A demonstration outside of the Bank of England in London, during the 2009 G20 protests in the centre of London. Image: PAA surprising concern has arisen recently on Wall Street: markets are becoming socialist. The culprit? Passive investing. Instead of actively choosing which stocks to buy, or paying someone to do that, investors are devoting a growing slice of their portfolios to funds that simply own every stock in a broad index, such as the S&P 500 – made up of 500 leading American companies from a number of sectors, from Amazon to Delta Airlines. When investors indiscriminately own a small share of every company, the result strikes some as a form of socialism. One alarmed director at a major firm has gone as far to describe passive investing as “worse than Marxism”. For famed hedge fund manager Paul Singer, such funds are “devouring capitalism”.
The argument has precedent. In 1914, a prominent German banker surveyed the growing consolidation of industry under the control of major banks and grew uneasy. “One fine morning we shall wake up in surprise to see nothing but trusts before our eyes, and to find ourselves faced with the necessity of substituting state monopolies for private monopolies,” he wrote. Financiers would have abetted the rise of socialism, he argued, “accelerated by the manipulation of stocks”.
Evident then, as now, was a seeming paradox: that the tools of finance might serve ends other than pure capitalism. Indeed, the idea that finance could be a socialising force is an old one. For radicals preceding even Marx, corporate stock provided a template for both the socialisation of ownership and redistribution of income.
