Aspirational. The term “democracy” in the US is one of pride, endearment and, yes, aspiration. Democracy by definition implies a governing system that is representative of the people. Certainly the term is resolute as we move days away from the mid-term elections. Speculating on the outcome of the vote, our country will likely find itself in a further purgatory-like position with divided government, simply a legislature at odds with the executive branch. While ‘people have a vote’, we are engaged in a period of divergent opinion, that has precipitated government frustrations, shutdowns and limited advancement. From a Western vantage point, democracy has been acclaimed to be a more effective, fair, socially sound, and economically beneficial system. But recent years may question its efficacy, and thereby fomenting a level of suspicion.
Observations are telling. We can traverse the Middle East and the desire and wisdom of Western powers to instill a democratic construct in places subjugated by oligarchs, dictators and depots. While noble in our vision, we should realize that other methods of governance, and economic posturing may well in fact be different than our own, yet still enable a level of political and societal stability, coupled with economic progress. Did external involvement in Libya, Iraq, even the Ukraine benefit the greater good, or was it merely an academic experiment that went sideways, leaving proclaimed “vacuums?” While basic human respect should call for free voices and representation, why is it that the Chinese government is fearful of the common folk voting on the Hong Kong matter, fearing the poor would have too much to say, misjudging priorities and economic initiatives, which would ultimately stifle progress of the largest economy in the world? And then we have Fox News hostess, Kimberly Guilfoyle, stating that young voting-age women shouldn’t cast a ballot next week as they don’t know the issues. Seems like everyone has their own flavor of democratic principles and practices and how they should be deployed, depending on their desired results.
We hold a view that democracy provides the most equitable system in terms of opportunity, rights and representation. Democracy cedes to capitalism as its form of an economic engine. But as Thomas Pikkety and earlier, Louis Kelso, have opined that capitalism effectuated in a democratic fashion leads to growing inequality, and may present the characteristics of France in the 18th century, where the classes became at odds, and those without means raised their voices that enough was enough. The US, as the icon of “democracy”, now witnesses the greatest economic disparity in recent history. It is important to have a voice, but we know that some voices speak louder than others and too many disconsonant voices seems at times to be nothing more than cacophony.
Should the Capital Markets Be Opened to Everyone?
This missive is written for a financial journal, with the underlying theme being one of democracy in investing. With the passing of the JOBS Act, we were hopeful that more investors would have broader access to investment opportunities, particularly for emerging growth companies. Title III, the crowdfunding section of the legislation, which envisaged non-accredited investors participating in unregistered investments, is still in abeyance, while the SEC is revisiting the definition of “accredited investor.” The SEC’s current definitional leaning is a prerequisite understanding of financial and economic matters, independent from one’s financial ability to absorb losses, as implied in Regulation D’s exemption. Will this open things up? Possibly, but to what extent or level does one’s knowledge have to be? The ability to play the game may suggest the competency to decipher a balance sheet from an income statement. So to gain access, one seemingly will need to study in order to make “allowable” informed decisions.
Reverting back to our upcoming election day, and the views of Ms. Guilfoyle and the Hong Kong situation, should there be an incumbent, even innate knowledge of affairs as a criterion to casting a vote? One would hope that those that participate in a democratic process would take responsibility of learning the issues and casting informed votes, but with a tsunami of political ads and spins, what constitutes objective understanding? Unlike a balance sheet, which should balance, might the content provided on topics crucial to our nation be objective, accessible and comprehensible? The SEC is opening its eyes to better and smarter ways of more informed decision-making to widen investment inclusion. Should there be some type of “testing” for those that cast votes as part of our electorate, demonstrating legitimate grasp of domestic and foreign policy for instance, and particularly with respect to the most pressing issues, rather than absolving ourselves in a feel good way that everyone should have their equal say, just by being part of the democracy?
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