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Wall Street: The Entrepreneur's Worst Friend
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The stock market doesn't put its money where its mouth is.
The Washington Monthly
, pp. 3-7 -
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by Thomas Redburn
What this country needs is a cen-
tral financial marketplace (in, say,
New York City), where businessmen
with good ideas but no capital can sell
shares of their businesses to the pub-
lic: The market (let us call it a "stock
exchange") would encourage the
transfer of idle savings accumulated
by the public into investment in the
most efficient and creative new com-
panies-and thereby provide a con-
tinual burst of energy for the econ-
omy in the form of new jobs, new
techniques, new products.
The function of such a market
would be so important that a sensible
government would consider giving a
special tax break to people who are
willing to take a risk on a good new
business by buying its stock issues.
Since they would be helping the econ-
omy as much as themselves, investors
in such new issues should have a
special, low-rate tax on the income
they receive from the sale of shares in
a successful new business. This reward
for risk-taking might be called a "cap-
ital gains tax."
If you think we already have such
Thomas Redburn is a contributing editor of
The Washington Monthly.
a market-on Wall Street-you're
crazy. Or, more probably, you've been
paying too much attention to Treas-
ury Secretary William Simon, the Se-
curities Industry Association, and
others who promote the traditional
mythology of Wall Street: that it is
the backbone of the free enterprise
system, the friend of the struggling
entrepreneur, the source of new cap-
ital for new ideas, the engine of
efficient economic growth.
Unfortunately, the stock market,
as currently constituted, is nothing of
the sort. It bears almost no resem-
blance to our hypothetical "stock ex-
change." Instead it is an overgrown,
t o p - h e a v y , monopolistic old
industry-dying of its own ineffi-
ciency as surely as the shoe manufac-
turers of New England. Rather than a
source of new capital for exciting,
productive new ventures, Wall Street
bas become a place where shares of
old, already capitalized firms are
traded back and forth; churning up
commissions for brokers, to be sure,
but doing very little for the rest of the
economy. Rather than a dynamic mar-
ketplace, the New York Stock Ex-
change has become a multi-billion-
The Washington Monthly/March 1976 3
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