Progressives' Stock Portfolios
a Regressive Dilemma

Dennis Fox

April 28, 2000

According to the constant business-page reminders, half the United States population now owns stock, either directly or through pension plans and mutual funds. Despite occasional blips, the gloaters tell us the future is rosy, at least for those who have the money and guts to log on to E-Trade. Regardless of the economy's true state of affairs, however, it's the stock market mania itself that may be the ultimate capitalist tool, one that too many progressives are tempted to pick up and try to use. We should know better, and we should do something about it.

Progressives can identify the fallacies in the thickening media haze. We know that individual stock portfolios won't end injustice. Some people get rich at the expense of many others who remain poor and exploited. Vast segments of the population don't have the means, the education, or the energy to invest.

And we know that the corporation is a recipe for social irresponsibility. When "our" corporations cause harm to people or the planet, we're neither legally nor financially responsible for the damage. Sure, we may lose our investment, but we won't be sued and we won't go to prison. And in most cases neither will the corporate managers who cause the harm. Corporations are explicitly and legally designed to accumulate immense wealth and power solely for the purpose of making a profit, with no risk to anyone involved except the victims.

Yet despite all that we know, politically conscious progressives suddenly find themselves among the new stock-holding class, increasingly dependent on the booming market to help get their kids through college and themselves through retirement. With stock market mania all around us and everyone a budding mini-capitalist, rising above principle is tempting as co-optation becomes easier.

Our dilemma is this: How can we satisfy our own legitimate needs without strengthening the capitalist system that prevents egalitarian social institutions from developing?

Most of us never set out to get rich. By choice, we became teachers and social workers, nurses and professors, legal aid lawyers and therapists. Now, after 20 or 30 years of socially useful work in harmony with a lifetime of political activism, many of us have some extra money to put in the bank. But the bank turns out to be a lousy place to keep ahead of inflation.

Worse, with traditional pension plans disappearing and Social Security threatened, many of us are forced by our employers to select among competing investment options. Along with millions of other workers, we're supposed to "manage our pensions" by immersing ourselves in mind-numbing details. We're given literature about 401(k)s and 403(b)s. We compare notes about IRAs. We wonder how to make up for lost time--those decades when we had better things to do with our money than invest in capitalism--while our children plan thirty-five years ahead, determined to avoid replicating their parents' financial shortsightedness.

It now matters to more people whether the Dow is up or down, whether the Nasdaq's latest slide is just temporary.

Imagining an easy way out of the dilemma, many progressive boomers turn to so-called socially responsible mutual funds. These funds screen out corporations that sell tobacco, produce weapons, or fail some other politically correct test of "good corporate citizenship." Larger mutual fund companies such as Vanguard are now starting their own socially responsible funds, seeking to attract more dollars from the growing number of conscience-ridden capitalists.

Unfortunately, there's less to this than meets the eye. Responsibility screens inherently are both loose and subjective. With profit the goal, compromises must be made. As explained by the pioneering Domini Social Equity Fund, "No company is a perfect model of corporate responsibility" and "you may find that some companies in the Index do not reflect your social or environmental standards." So if you buy into Domini or similar funds, your money goes to Wal-Mart, AT&T, Microsoft, Coca Cola, Disney, the Gap, and a host of other corporations that might violate your own conception of good corporate citizenship.

If you object to the stultifying, homogenizing impact of large corporations on modern life--even if they're good to their employees and don't destroy the environment--then the socially responsible funds don't resolve your dilemma. Besides, it's hard to maintain an anti-corporate political stance when your computer keeps a running tab of your ever-changing net worth. Does it matter to you whether Wal-Mart moves in to your town? Do you care if the feds break up Microsoft? Are your answers based on your politics or on your portfolio? Are you sure?

So where does that leave you? One option is to avoid the mutual funds and set up your own screens. Invest in individual companies based on your own research, selecting those whose products and policies meet your standards. With on-line trading you can buy and sell more easily and cheaply than ever. But that's a pretty risky investment strategy, especially for people with limited funds. Even worse, all that research is time-consuming, and it never ends. Your small benign corporation gets bigger, or sells out to something less cozy. The equation changes. Remember Ben & Jerry?

There's a third option: invest in whatever makes you richest. Like it or not, we live in a capitalist system, so why not accept the capitalist rationale? Just sit back and enjoy it. You can always send off a check to your favorite cause. When you start wondering if any ruined lives might be financing your profits, just send a bigger check to an anti-sweatshop group. It's probably tax deductible.

The truth is we have no good options. The left has been out-maneuvered by a structural adjustment of the US economy that's muddied the line between capitalists and the rest of us. Worse, to the extent that our personal finances really do depend on the health of corporate institutions, we're not likely to create alternatives. We may still march in Seattle or DC against corporate-designed structural adjustments imposed by the IMF on Third World nations. But people whose minds are on their readjusted portfolios may find it hard to work up much enthusiasm.