By Neale Godfrey ***This article was originally posted on Forbes
If we really give economic access to the global Millennial middle class my premise is that we can create a more peaceful world, where we have buyers, sellers and owners who co-exist. I know that this may be a stretch for many of you, but we do know that when people have a stake in something tangible, we are less likely to feel disenfranchised. We dramatically saw this here in the U.S. during the race riots. Boomers can relate these stories to Millennials. Our disenfranchised African-American population in the 1960’s was kept out of mainstream economic America. They didn’t own homes, they didn’t own businesses, they were unemployed. They essentially had nothing to lose by setting their neighborhoods aflame. We saw the same phenomena during the Arab Spring that erupted in Egypt. The over educated middle class couldn’t get jobs and weren’t part of the home-ownership class. They had nothing to lose by violently revolting. The bottom line was that these groups did not have a seat at the economic table.
Let’s look at China, for instance which has the largest emerging middle class. This population has lots of access to U.S. products. They drink Coke, they wear Nikes, they talk on their iPhones. It’s estimated that the China consumer purchased over $100 billion of U.S. goods in 2013. According to Seeking Alpha, “Nowhere else in the world is there such a growing consumer market with an estimated 600 million individuals (roughly 40% of their entire population) making up the middle class …” But, it is really difficult for the average Chinese consumer to buy stock in these companies. The rich government and non-government Chinese have cracked the code enjoying about $40 billion in direct investment in the U.S. It takes many forms, including owning U.S. Treasuries (China’s government is the largest holder), real estate, cars, companies and the Chinese are recently getting into the media. The National Association of Realtors has noted that the Chinese also just became the largest foreign purchasers of residential property in the United States, accounting for 16 percent of all foreign purchases overtaking the Canadians as the top foreign investor.
The Chinese are investing in the U.S. because “There is more trust felt for the United States and the U.S. government that those assets will be protected by the government, compared with assets here in China, which could be taken away tomorrow,” as stated by Michael Godin, V.P. of Real Estate Global Partners on a CNBC show. The rich can get around the Chinese law that actually prohibits any more than $50,000 U.S. dollars per person, leaving the country per year. The Chinese have pent up savings that is not earning much in China. It is estimated by Bloomberg, that their “savings—deposits currently stand at $21 trillion—(and they) will increasingly need to be deployed overseas.” Heretofore, the Chinese investor could not “purchase overseas equities directly due to (Chinese) government restrictions and only the wealthiest can buy them indirectly through qualified investor programs,” as noted by Bloomberg.com. It is legal now for a Chinese investor to buy U.S. stocks. All they need to do is simply fill out some forms and upload ID, like a passport, proof of address and other scanned documents and wait for the okay to use a U.S stock account. This has been a slow process beginning in 2006, when the Chinese government first allowed Chinese investors to invest in foreign securities markets via certain fund management institutions, known as Qualified Domestic Institutional Investors.
It’s time to open our stock market to these foreign investors. It is good for our economy to increase our domestic U.S. company’s access to capital. As Brian Dolan, noted financial writer said in a recent article, “ Established global brands located in mature economies are well-positioned to benefit from the expected growth in Asia and other fast-growing economies.” It’s good to have the foreign investor share in the ownership of the company’s stock and not just consume their products. I work with a company called, DriveWealth. They are a mobile brokerage firm that gives the emerging Millennial middle class everywhere, the ability to buy U.S. listed securities, U.S. listed ETFs, including individual stocks. This virtually allows everyone in the entire world to invest. It’s nice to know that the Chinese investor can now buy stock in Alibaba. Alibaba did their biggest ever IPO last year in the U.S., and the regular Chinese investor was precluded from investing. Now they can.
I want to be clear that the coming together to create a flat world has to be based upon more than just access to the stock market. This Millennial generation has already begun to crack-the-code to create a flat world by connecting anywhere and anytime via social media. A global charity called, World Merit embraces this new connectivity and has a mission to improve our world by providing young global citizens inclusive opportunities to become leaders through social action. World Merit sends out a monthly challenge to their more than 100,000 Millennials who have to creatively design solutions. DriveWealth is hosting a challenge related to economic sustainability. Each participant has to take several Wall Street Survivor courses on line, learning about saving and investing. They are then challenged to “pay their knowledge forward” by teaching a peer or a younger person about what they have learned. This is a perfect activity for your Millennials to also become engaged.
We Boomers need to learn how to connect from our next generation of young people. I may be the eternal optimist, but I truly believe that through access and education, we can together build a flat world. I’m a child of the age of the Beatles and I love the words of John Lennon when he said, “You may say I’m a dreamer, but I’m not the only one. I hope someday you’ll join us. And the world will live as one.”