The Politics of Wider Share Ownership

The question of whether ordinary people should own stocks and shares has a long political trajectory in Britain. When the idea of creating a property-owning democracy of small shareholders took shape in the interwar period, there was still a consensus among Britain’s political elites that ordinary people should stay away from the stock market. By the end of the century, however, politicians welcomed the fact that there were more private shareholders in Britain than trade union members. In the post-war decades, wider share ownership had some supporters in all major parties, but no government took legislative action because schemes were difficult to reconcile with the mixed economy. Eventually, the economic hardship of the 1970s brought a noticeable shift in attitudes towards mass participation in the stock market. Conservative politicians, journalists, and businessmen of the increasingly influential New Right advocated a return to economic individualism that was motivated by a perceived decline of allegedly middle-class, bourgeois, or ‘Victorian’ values. This ‘declinism’ shaped Thatcherite plans in opposition for a new tax code that would encourage direct involvement with capitalist enterprise. Throughout the decades, however, policymakers and advocates of wider share ownership realized that stock market investment not only lent itself to an exercise in bourgeois values of thrift and deferred gratification, but could also foster speculation and gambling. The line between prudent saving, beneficial investment, and speculative risk-taking always proved difficult to draw and crossing it demanded careful communication.

The Stock Market Game in Post-war Britain

After World War II, the financial sector took a back seat in Britain’s political economy and Labour’s nationalization programme initially wiped out significant areas of investment. In the post-war decades it was common for politicians of all parties to attack stock market operators as harmful gamblers. This anti-finance rhetoric has obscured our view of retail investment in those years in the way that it became almost invisible from public debate—and a historiography—that was dominated by nationalized industries, Keynesian demand management, and the welfare state. If anything, contemporaries were and scholars have been preoccupied with the ‘Cult of Equity’, the rapid growth of institutional investment at that time. While more private individuals ventured into the stock market—there were approximately 3 million direct shareholders by the early 1960s—their share of listed equity was declining. Hence, the small investor’s comeback went unnoticed in comparison with the shift of pension funds and life insurance companies from bonds into equities once markets had recovered by the mid-1950s. Investors small and large made and lost fortunes in two unprecedented boom markets while the burgeoning climate of affluence and permissiveness loosened traditional reservation against financial securities. More and more middle-class Britons not only invested in equities as a means of retirement planning, but also discovered the stock market as a hobby that offered thrills of risk and reward similar to gambling.

Bucket Shops and Outside Brokers

In order to finance World War I, the British government sold war bonds to millions of investors and savers, thereby prompting a wider interest in financial securities including stocks and shares during the interwar period. Faced with a large intake of investment newcomers, the City of London was anxious of ‘amateur’ involvement in the market. The largest securities market, the London Stock Exchange, restricted access to small investors where possible, which pushed much of the new retail activity to the market fringes. Here, ‘outside brokers’ and ‘bucket shops’ catered for investment newcomers, the more gullible of which fell prey to fraudulent share pushers. Scholars have entirely overlooked this vibrant grey market for financial securities. But it was here—and not just at the organized exchanges—that ever more people made their first experiences with the ups and the downs of the stock market, most prominently in the great crash of 1929. This new perspective brings a sharper contour on some fundamental challenges that Britain’s financial landscape was facing in the interwar period: a large intake of new investors, a resurgence of financial fraud, and a new struggle over the distinction between speculation and gambling. The City’s response to these challenges can be described as financial paternalism. After a surge in political democratization, there was very little appetite to enfranchise ordinary people in the stock market. Instead, institutions like the Stock Exchange deliberately took a conservative stance on the ‘democratisation of investment’.

Conclusion

The outbreak of the Covid-19 pandemic in February 2020 led to a spectacular comeback of retail investing in global equity markets. Lockdowns forced millions of people to stay at home, and the suspension of the online sports gambling spirit enticed a new generation of ‘have-a-go investors’ to seek their luck and thrills in the stock market. Financial observers across the board expected the breathtaking surge in retail investing to be a lasting trend and to pose regulatory challenges to the market infrastructure for years to come. The retail stock market frenzy of 2020 and 2021 sparked debates over the place of the ‘amateur’ in the market, the role of social media, and the ‘gamification of investing’. These debates offer an opportunity to hold up a sharp and topical mirror to the historical findings of this book, which in turn may inform future debates about the meaning of retail investing.

