Was Margaret Thatcher right? Not about everything, obviously. Only the true-Blue keepers of the flame believe that, surely?
But was she right about ‘popular capitalism‘, the intuitively plausible idea formed by Tories in heady days of the Eighties that held that spreading share-ownership via the privatisation of publicly owned firms and industries would give ordinary Brits ‘a stake in the market’ and, in so doing, would push them to vote Conservative instead of Labour?
The answer, according to some intriguing research I heard about this week during a trip to the States, suggests she might have been.
As far as I’m aware, Lady Thatcher had no personal connection with Princeton, one of the USA’s Ivy League universities, although one of the best recent books on her was written by Sir David Cannadine, a British historian and Princeton faculty member.
But it was here that I attended a colloquium exactly 40 years to the day after Thatcher first entered Downing Street as Prime Minister, and where I heard Yotam Margalit, from Tel Aviv University, present some research he’d conducted with Moses Shayo from the Hebrew University of Jerusalem.
Margalit wasn’t talking about Thatcher, but the findings of his research would, I’m sure, have pleased the Iron Lady no end. As a trained chemist, Thatcher would especially have liked the fact that they resulted not from desk research, but from an experiment.
The experiment was a complex one, with different ‘treatments’ applied to subgroups of the sample of 1,500 English participants. In essence, however, it involved giving the participants, most of whom had never invested in the stock market, £50 to spend over the course of two months on buying and selling stocks on a web-based platform.
In the weeks before and afterwards they, along with a control group, were also asked a range of apparently unrelated questions designed to tap into their underlying social and political attitudes, as well as some more specific, policy-related questions on tax, spending, and regulation.
The results? The people who actually got to trade stocks, they found, ‘shifted rightward’ in their social-economic values. This influenced their attitudes on economic fairness, inequality and redistribution, the role of luck in economic success. They also found that ‘exposure to the market increased subjects’ confidence in the ability of regular people to successfully invest in the market, as well as their own inclination to invest’.
Although there was no shift in participants’ views on policy, such as whether government should provide either more or less generous benefits to the jobless, they did become less sympathetic to the idea of taxing investment gains and regulating the market. They also became much keener on the idea that people be allowed to invest some of their national insurance contributions in the stock market, even if that that meant more meagre retirement funds for those whose gambles didn’t pay off.
Moreover, and in some ways most fascinatingly of all, this ‘rightward shift in social-economic values’ occurred among both left and right-wing voters but was ‘more pronounced among those on the left’. They also found ‘little evidence that the change in attitudes was determined by how well participants’ investments performed’. Amazingly, Margalit and Shayo discovered that the effects on attitudes that came about by playing the stock market were still there when they followed up participants a year later.
These results are striking but they also accord with research based on the science of elections gathered during the late 1980s, which suggests a relationship between share ownership and increased Conservative voting and a similar tendency among the millions who bought shares in the utilities privatised by Thatcher.
Even if those correlations weren’t spurious, popular capitalism (and what Left-wingers consider its evil twin, ‘the property owning democracy’ kickstarted through council house sales), could do the trick forever.
Thatcher herself was unceremoniously dumped by her parliamentary party when the economy tanked soon after her third successive victory in 1987, at which point it had become clear she and many of her flagship policies had become an electoral liability. And although her party managed to pull off a surprise win in 1992, it got its comeuppance in 1997 and, frankly, has struggled ever since.
Nevertheless, leaving time and chance aside, and incorporating a little bit of economic history, this latest research suggests that it wasn’t so much that providing people with the opportunity to own shares failed to shift them to the Right, but that it involved far too few people to pay off long-term, at least electorally.
It’s estimated that around three million individuals owned shares in 1979, and by 1987 the figure had risen to over eight million. But many of the smaller investors were in it for immediate short-term gain, while relatively few were so bitten by the bug that buying shares in privatised companies led them to expand their portfolios to include other asset classes.
In any case, eight million people was only ever a small proportion of the total population. Ownership of UK listed shares by individuals fell precipitately in the 60s, 70s, and, yes, the 80s too, and now stands at around 12%, which incidentally is around the European average. Establishing the proportion of the UK’s population that owns shares individually as opposed to through, say, pension funds, is far harder. Apparently, nearly nine million people in the UK hold stocks and shares ISAs, which constitutes less than one in five of us – a figure which accords neatly with the 19% estimate quoted in a 2015 ResPublica report.
Even if Margalit and Shayo are right, then, capitalism would need to be a lot more popular – in the literal sense of more people owning more shares – to make as big a difference to the nation’s politics and attitudes as Thatcher firmly believed it would.
Sceptics will argue that their findings were produced ‘in the lab’, and that things would be very different in the real world. They may say that in reality, people playing with their own hard-earned cash would lead to devastating losses in their standard of living as well as their faith in financial markets – the very thing the researchers think may (along with sheer familiarity) be driving the attitude shifts they observe.
But that prompts a further question. Would anything that contributed to distrust of financial markets have opposite effects to those that the research discussed here discovered?
Could another crash, or simply a gnawing feeling that the markets are rigged in favour of big banks and crony capitalists, generate support for greater regulation, a more comprehensive safety net, and the idea that failure or success is as much a product of society as it is of individual effort and responsibility? Politicians of every stripe would do well to bear that in mind.