Join getAbstract to access the summary!

The Speculation Economy

Join getAbstract to access the summary!

The Speculation Economy

How Finance Triumphed Over Industry

Berrett-Koehler,

15 min read
10 take-aways
Audio & text

What's inside?

Discover how America’s obsession with the stock market led to widespread speculation.

  • 0.5×
  • 0.75×
  • 1×
  • 1.25×
  • 1.5×
  • 1.75×
1×

Editorial Rating

6

Qualities

  • Comprehensive

Recommendation

Scholar Lawrence E. Mitchell makes his case about the speculative nature of the American economy in a complex, highly annotated volume. His detailed presentation explores historic, social, academic, legal and regulatory forces that shaped financial capitalism, especially in the late 1800s and the early 1900s. He depicts an American infatuation with speculative stock market investments and describes efforts by the federal government to nurture stock appreciation and provide regulatory protections for the average investor. getAbstract recommends this slice of financial history to readers interested in the early turning points that shaped modern American capitalism.

Summary

Early Development of the Stock Market

The same complex forces that forged modern capitalism and the modern corporation produced the stock market and its inherently speculative personality. The foundation of the stock market developed from 1897 to 1919 in three phases. In the first phase, more middle-class citizens became investors. Investment no longer remained the exclusive domain of the rich.

In the second phase, common stocks emerged as a new engine for creating wealth. Though riskier than bonds and other alternative investments, common stocks became an egalitarian means for the average American to gain higher returns on investment. Regulatory protections for investors gradually took form in the early 1900s, encouraging speculation.

The third phase, the rapid development of the securities brokerage industry, began after the outbreak of World War I. Millions of American investors bought Liberty Bonds from the federal government to fund U.S. involvement in the war, and securities brokerages that sold war bonds branched into other types of securities as they refined their retail sales networks.

During these three phases, government efforts to restrict monopoly...

About the Author

Lawrence E. Mitchell is Theodore Rinehart Professor of Business Law at The George Washington University Law School. A former corporate lawyer, he has been a corporate and business law scholar for 20 years. Mitchell is one of the founders of the progressive corporate law movement named after his 1995 collection, Progressive Corporate Law. He is the author of Stacked Deck: A Story of Selfishness in America and Corporate Irresponsibility: America’s Newest Export as well as casebooks on corporate law and finance.

Comment on this summary