How America fell in love with stocks

by Chloe Thurston

In 2021, Americans’ home values increased by 30 percent, while their 401(k) balances rose on average by 20 percent for older Americans and 33 percent for younger ones. Incomes, by contrast, increased by 11 percent. The rise of asset appreciation as a metric of household economic well-being, and the notion that Americans might consider themselves investors seeking returns on their houses, stock portfolios, and even human capital (in the form of higher ed), are important dimensions of a broader transformation in the American political economy since the 1960s.

This transformation constituted not only a reordering of policy aims, institutional commitments, economic ideas, and governing coalitions, but also a shift in the normative ideas that could incorporate citizens into the political economy. In A Consumer’s Republic (2004), historian Lizabeth Cohen depicts the architects of the New Deal order as also seeking to develop a “consumer’s republic,” a

“political economy and a political culture that expected a dynamic mass consumption economy not only to deliver prosperity, but also to fulfill American society’s loftier aspirations: more social egalitarianism, more democratic participation, and more political freedom. In their ideal America, a mass consumption-driven economy would provide jobs, purchasing power, and investment dollars, while also allowing Americans to live better than ever before, to participate in political decision- making on an equal footing with their similarly prospering neighbors, and to exercise their cherished freedoms by making independent choices in markets and politics.”

In contrast, the ascent of neoliberalism entailed an embrace of an “investor’s republic,” a political economy and political culture that sought to incorporate citizens as asset holders into a newly financialized global economy, offering them a non-labor path to participate in the wealth stream generated by an economy rapidly transitioning from industrial production to a nontangible, service-oriented knowledge economy. How should we make sense of the cultural political project underlying this transformation? What factors enabled this transformation to take hold? And what have been the consequences, social, economic, and, especially, political?

Industrialized democracies across the globe felt similar pressures to liberalize their economies beginning in the 1970s, but not all embraced mass investment. One reason why the US did so was the affinities that mass investment had with the impulses towards ownership that long predated it. Since the American Revolution, through the nineteenth and into the twentieth century, the federal government regularly turned to land ownership and credit promotion. During World War I, bond drives and war savings programs encouraging citizens to “Invest in Victory” further helped fuel the rise of a “new proprietorship” ideology following the war, and led to a vast expansion in participation in stock ownership such that, by the close of the 1920s, nearly one-quarter of households were invested in the stock market.

Embedded within these various early efforts to expand ownership were multiple goals: fiscal, developmental, military, as well as territorial expansion. In a nineteenth-century context of weak state administrative capacity, land dispensation and credit proved a crucial tool of statecraft. With the expansion and consolidation of administrative and fiscal capacity of the New Deal and postwar years, home ownership in particular became a means to other goals, including employment stability and the bolstering of consumer demand. Throughout, the promotion of land and homeownership proved a means by which to navigate a fragmented institutional and social landscape while also sidestepping distributional questions.

Since the American Revolution, through the nineteenth and into the twentieth century, the federal government regularly turned to land ownership and credit promotion.

These efforts also frequently incorporated higher ideals about the political consequences of a culture of ownership. Land ownership was theorized as essential to secure freedom from domination required to exercise one’s duties as a citizen. Homeownership’s twentieth-century boosters touted it as the “bed-rock of useful citizenship” (in the words of one news article), and would safeguard “the permanence of our institutions” (in the words of another). A second normative impulse concerned the proper role and boundaries of the state within society. Promoting ownership was regarded as a method to govern “with a light touch” (in the words of sociologist Sarah Quinn) and to bolster public support for limited government. It was also often viewed as serving explicit party-building and electoral goals.

These anticipated outcomes often failed to materialize and sometimes backfired. Nineteenth- and early twentieth-century farmers’ frequent experiences with economic crises threatening financial ruin led them over time to stress freedom less in terms of ownership and the absence of government interference, towards a vision of republican freedom that required government to protect them from the arbitrary domination of their creditors. The Great Depression unleashed a torrent of public pressure for government intervention in the banking sector, from calls for government ownership of banks, to depository insurance, and stronger regulatory safeguards against speculative behavior. The home-ownership drives of the first half of the twentieth century may have strengthened homeowners’ sense of individualism and commitment to limited government in the abstract, but they also helped motivate exclusionary behavior and policy aimed at protecting property values. Beliefs in democratizing ownership tended to operate under a narrow definition of the demos, exacerbating existing wealth disparities, generating new ones, and fomenting new race-class political cleavages.

This most recent iteration of the asset-building project—and the one in which ownership would not only once again be widespread, but whereby households’ returns on their investments would ultimately become important indicators of economic performance and households’ economic well-being—dates to the 1960s and 1970s. Policymakers turned again towards the promotion of homeownership, this time to renew the push for homeownership to those previously excluded, and also to promote private defined-contribution retirement accounts. Over the next few decades, new technologies emerged and proliferated. The first modern mortgage-backed security was issued in 1970, setting the stage to render housing into a more tradeable asset for investors, while tax, regulatory and marketing changes allowed the secondary mortgage industry to shed its previous unsavory image and rebrand as home equity loans, allowing individual homeowners multiple new ways to cash in as investors in their own homes. Index funds, initially treated with suspicion and deemed “un-American” by their competitors, became a popular vehicle for small investors and a dominant force in the economy more broadly. By the late 1990s the political culture around ownership and investment had shifted.

