing power as consumers, average Americans must have expanded ownership of publicly traded firms. It is the nature of big businesses to put their interests before the interests of all others, even if ignoring the broader interests of society hurts them. Similarly, it is in the interests of politicians to cater to the interests of those who fund their campaigns and post large financial gains every year. The consequences of a far more democratized economy would be financial institutions and manufactures compelled to better serve the interests of the American People and the Peoples of the world.
Not only would the democratization of the markets politically empower people, the true democratization of the economy would mean individuals would have the leverage they need to negotiate larger incomes and greater access to financial opportunities. It would allow the economy to reach equilibrium instead of fostering the creation of artificially accelerated inflation and the bubbles that resulted in the Great Recession. The US economic is increasingly failing to serve the interests of the American People. The strength of democracy, i.e. its long-term potential to continually recognize and address the interests of an entire population, can help ensure an economy runs smoothly. Consequently, the modern economy needs to be truly democratized in order for the “free” market system to function properly. Focusing on getting more money into the hands of the majority and incentivizing the deliberate investment of excess funds will allow for increased socioeconomic stability and improved economic growth.
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