Nearly 12,500,000 people in the United States today own common stock.
This fact, so briefly stated, is of first-rank importance. It summarizes one of the profound and far-reaching shifts in American social and economic life in the 20th century. Never before in our history have so many of us owned so much of the nation's industrial wealth, so much of its productive capacity, and so much of its profit potential.
Many elements have combined to bring this about. Until the end of World War II in 1945, stock ownership was for all practical purposes the privilege of the well to do. Only the man of wealth could afford to buy stock in significant amounts. Only the man with surplus funds could afford to ride out market slumps and the temporary loss of income and value. And only the few initiates were really educated and informed about the behavior of markets and the ground rules of investment.
In the minds of most, the stock market was a vast trap for the unwary. Like all public images, this was inexact, but not without a basis in reason. Time and again in the tumultuous capital expansion of the nation that began after the Civil War, small investors had been whipsawed in the market struggles of the tycoons, and panics and depressions had shriveled their bright dreams of prosperity. Sober citizens were appalled by the insanity of the rampant speculation of the 1920s. Everybody knew someone who had been scorched in the holocaust of the crash, and those who were not wiped out were nonetheless inclined to blame Wall Street for the depression that followed.
For most people, capital investment meant buying a home. If there was anything left over, it went into insurance and the savings bank.
The myth died slowly. Recovery from the depression consumed most of the Thirties. The Second World War lasted until the middle Forties. Throughout this period, the stock market continued to do business at the old stand, but at a greatly reduced volume. Reflecting the times, it pulled itself back uphill to a respectable peak in 1936, considerably short of the 1929 summit, but still the highest point since the crash. It dropped sharply in the 1937 recession, staggered up and down uncertainly for several years, and then retreated under the impact of the war. From 1942 on, however, despite occasional setbacks such as the 1957 recession, the trend has been steadily upward.
The nation emerged from the war hardly conscious of how greatly the basic economy had changed. Production for war had forced a gigantic expansion of industrial plant, much of it with the aid of government funds. High tax rates and controlled profits encouraged further investment in facilities. And liberal postwar settlements enabled corporations to buy government-built plants cheaply or to depreciate them quickly, thereby reducing or eliminating what might otherwise have been a burden of long-term debt. The net result was a stupendous increase in the book valuein the fundamental assetsof a great number of companies, which eventually led to a surge in public investing.
Now, it is relatively easy for anyone to play the stock market -- just search for "invest online" in your favorite search engine, and the results are astounding. The sea change over the past century was fueled by World War II and subsequent recessions, but the greatest advantage for the small-to-medium sized investor today is the advent of the Internet. As always, however, read the fine print before investing online, and be sure to do your research about hidden fees and taxes. The easier it is to invest in an online stock, the more risky it might be for your wallet.