Turning tide: why stock ownership benefits society

by Carsten Mumm, guest author of Euro am Sonntag

EGetting started early in saving with shares, especially young investors, not only benefits them, but the economy as a whole – an effect that receives far too little attention. According to the Deutsches Aktieninstitut (DAI), 12.1 million people in Germany had shares or share-based funds or ETFs (exchange-traded index funds) in their portfolios in 2021. Compared to the previous year, the number of shareholders has fallen slightly by 280,000. Due to the strong increase from 2020 by 2.7 million, the value is still close to the highs of 2001 with 12.9 million share savers.

And this comparison is very remarkable. While many were caught up in the general euphoria of the internet hype around 20 years ago and – mostly much too late, i.e. close to the highs at the time – made their first attempts at the capital markets, now, in the midst of the Corona crisis, the entry seems to have been successful. Anyone who bought shares during 2020 should have decent profits today. Unlike after the bursting of the internet share bubble, investors should now see their capital investment decisions confirmed in retrospect and remain loyal to the stock exchanges for longer. Since the demographic change in Germany is pushing pay-as-you-go pensions to their limits, at the latest when the baby boomers retire, and at the same time the interest-bearing investment is hardly profitable in view of widespread negative real interest rates, self-reliant funded provision is becoming more and more important through a share in the productive assets of the economy – for example over Shares – essential for the retirement of today’s young people.

The fact that private individuals are increasingly involved in the capital market also has other economically and socially relevant advantages. In the past, a lack of private investment capital has all too often led to promising innovations developed in Germany being brought to economic maturity abroad, primarily in the USA, and becoming the basis for the rise of new business areas or entire companies. Today, economies around the world are facing drastic transformations, in which it is particularly important to generate innovative ideas and quickly develop them into viable business models.

Understanding of economic relationships is necessary

The decarbonization of production, mobility and energy generation will not be feasible without technological innovations. The key technologies required for this from the field of digitization are, for example, artificial intelligence or blockchain, which will massively change existing production processes in all relevant segments, from industry to retail to service providers. If it is possible to transfer the basic scientific research that is often available in these areas in Germany into a scalable economic use, the competitiveness and resilience of the business location will be decisively strengthened in order to master the upcoming challenges.

It’s not just about the available capital. On the contrary, a greater share commitment by the citizens of an economy can also sharpen their understanding of economic relationships and the necessary prerequisites for economic success, a development that is particularly desirable in Germany. In all necessary efforts to play a pioneering role in important future issues, such as climate protection, the preservation of the economic potential of the German economy must be an important secondary condition that must be observed. The hastily initiated energy transition after the Fukushima nuclear accident shows that complex economies require well thought-out concepts in order to achieve desired goals without massive collateral damage.

You have to put people in a position to get an idea of ​​the pros and cons of economic policy decisions. Anyone who can see the effects of political or regulatory decisions on the future viability of various companies and sectors based on their own stock positions will get a better overview of their very different directions of impact. It is therefore not only in the interest of the citizens with a view to their old-age provision, but also of business and politics that domestic share ownership in private hands is supported and expanded.

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Image sources: Donner & Reuschel, MichaelJayBerlin / Shutterstock.com