What's the issue?

The stock market's short-term boom is, to a large extent, concealing its long-term shrinkage; the rising price of shares is to no small degree the result of the decreasing quantity of available shares. This is because the numbers of quoted companies and share issues have been declining, as publicly listed ‘PLCs’ disappear due to mergers and acquisitions, share buybacks and/ or private equity-financed buyouts.

This decline in one of liberal capitalism's major institutions might seem like good news to many on the political left. But it's not quite that simple, and there are several ways that most citizens risk losing out as a result. The reprivatisation of public corporations ends any prospect of Britain developing ‘democratic’ ownership, where pension and insurance funds (or a sovereign wealth fund, if the UK were to set one up) hold equity and collect dividends on behalf of most UK households. Progress towards using shareholder power to improve corporate governance is socially pointless if most UK companies cease to be answerable to shareholders. Now that the door to generalised stakes in corporate ownership and profit has been firmly shut, there is a strong case for policies to reopen it.

Analysis

Stock markets have long been accused of not only prioritising short-term profit over long-term reinvestment, but also of promoting unproductive speculation and distracting investors from raising new capital by endlessly retrading the old. More recently, high frequency and algorithmic trading have raised the spectre of ever-greater volatility, and of professionals with fast programmes (or insider knowledge) beating ordinary investors to every possible capital gain. However, the drift of corporate ownership away from public stock markets might actually be even worse for labour.

The case for promoting more UK company shares on UK public stock markets – and enabling more of those shares to be owned by UK-based funds and individuals – has a number of different strands:

• Investment and pension funds have traditionally relied on listed equities to inflation-proof and build long-term savings, by capturing some of the capital gains and dividend streams that would otherwise flow to already-rich capital owners.

• New equity promotes business growth and hence employment, by providing entrepreneurs with the funds to finance expansion under professional management, without excessive borrowing.