The stock markets have once again returned to centre stage with the recent tumbling shares in China. Those financial events have yet to fully play out, but they do once again raise questions about the roles and purposes of the instruments of the finance sector in the global economy. John Fullerton, president of the Capital Institute, has written extensively on this subject and recently published his ideas about a new framework for the finance sector and global economy at large – Regenerative Capitalism.
Fullerton is quick to point out that stock markets were set up with a clear public purpose in mind. They were suppose to provide opportunities for companies to raise equity from a larger pool of investors and to a place where they could sell shares, or parts of the company to other stakeholders.
The 2008 financial crisis brought the nature and enormity of the short-termist, speculative and opaque. Still, a number of sources have actually suggested that the situation is even worse in 2015 than it was in 2008 with an even smaller percentage of investment being directed towards the “real” productive economy.
Fullerton’s argument is that the stock markets, as instruments, are no longer working for the benefit of the economy. Instead, a combination of factors, including the development of technology that enables a huge number of transactions to happen in a short space of time and the growth of “Wall Street intermediaries” has created a situation where much finance activity is actually working to the detriment of most of the economy. A re-thinking of the global economy also requires a re-thinking of the financial sector.
Another interesting link here is Ken Webster’s recent article on the subject of money:
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