Defending Capitalism's Vulnerable Fortresses

Defending Capitalism's Vulnerable Fortresses

Publicly traded corporations are capitalism's vulnerable fortresses, the economist Joseph Schumpeter argued in his epochal “Capitalism, Socialism and Democracy.” Dematerialized, absentee ownership does not call forth moral allegiance in the visceral way that private property once did. “Defenseless fortresses invite aggression especially if there is rich booty in them,” Schumpeter warned.

The relationship between the stock investor, the ultimate beneficiaries, and the means of production is more attenuated than it was in the 1940s, when Schumpeter wrote. Mutual funds, index funds, ETFs, state pension schemes and the like have resulted in the atomization of shares of publicly traded corporations into vast portfolios controlled by institutions, some private but many answering to state politicians.

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