Index Funds May Harm the Economy

While I think this article does a great job of highlighting what the dangers of the consolidation of power inherent to the growth of index funds, I'm not certain it captures the whole picture behind why exactly they've become the dominant investment vehicle of choice.

I don't need to rehash any discussion of low interest rates, QE infinity, and housing prices here. But I wonder if an increase in interest rates / treasury yields would marginally drive capital out of index funds to mitigate the problems the author discusses. The money must move or slowly decay, but where else can it go?