Europe's small investors spooked by stock-market drop. `Popular capitalism' loses popularity in Britain

Prime Minister Margaret Thatcher's policy of ``popular capitalism'' and her government's privatization of state-owned industries are the major long-term casualties following the City of London's stock-market plunge. This is the view of brokers and other financial experts, who report that small investors who held stock for only three or four years are in a state of shock.

As one broker said, ``These are people who have known only a rising market. They should have realized that markets that go up one day will come down. But the truth has hit home, and many people who have had their fingers burned are not going to try again.''

In the two days of ``free fall'' in the City, many small investors lost as much as 25 percent of the value of their holdings. Small investors were worried - and so, too, was the chancellor of the Exchequer, Nigel Lawson. British Petroleum (BP) shares worth $12 billion will be offered next week to the public. The offer price was $5.45 a share, but on Tuesday the market price for existing BP shares was down to $4.79.

The immediate question was: Why should investors show any interest?

Lawson's answer was to issue a ``keep calm'' statement and to urge potential BP investors to take a long view of the situation. But market analysts reported that many private investors were jittery.

That could be very bad news for the Thatcher government, which has made ``people's capitalism'' a central plank of its policies. On Tuesday, as privatization stock such as Rolls Royce, British Telecom, and Jaguar plunged heavily, the government canceled an $3 million per a week advertising campaign to support the new BP share issue.