Abstract:

The author adds his own evidence to the argument that universal ownership of company stocks by mutual and pension funds aligns the economic interests of such groups with the interests of the public, thus stabilizing and promoting business investment. Van Lear adds, however, that universal ownership can also create a stagnant economy. Investors participating in pension funds usually invest more money with a long-term focus, and are representative of an increasingly older more stable economic group. Van Lear warns that just because a stable economy emerges, does not mean that increasingly stable economy fosters financial growth. The increasing reliance on mutual funds rather than banking institutions to allocate funds could create an economy with low growth rates, because it does not encourage the injection of new money into the fold. Also, the uneven distribution of wealth to earners in the top twenty percent does not encourage economic activity. The author concludes by calling on policy makers to shift to a more traditional version of public policy to combat the recession-like effects of what economist Hyman Minsky terms, “money manager capitalism.”