Thursday, 28 January 2010

A share-owning democracy... or not

From the Daily Telegraph, 10th January, 2010:
new estimates from the Office for National Statistics appear to show that Margaret Thatcher's dream of creating a shareholder democracy has taken root.
The ONS found that 15pc of British households – 3.75m – own some shares directly on the London stock market.
From the Daily Telegraph, 27th January, 2010:
Just 10.2 per cent of the value of shares traded on the UK stock market were held by individuals at the end of 2008, down from 12.8 per cent two years previously. This fall equates to a substantial decline of £120 billion.
Back in 1964 more than half of the UK stock market - 54 per cent - was held by individuals.
The data highlight how the Thatcher revolution in private share ownership failed to create a lasting impression on the stock market, while more recent turmoils in the market such as the dotcom bubble bursting and the financial crisis of 2008 have led to individual consumers owning ever smaller share portfolios.

Actually if you read both articles the stats make sense - one study takes a wider view than the other. But you might have thought that the Torygraph might read it own news.

1 comment:

Cantab83 said...

Yes, it is interesting that the Daily Telegraph apparently can't decide whether the fact that 15% of the public own shares constitutes a shareholding democracy or not.

The stats are, of course, not contradictory, even if the Telegraph's conclusions are a bit ambiguous in regard to the extent to which a shareholding (or share-owning) democracy has been created post-Thatcher. The data just show that, while more people may own shares, the total value of their combined holdings is decreasing, at least in relative terms. But why should we be surprised by this?

Why would we expect more people to invest in shares when house prices have been allowed to rocket out of control? You can't create a mass share-owning democracy if shares are seen by most people as carrying a greater risk and providing a lower return than the housing market.

And then there is the impact of our never-ending balance of payments deficit. This outflow of capital has to go somewhere, and a significant proportion of it is clearly used by overseas investors to buy up UK assets including shares.

This data is just another indicator of the weakness of our economy, but also of the growing gap in wealth between the non-domiciled super rich and the rest of us.