In speeches given to rapt audiences over the decades, Cato Institute distinguished senior fellow Jose Pinera has talked about the exciting implications of his time as Minister of Labor and Social Security in Chile. Pinera was the architect of the country’s transition to a private pension system, from which the country’s citizens emerged as owners of their private pension accounts.
Most uplifting in Pinera’s talks are his stories of subsequent conversations with the country’s citizens. Not infrequently they’ll show him the booklets they proudly keep on their person, and that indicate their equity in Chile’s future, and for that matter, the world’s. To say that this ownership transformed the people is an understatement. The simple truth is that when you’re an equity participant in the private economy, your views about economic policy evolve in a positive way.
This is something to think about with The Vanguard Group, State Street, Goldman Sachs Asset Management, and other providers of investment products to the retail investor well in mind. Most readers need no introduction to entities like Vanguard. It has long made saving and investing simple for Americans with Index funds that have made it possible for Americans to quite literally own the future of the United States. Which is really something.
While there are all sorts of ways to invest, and all sorts of reasons to invest in different ways, the genius of Index funds is that they free the saver from having to divine what’s ahead, and what presently unknown companies will define what’s ahead. With cap-weighted Index funds, savers don’t have to worry. Instead, they can rest easy that they’ll always and everywhere attain exposure to market leaders through funds designed to expose them to those leaders.
This growing exposure looms large in regularly expressed optimism in write-ups that more than a few view as Pollyannish. People ask how I can be so optimistic based on what’s happening in the world, based on what they’re teaching tomorrow’s leaders about the world in school, and all sorts of other problems that should have me glum. Sure, but consider what’s happening with savers.
More and more they own what’s ahead. And they do because they want returns on what’s ahead. Since they do, fears of creeping socialism, communism, and all sorts of other “isms” don’t worry me. As ownership of the commercial future grows, so grows a global bulwark against beliefs and policies that run counter to progress.
Consider Vanguard alone. While most known for matching U.S. savers with a broad array of investment options, Vanguard increasingly has a global footprint. Stop and think about what that means with Pinera well in mind.
About this, domestic readers don’t need to be reminded of the genius of compound returns any more than they need to be told about Charles Schwab, T. Rowe Price, and any other large provider of investment options to the retail investor. These things we know. When you’re part of the richest country in the world, financial intermediaries find you.
The above truth has happily made U.S. equity markets incredibly powerful. And that’s a good thing. As a Wall Street Journal opinion piece observed several years ago, the U.S. stock market is the most powerful force in the world, more powerful than any nuclear weapon. What this means is that politicians stateside can only go so far before markets discipline them. Of course, what makes the markets so powerful is broad ownership of them by the electorate.
It’s worth thinking about as Vanguard, Edward Jones, BlackRock and others take their products and services global. The more that they do, the more that global markets act as a bulwark against creeping statism in the way that they do stateside. It’s a big positive, and it’s something to keep in mind as American pundits in particular aim to find fault with these massive asset managers.
More on the presumed faults in the future, but for now it’s useful to stop and cheer just how much money the biggest of the big retail investors have under management. It’s a hugely bullish sign that whatever the popular ideologies or investment styles at the moment, the overarching notion that powers all asset managers is returns. So long as that’s the case, readers can be optimistic that global savings in pursuit of returns exist as protection from any faddish notions that could potentially bring us harm.
