What Will It Take To Build An Ownership Economy?

Just last week, the U.S. stock market hit record highs. Unemployment is low, inflation is starting to come down. By many standard indicators, the economy is humming along just fine.

But there’s an underlying problem: Far too few Americans have realistic pathways to build wealth and assets over time. It’s a problem that’s getting worse. And until we fix it, most Americans won’t achieve financial freedom, let alone the so-called American Dream.

Income and wealth inequality in the U.S. are as high as they’ve ever been. The top 1% of American earners now control more wealth than the nation’s entire middle class, federal data show — a big change from 30 years ago. Low-income Americans — those at the bottom 20% by income – own just 3% of the country’s wealth. Meanwhile, the Black-White wealth gap in America is the same today as it was in the late 1960s.

So while we celebrate a rising stock market, it’s important to remember that the wealthiest 10% of Americans own 89% of all U.S. stocks.

How did we get here? It wasn’t by accident. It’s the result of policy choices: from banking deregulation to tax policy to the assault on unions beginning in the 1980s. These choices drove economic outcomes, including anemic wage growth beginning in the 1980s. (Yes, wage growth the last few years has been strong, but nowhere near enough to keep up with both productivity gains and with rising costs.) This has left an enormous chunk of the workforce financially insecure, with few opportunities to get ahead and limited choices about their futures.

So how might we reverse course — and enable millions more to live choice-filled lives? A good start is to listen to social innovators who are doing just that. People like Alison Lingane, co-founder of Project Equity, who is a national leader in the movement to expand employee ownership in the U.S. Or Bree Jones, who founded Parity to expand home ownership among legacy Black residents of Baltimore, and test a new model of development that doesn’t drive gentrification and displacement. Or Tim Lampkin, who is unlocking creative forms of capital to support Black entrepreneurs in the Mississippi Delta and beyond.

And people like Molly Hemstreet, a founder of Industrial Commons, a North Carolina based network of worker-owned cooperatives that is demonstrating a more sustainable way to manufacture textiles while keeping wealth in local communities. Just last month, her team was recognized with a N.S.F. Innovation Engine Award that unlocks up to $160 million over a 10-year period.

A central ingredient in these four efforts: ownership as a pathway to wealth creation. Ownership is both significant, and distinct from just higher wages. It enables the accrual of equity and wealth over time — the kind that can be leveraged to start a small business, for example, or to invest in kids’ education, or buy a home. Ownership also means more control and more choice.

Take an employee-owned business, for example: research has shown that when employees jointly own the businesses they work for, wages and working conditions are better. And at the end of the year, employees get their share of company profits in the form of a dividend check. $5,000 or $8,000 or $12,000 — even modest profit shares can be transformational for low-and-middle-income families. Turns out that employee-owned businesses also outperform their peers.

Broad-based ownership can be a force for adjusting the very DNA of our economy so that many more can partake in the fruits of economic growth. Some refer to this as “inclusive wealth” — and something like it is essential for widespread financial security and economic mobility. And it may be one of the most powerful ways to overcome the racial wealth gap that has been centuries in the making.

“The benefits are clear,” Alison Lingane told me. “And the moment is now, as we move into the greatest generational wealth transfer in human history. Consider this: Over the next decade alone, almost 3 million baby-boomer-owned businesses will be sold as current owners retire. Imagine the impact if most of those are sold to employees?”

But making this happen will take capital: capital to facilitate employee buyouts, for example, or to provide low- or zero-interest loans to new homebuyers or Black business entrepreneurs. When you ask social entrepreneurs like Lingane, Jones, Lampkin, Hemstreet and others, they overwhelmingly name lack of capital as the major barrier to growing the Ownership Economy. Capital to compete with private equity firms that over the last decade or so have bought up hundreds of thousands of single-family homes to convert into money-making rentals, not to mention massively consolidating business ownership across countless industries.

Those private equity firms are working with trillions of dollars. Building a broad ownership class won’t happen one $250,000 foundation grant at a time. Billions are needed. Yet much of the capital out there — even of the “impact investing” variety — demands market-rate returns and crowds out the possibility of meaningful change.

How might we get creative? For example, $230 billion is sitting in Donor-Advised Funds (DAFs), with very few rules about how and when that money must be distributed. What if a DAF — say, starting at $1 billion — were created explicitly to grow the Ownership Economy?

Expanding ownership and wealth-building opportunities in America has the advantage of wider political support than an effort to greatly expand our social welfare system. After all, equality of opportunity is an American value with universal appeal. This is about giving more people a shot — a financial runway. It’s imminently doable, and doesn’t require filibuster-proof legislation. The public sector can absolutely play a role — via policies and incentives that turn headwinds into tailwinds, including de-risking the capital investments we desperately need.

And importantly, the evolution can be guided by innovators for the public. Including people like Frank Altman, who was a major force behind the growth of community development financial institutions (CDFIs) in the U.S., and Brandon Dennison, who founded Coalfield Development in West Virginia to rebuild the Appalachian economy with an emphasis on social enterprises.

A broad-based Ownership Economy could be the trickle-down strategy that actually works: modest investments that expand economic choice and opportunity not just today but for generations. It’s too big an opportunity to let slip away. And it will take real money to get real traction. Money is not something that’s in short supply in the United States: but can we put it to better use?

This is Part One in a series. Next up: the ‘how’ of growing an Ownership Economy with social entrepreneurs Bree Jones, Brandon Dennison, Tim Lampkin, Molly Hemstreet, Frank Altman, and Alison Lingane — all Ashoka Fellows.

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