The GameStop Saga and the Incoherent Politics of the Stock Market

In the 1980s, President Reagan saw employee stock ownership as a way to undermine communism and promote free markets. He established a task force chaired by conservative financier J. William Middendorf and ESOP expert Norman G. Kurland to study worker-controlled companies in developing countries. In announcing the report of this task force, Reagan said when workers have a stake in the place where they work, they have “a stake in the freedom of their country.” In the United States, he said, employee ownership is “a path that benefits a free people.”

By the 1990s, a considerable number of workers had 401(k)s and could see on a day-to-day basis exactly what the present value of their pension was. (Of course, defined-benefit pensions always had a capitalized value, but workers seldom had any idea what it was worth in contemporary dollars.) As the market went up, year after year, there is no doubt that the rising level of 401(k) plans was having a political effect. (The popularity of mutual funds also played a role in this shift by making it much easier for unsophisticated investors to buy a portfolio of stocks, including funds that invested in the stock market as a whole—a technique long advocated by economists.)

The first evidence I can find of an overt effort to use the bull market to convert workers into reliable Republican voters is from 1998. A February 24 article in the conservative Investor’s Business Daily newspaper cited data from Rasmussen Research, a Republican pollster, showing that among those making between $20,000 and $60,000 who had at least $5,000 invested in stocks, bonds, or mutual funds, 43 percent were Republicans and 34 percent were Democrats. Even more revealingly, among those in that income bracket who had no money invested, just 29 percent were Republicans and 45 percent were Democrats.