President George W. Bush’s “Ownership Society” affixed a label to this transformation that had been underway for decades. In his second inaugural address, Bush renewed and expanded his administration’s commitment to using the tools of the federal government to create a nation of stakeholders:

“In America’s ideal of freedom, citizens find the dignity and security of economic independence . . . To give every American a stake in the promise and future of our country, we will . . . build an ownership society. We will widen the ownership of homes and businesses, retirement savings, and health insurance, preparing our people for the challenges of life in a free society. By making every citizen an agent of his or her own destiny, we will give our fellow Americans greater freedom from want and fear and make our society more prosperous and just and equal.”

There was also a sense among Bush and other Republicans that support for ownership could translate to increased support for the GOP. The political strategist Karl Rove viewed the promotion of ownership as a way to strengthen the party’s standing with the more than 60 million households already in some way invested in the stock market in the early 2000s, and to do so in a way that bolstered the party’s commitments to financial deregulation and social policy retrenchment. Like those earlier periods, the project failed to bring about its anticipated consequences. Bush overstepped his perceived mandate by announcing an effort to partially privatize Social Security, providing an opening for Democrats to mobilize in support of the popular program. Following this first failure, a foreclosure crisis then triggered a global financial crisis, serving as a cautionary reminder that investments could also lose value and induce new vulnerabilities to financial ruin for middle-class households. In October 2008, a Newsweek headline formally proclaimed “The End of the Ownership Society.”

Yet a number of curious developments have transpired in the wake of the Ownership Society’s professed demise. One is that Americans are now more invested in the stock market than ever. In 2023, stock market ownership reached a record high, with some 58 percent of households owning stock. This was up from a post- financial crisis low of about 49 percent in 2013, and almost double the rate of participation in 1989. Another is that the number of options citizens had for participating in financial markets has expanded. While 401(k)s had been the primary vehicle since the 1970s connecting households to the stock market, Americans by the 2020s faced an ever-wider range of options: web-based investing platforms, index funds, cryptocurrency, or even trying their hand at small-scale real estate investment. Policymakers now regularly tout the health of the stock and housing market as an indicator of the overall health of the economy—at least when it is perceived to help their cause.

Americans are now more invested in the stock market than ever. In 2023, stock market ownership reached a record high, with some 58 percent of households owning stock.

The seeming ascendance of investment has yet to break free from the challenges that have historically limited the ideology of ownership from working in practice. Historically, US policies have sought to promote land and homeownership (often through credit) in order to sidestep more difficult questions about the distribution of wealth and opportunities. The rising number of “investors” obscures important disparities in the composition of household wealth. In 2023, the bottom half of the wealth distribution held just under $4 trillion out of a total of $150 trillion, the vast majority of it stored in their homes. For several decades before the financial crisis, increases in housing values helped dampen the concentration of top-end wealth that had surged since the 1970s. The top 10 percent of the wealth distribution held a larger share of their investments in equities and bonds, which recovered more quickly than housing did in the post-financial crisis landscape, helping to account for an unprecedented rise in wealth inequality.

Nor is it clear that the widespread embrace of investing has generated its intended political consequences. The sociologists Neil Fligstein and Adam Goldstein find that to the extent “a deepening culture of risk-taking and strategic deployment of assets” developed, this was contained to middle- and upper-class households, who became more likely to take on debt and “adopt a more thoroughly financial mindset” in order to better compete for positional goods including housing and schools. There was little evidence that increased use of financial services altered how individuals at the bottom of the income distribution perceived risk and debt, although they depend on the latter more than in the past to bridge the gap between their household income and their daily needs.

There is also evidence of shifting expectations of their political systems and elected officials, albeit in unanticipated ways. In the wake of the foreclosure, financial, and COVID-19 crises, voters have voiced new demands for government protection. These include movements for student loan debt forgiveness and efforts to hold non-performing post-secondary institutions accountable for alumni outcomes, to demands for protection against foreclosure and financial sector bailouts, exposing incumbent politicians to new demands and new political risks. The situation has also generated new intergenerational and insider-outside cleavages, particularly around housing. Finally, the strategy of leaning on asset-building programs to ameliorate longstanding racial and social inequalities was—unsurprisingly—unable to reduce the racial wealth gap and has generated inequalities in how citizens approach investment. Black consumers own cryptocurrency at a rate more than double that of stocks and nine times that of mutual funds, and participate in cryptocurrency investing at a higher rate than white households (18 percent versus 13), according to the Federal Reserve Bank of Kansas City. These disparities are owed in part to lower trust in traditional financial investments, as well as in the perceived need to catch up financially by pursuing higher-risk, higher-reward investments.

Writing in the Cardozo Law Review at the height of the Bush era Ownership Society push, in 2005, the legal scholar Robert Hockett likened it to “the seventeen-year cicada of American domestic policy, emerging once per generation onto the national agenda, generating just a bit of buzz, then receding once again to leave a mass of empty husks and buried eggs behind.” A look through the past- and afterlives of the failed experiment seem to confirm this pattern, yet leaves an important question in its wake: How does each round of unfulfilled promises of a nation of owners (and now investors) remake the politics of the next wave of ownership fervor?

Photo: Katelyn Perry. Unsplash+

This article appears in the 2025-26 Berlin Journal (39).