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The Battle for the Soul of Capitalism

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The Battle for the Soul of Capitalism

How the financial system undermined social ideals, damaged trust in the markets, robbed investors of trillions – and what to do about it

Yale UP,

15 min read
10 take-aways
Audio & text

What's inside?

Companies were once managed for the benefit of shareholders. Now they’re managed for the benefit of managers.

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Editorial Rating

8

Qualities

  • Applicable

Recommendation

John C. Bogle is the best possible person to provide this critique of the U.S. slide into dysfunctional capitalism. As the founder and former CEO of Vanguard mutual funds, Bogle has taken the high road in investment management, implementing policies that contain fund expenses and benefit shareholders. Of course, this should be the main job of any fiduciary, but it often gets lost among other interests. With his long-term perspective and in-depth knowledge, Bogle presents the industry’s problems and explains how to correct the mistakes generated by greed, runaway management, wild speculation and sloppy oversight. Although occasionally repetitive and rhetorical, he raises important concerns: Rampant self-interest is destroying the investor class and, even worse, many fiduciaries are standing by and passively watching the debacle. If you are an investor, investment professional or a dispassionate fan of the benefits of capitalism, getAbstract recommends this as essential reading.

Summary

Decline and Fall

U.S. business has achieved remarkable results and reshaped the world. But during the last part of the 20th century, its values have deteriorated, derailed by materialism and greed. Although the federal and state governments once focused idealistically on solving social, educational and resource allocation problems, selfishly motivated campaign contributions have redirected the political system. In the business sector, excessive compensation and unbridled activities by investment bankers, financiers and corporate managers helped produce the stock market bubble of 1998 to 2000, which inflated and then evaporated half the wealth created in the stock market during that period.

Today, the stock market is entertainment, not a long-term investment vehicle. Excessive TV coverage and the rabid pursuit of financial information, much of it meaningless, drive investors to pursue day trading and short-term profits. At the corporate level, managers are running their companies for their own benefit rather than that of their shareholders, even though the shareholders assume most of the risk by investing their cash.

In “owners’ capitalism,” managers operate companies...

About the Author

John C. Bogle is founder and former CEO of a large mutual fund company. In 2004, Time magazine named him one of the most influential people in the world. In 1999, Fortune magazine named him one of the four investment giants of the 20th century.

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