The Fault Lines of Capitalism Emerge, Shaky Capital Markets and the Rise of the Empowered Investor in 2017

Deborah B. Jackson | Dec 19, 2016

The year of 2017 will be a time of evolution in our form of capitalism and our capital markets. Investors will have a newfound role and confluence of these changes will impact our lives more than any one idea or innovation.

The US economic system of capitalism is based on private citizens owning the country’s means of production and receiving goods and services from companies to sustain their lives. At the same time, we give companies capital to produce the goods and services as we invest in stocks and bonds in the capital markets. In return for our invested dollars, we have a chance to make money when the company does well.

Our capitalist economic system works when our citizens are able to have enough money to buy stocks or bonds. In effect you need to have money to make money. Right now, half of our population owns no public securities at all, not in retirement or other accounts. Why? Because they cannot afford to buy them. So what are the implications of half of our population having no ownership in the country’s means of production? It is a ticking time bomb that is likely to cause more social and political unrest.

This is likely to be exacerbated in 2017 with more contract workers with no company benefits or retirement accounts and the downsizing of the labor force due to robots and automation. Because capitalism is focused on corporate profit as the sole metric and driver for investment returns, greater economic inequality is the likely outcome.

More Volatility and Threats to Our Capital Markets

The ability to raise capital in the capital markets is the lifeblood of our capitalist system. In the past few years, there have been some new and unpredictable events that are influencing and changing the capital markets in a profound way.

The year ahead will be full of surprises with a new administration and new rules. For example, the President-elect recently tweeted comments about Boeing, a public company, and his tweet immediately lowered the company’s stock price. We have never experienced before the way a tweet can influence the market and penalize a public company. [Rest of Story]

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