The rise of worker-investors

Posted: Jan 01, 2004 12:00 AM

"To the workers the means of production," goes the old Marxist rallying cry. To which any good capitalist these days can only say, "Amen -- and the sooner the better." During the past two decades, America has undergone a revolution, as ordinary workers have become the owners of "the means of production" through mass stock ownership. The rise of this "investor class" will help define politics in 2004 and beyond, undercutting the premises of the New Deal and contributing to a free-market-friendly culture of self-reliance.

Kansas City, Mo.-based journalist/provocateur Richard Nadler has been heralding the advent of the investor class for years, and the broader political culture has finally begun to take notice. In a recent speech at an investor-class conference sponsored by the New America Foundation, Nadler surveyed the data. In 1983, when the explosion in stock ownership began, 19 percent of U.S. households owned equities -- stocks or mutual funds. By 1995, the number had risen to 41 percent. By 2002, 52 percent of households owned equities.

In 1983, the median value of the equity holdings was $10,912. By 2001, the median value was $34,300. As Nadler says, "In other words, while the size of the investor class increased 173 percent, the median holding of that class rose 214 percent -- a revolution in both breadth and depth." A recent survey by the Securities Industry Association found that 29 percent of shareholders own stocks and mutual funds worth $100,000 or more. Meanwhile, in 1983, 24 percent of households benefited from "defined contribution" retirement plans -- 401(k)s and the like. By 2001, 52 percent of households had such plans.

What does this mean? Fundamentally, that the age-old opposition between capital and labor begins to abate. Worker-investors become much more favorably disposed to policies likely to increase corporate profits, since they will share them. As Nadler puts it, "A mass class of wage-earning capitalists regards corporate America not as a competitor for resources, but as a partner." According to Nadler, the rise of mass investment "arguably explains the rightward drift of the U.S. electorate over the past generation -- a drift that elected a Republican Congress in 1994, and that has kept it there ever since."

Evidence for this thesis is accumulating. Surveys show that investors skew Republican in their voting by 5 to 7 percentage points. This doesn't mean that as soon as a worker has a 401(k) he puts a "re-elect Bush" bumper sticker on his car, but as his assets grow he becomes more aware of them and embraces policies favorable to their growth. The effect of stock ownership is evident even among traditional Democratic constituencies like low-income and union voters who are more likely to vote Republican if they own portfolios.

It is in the interest of Republicans, therefore, to get as many people into the investor class, with their many assets, as possible. That is why President Bush is considering proposing this year "lifetime savings accounts" to make it easier for people to save and invest tax-free by liberalizing the rules around 401(k)s and IRAs. It is a possible prelude to the biggest investor-class boon imaginable -- a Social Security reform that would allow workers to keep a percentage of their payroll tax to save for their own retirement. The liberal shrieking is already beginning.

Conservatives and liberals are in a race. Liberals want to extend government programs to make as many people dependent on government as possible, while conservatives want to increase the ranks of those with the assets to care for themselves. As the Left thrived by offering programs to promote education, retirement and health care, the Right hopes to thrive by promoting individual savings for those same needs. "By attacking the same lifecycle needs through investment policy," Nadler says, "the Right removes the programs, the bureaucracies that administer them and the taxes that pay for them, and restores them to individuals and households."

For Karl Marx, this would be the most hideous of unintended consequences. But so it goes as workers attain "the means of production."