Large companies need a way to reach the savings of the public at large. The same problem, on a smaller scale, faces practically every company trying to develop new products and create new jobs. There can be little hope of raising the money needed from friends and people we know, and while banks may agree to provide short-term finance, they are generally unwilling to provide money, for long-term projects. So companies turn to the public’ inviting people to lend them money, or take a share in the business in exchange for a share in future interests. This they do by issuing stocks and shares in the business through the Stock Exchange. By doing so they can put into circulation the savings of single persons and institutions, both at home and abroad.
When the saver needs his money back, he does not have to go to the company with whom he originally placed it. Instead he sells his shares through a stockbroker to some other Saver who is seeking to invest his money.
Many of the services needed both by industry and by each of us are provided by the government or by local organizations. Without hospitals, roads, electricity, telephones and railways, this country could not work. All these require continuous spending on new equipment and new development if they are to serve us properly, requiring more money than’ it is raised through taxes alone. The government, local organizations and nationalized industries therefore frequently need to borrow money to finance: major capital spending, and they, too, come to the Stock Exchange.
There is hardly a man or woman in this country whose standard of living does not depend on the ability of his or her employers to raise money to finance new development. In one way or another his new money must come from the savings of the country; The Stock Exchange exists to provide a channel through which these savings, can reach those who need finance. The Stock Exchange makes it possible for the government, local organizations and nationalized industries ______.