Introduction

The book gains new insights into the history of Britain’s stock market by foregrounding the power of popular knowledge and specific market practices from a ‘bottom-up’ perspective. Alongside high-level financiers, the voices of the small-scale participants of the market will be heard, an approach that yields a subtle narrative of cultural change and adaptation. Throughout the century, a popular knowledge of the stock market was promoted by the financial press and by numerous investment guides that sold millions of copies. This exposure to the market in everyday life has been overlooked by other accounts preoccupied with intellectuals and economists, Westminster politics, and the engine rooms of high finance. Contextualizing specific financial practices of retail investors offers a better understanding of how the stock market captured the public imagination. In doing so, Playing the Market takes issue with the way the investing public has been conceptualized in the existing literature: all too often the actual investors are either absent from the narrative or are implied to be a homogenous group of rational actors who consciously adjust to changing economic parameters. However, if we listen to their voices and stories, the diversity of attitudes towards investment and speculation comes to the fore as well as the inherent difficulty of distinguishing between the two categories. What some investors considered a perfectly legitimate way of making money, others may have viewed as immoral profiteering. The ensuing moral debates over the social value of buying and selling financial securities mattered profoundly for the legitimacy and popularity of capitalism.

The Financial Press and the Investing Public

For centuries, Britain has had a financial media landscape unrivalled in Europe with newspapers like the Financial Times or The Economist traditionally keeping business professionals up to date about market developments. But by the early twentieth century, punters could get the latest prices and market-moving stories from tabloids like the Daily Express and the Daily Mail. By 1960, even the working-class Daily Mirror had a designated City page—right next to the racing coverage—and gave investment advice to people of modest means. This chapter takes a fresh look at the financial press as the main source of information for private investors of different social backgrounds. When seeking to explain why economic liberalism became fashionable again in Britain during the 1970s, we must consider that for more than two decades, millions of newspaper readers had been increasingly exposed to the asserted benefits of free-market capitalism and were actively encouraged to take part in the market. Recent studies on the history of neoliberalism state that financial journalism became an important amplifier for the Thatcherite language of profits in the 1980s. This chapter argues that this misses the point and shows instead how Britain’s financial press was not an echo chamber of Westminster politics—it set the tone of the wider share ownership agenda. The newspaper columns of the Financial Times and the Daily Telegraph or the market populism of The Express, The Mail, and The Mirror played a crucial part in shifting British public opinion in favour of free-market capitalism.

Popular Capitalism? Privatization and Demutualization in the 1980s and 1990s

While Margaret Thatcher publicly promoted a Puritan emphasis on thrift, hard work, and asceticism, the outcome of her policies stood in stark contrast to this side of her rhetoric. Her way of selling off nationalized industries allowed the British to have a heavily subsidized flutter on the stock market and increased the shareholder population to ten million investors. Reality, however, was a far cry from Thatcher’s slogan of a ‘share-owning democracy’, not least because the continued growth of large financial institutions meant that small shareholders had very little influence on corporate governance. Millions of people merely ‘stagged’ the privatization issues, meaning that they sold for a quick and easy profit in early trading. ‘Investors’ new and old applied the same short-term logic during the demutualization of major building societies like Halifax or Northern Rock during the 1990s, when ‘carpet-bagging’ became a national sport. Carpetbaggers opened accounts in societies ripe for demutualization not in order to save for a house, but to make a quick profit from selling their accounts once they were converted into shares due to the building society becoming a public company. This chapter places centre stage prominent carpetbaggers such as the former royal butler, Michael Hardern, who during the late 1990s campaigned to become a board member of all remaining building societies. The extent of ‘stagging’ and ‘carpet-bagging’ shows that popular capitalism was less an economic enfranchisement of the nation, and more an expressive culture of self-referential speculation, personal enrichment, and stock market gambling.

The Profit Motive

Throughout the twentieth century, Britain was haunted by debates over its allegedly poor relationship between domestic industry and the financial sector. This controversy reached a climax in 1976 with the Committee to Review the Functioning of Financial Institutions chaired by the former Labour Prime Minister Harold Wilson. Tasked to investigate the claim that British finance was starving out domestic industry, the Wilson Committee gathered evidence from the financial sector, businesses, and organized labour. What has been overlooked is that the committee also invited members of the public to provide testimony of their experiences with financial institutions and between 1976 and 1980 the committee received letters from 258 small savers and retail investors. These personal testimonies allow us to gain a rare insight into the ways in which ordinary savers and investors navigated through a decade of economic turmoil. Making sense of these everyday experiences with the financial markets allows us to better understand the appeal of Margaret Thatcher’s market populism that eventually offered a more optimistic future to an electorate weary of inflation. It also adds colour to our notion of the 1970s as a traumatic period for British savers and investors, at the end of which a more welcoming appraisal of the profit motive emerged in public discourse. But at the same time, with many investors feeling compelled by inflation rates to take higher risks, the decade heralded the acquisitive, short-term, and speculative approach to finance that came to dominate the 1980s.