Imagine a society in which all but 10 individuals invest a fixed percentage of their income money in an index fund that in turn buys shares of any publicly listed firm in proportion to its market capitalization. The remaining 10 trade actively. For simplicity, assume that the necessary purchases and sales are done every day at market opening, based on the data from closing at the previous day.

The ten active traders would determine those market capitalizations; everyone else would be along for the ride. If that group of ten colluded, they could extract money from the passive traders conducting straw purchases of a stock to inflate its price (and thus market cap), triggering the index fund to buy it, at which point they can take a profit and divide the spoils among themselves.

This is obviously hugely stylized and exaggerated. But clearly, at some point between no passive investment and overwhelming passive investment, there is a strategic tipping point.

Politically, we have to ask why the mass of passive investors should allow private traders pursuing short term profit maximization strategies to determine the allocation of investment in our society. Wouldn't every vision of the good life be better served by democratically electing the bodies that make the major investment decisions that determine our economic direction, returns to labor, basic infrastructure, etc?

https://www.tandfonline.com/doi/full/10.1080/08935696.2022.2... https://thenextsystem.org/node/204