Stock Markets Win the Masses
David R. Francis, writer of The Christian Science Monitor, The Christian Science Monitor
Capitalists are spreading like dandelions.
In the United States and around the world more and more people are buying corporate stock.
Ownership of shares in most industrial nations and in many emerging markets is "increasing rapidly," says Lorenzo Gallai, chief economist at the International Federation of Stock Exchanges (FIBV) in Paris. The US leads the pack. The last Federal Reserve study of wealth in 1995 found that 40 percent of the 100 million American households own shares directly or indirectly through mutual funds, trust accounts, or pension accounts. That's up from 31 percent in 1989. At least 50 million Americans own shares directly, says New York Stock Exchange (NYSE) president Richard Grasso. That number has doubled since 1975. Another 110 million own shares indirectly. People in other nations are buying more stock as well, encouraged in part by new freedom to invest and rising prices. "Nobody wants to be left behind," says economist William Freund at Pace University in New York City, referring to the 90 percent rise in stock prices in the past three years. Reflecting the interest, the Nasdaq stock market, sometimes called the over-the-counter market, gets about 10 million to 12 million "hits" per day on its Internet Web site. Stock investing, says Dean Furbish, the chief economist for that market, has become "cool." As a result, more Americans view the economy in a capitalist manner. "They think more of returns to capital," says James Poterba, an economist at Harvard University in Cambridge, Mass. Meanwhile Russia, which had nearly zero stock investors four years ago, has an estimated 500,000 today. China, which opened its first formal stock market in 1993, has perhaps 10 million stockholders now, says Peter Wall, an expert at the International Finance Corp. (IFC) in Washington. Among India's 900 million people, perhaps 30 million own stocks, many through a lively mutual-fund industry. Share ownership in Australia soared this year to 5.5 million, or 40.4 percent of all adults. That proportion is up 6.4 percent in the past nine months. One key reason was the sale of one-third of Telstra, the government-owned telecommunications company. Encouraged by a low price and an allocation system, nearly 2 million Australians took advantage of the partial privatization to buy shares. The government announced March 15 it would sell the remaining two-thirds of the $40 billion company, using the proceeds to retire 40 percent of the national debt. In Norway, 14.4 percent of adults owned stock directly or indirectly in 1994; today that figure is 17 percent. Ownership of stock has also grown in Canada (to 37 percent) and Britain (26 percent). German share ownership rose when a chunk of its state telephone company, Deutsche Telekom, was sold to the public with a tax advantage for buyers of the stock. But only 6 percent of adults own stock. Germans, inclined to be cautious, usually prefer to invest in bonds. In France, 9.2 million people owned stock in 1996, or 15 percent of all adults. Spreading stock ownership is "a good thing," Mr. Gallai says. It facilitates the financing of businesses through the sale of stock to the public. "For companies, it is more sound to finance their growth with capital-raising from markets than from financing through the banking system," he maintains. The FIBV has a membership of 51 exchanges around the world. It has 16 affiliate exchanges waiting to become members as soon as they fulfill the requirements, and another 30 "corresponding" exchanges in emerging markets. …