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These are pretty spectacular times for shareholders.
In the past five years, the index of the 500 most important US stocks, the S&P 500, has doubled and the US technology exchange Nasdaq tripled, while the German Dax 30 and the French CAC 40 have risen by 50 percent.
Capitalism, one would think, is fit and vital.
But that is deceptive.
The stock exchanges have lost a lot of their importance, almost everywhere in western countries.
They are increasingly dominated by large companies.
They are fulfilling their role as financiers of progress worse than they used to be.
Instead of offering private citizens a level playing field on which they can invest their savings directly, a handful of large institutional investors set the tone in the financial centers.
If the stock exchanges are the heart of capitalism, then it suffers from latent insufficiency.
Since 2005, more than 30,000 companies have been taken off the stock exchange in western countries. 8,000 of these "delistings" were in Europe and 5,000 in the USA. Because fewer new companies were entering the financial markets at the same time, the number of listed companies has fallen year after year since the financial crisis in 2008, the OECD, the organization of market democracies, calculates in a study. Overall, the value of the stocks listed on the stock exchanges has risen, but is concentrated in fewer and fewer companies.
The consequences are problematic.
"In particular, the substantial and structural decline in the stock exchange listings of smaller growth companies" has torn a serious financing gap, according to the OECD.
When innovative younger companies have difficulties growing on their own, it is hardly surprising that productivity advances in western countries are threatened with stagnation.
European sadness
The EU is particularly poor. According to the OECD figures, there were 2,877 listed companies in our country in 2020, compared with 4407 in the USA. France, after all the second largest economy on the continent, has as many listed companies as the much smaller but agile Israel .
In Germany there are around twice as many companies on the stock exchange, but together they are worth less than the companies listed in France.
The German leading index Dax is full of old, traditional companies. The top industries of the 19th and 20th centuries dominate: Chemicals and pharmaceuticals (BASF, Linde, Henkel, Merck, Fresenius, Bayer and its spin-off Covestro), electronics (Siemens and its spin-offs), automobiles (BMW, Daimler, Volkswagen , Continental), insurance companies and banks (Allianz, Munich Re, Deutsche and Commerzbank). (Pay attention to the business figures of many corporations this week.) In all of Europe there is no counterpart to Apple, Amazon, Google, Facebook or Tesla - US companies that are only a few decades old but have revolutionized entire markets. With us, the corporate software group SAP, also almost 50 years old, is alone in the corridor.
Of course, the traditional large companies are also developing, in some cases quite radically.
But the new typically comes into the world through new companies.
And there is a remarkable sadness.
Underdeveloped stock exchanges - tight venture capital
The hottest companies in the Dax?
The delivery service Delivery Hero, which is caught up in one takeover battle after the other, and the housing company Vonovia, which has just failed again with the takeover of Deutsche Wohnen, another “concrete manager” (manager magazin).
All of this does not exactly testify to excessive innovative strength.
The mRNA pioneer Biontech from Mainz, on the other hand, is listed in New York.
Why?
Because the European financial market simply lacks depth, especially for technology companies.
Where the stock exchanges are underdeveloped, private venture capital is also scarce;
Investors who invest in companies in the early stages simply lack the option to exit.
The state is trying to compensate for the shortage with public money, which is "to be welcomed" but is not enough, judges the council of experts for the assessment of macroeconomic development.
Ultimately, it is about "that private involvement in the venture capital market must be strengthened."
After all, there is enough money - what is missing are framework conditions under which it can work highly productively.
The big ones make the game among themselves
Not only in Germany today, the stock exchanges are primarily a source of finance for a relatively small number of large companies. The OECD report sees the reasons in a set of factors that reinforce each other: unlike in the past, the operators of the stock exchanges are themselves profit-oriented companies today; it is easier for them to make money in large corporations and all kinds of derivative securities than in small, fledgling firms. According to the OECD, high costs prevented going public. (The latest "Spacs" boom, in which empty corporate hulls - "Special Purpose Acquisition Companies" - are placed on the stock exchanges with the aim of buying up companies with real business activity at some point is an outgrowth of this development.)
There are also other factors: The low interest rates make financing through debt more attractive than through equity; The abundance of unlisted equity capital means that IPOs no longer appear to be absolutely necessary; private equity, pension funds and asset managers like BlackRock also play an important role today. All of these developments create distortions in favor of the large and established, while the smaller and new ones are left behind.
That's a problem.
And a pretty fundamental one.
In order for new ideas to prevail and productivity to increase overall, companies need to grow quickly.
Citizens should be able to participate broadly via the stock exchanges.
The middle classes, who have so far been fobbed off with high fees and low returns, could benefit if they succeed - which in turn could counteract the pronounced unequal distribution of private wealth in Germany.
"Capitalism without capital"
In order for capitalism to contribute to the prosperity of nations, a number of conditions must be met: New companies must be able to move into competitive sizes relatively quickly.
Entry barriers to the markets should be as low as possible.
As many citizens as possible should benefit from the productive process, as consumers, investors or employees.
The greatest possible transparency - and consistently applied competition law - should limit positions of power.
Harmful consequences of economic activity (see climate change) should be charged to the polluters, the associated risks must be borne by companies and investors themselves.
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Henrik Muller
Short-circuit policy: How permanent outrage destroys our democracy
Publisher: Piper
Number of pages: 256
Publisher: Piper
Number of pages: 256
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If it is true that our economic system is increasingly becoming "capitalism without capital" (according to British economists Jonathan Haskel and Stian Westlake) - an economy that is driven more by spiritual than physical values - then corporate finance is over the stock exchanges are becoming more and more important. Buildings, machines or vehicles can be financed with loans because banks can accept them as tangible collateral. Ideas, knowledge, processes and other »intangible assets« can hardly be financed through loans. Equity capital is required, preferably broadly spread across the stock exchanges.
Before we discuss state intervention, redistribution, nationalization, property taxes and whatever else is buzzing through the election campaign, it should first be about improving capitalism itself.
There is a lot to be done there.
In fact, there is quite a lot of dissatisfaction with our system.
After all, 43 percent of German citizens are unsure whether there could be a better economic order than the market economy, as a survey by the Allensbach Institute for Demoscopy shows.
A remarkable finding - after a decade and a half of an upswing, millions of additional jobs, rising wages and incomes in Germany.
Better functioning markets could contribute to satisfaction.
It would be worth a try.
The most important business dates of the week ahead
Open assembly area
Reporting season I
- business figures from NXP Semiconductors, Heineken, Ferrari, AXA, HSBC.
Expand Tuesday area
Reporting season II
- business figures from BMW, Stellantis, Infineon, Pfeiffer Vacuum, Generali, Conoco Phillips, Eli Lilly, Amgen, Societé Générale, Standard Chartered, BP.
Expand Wednesday area
Reporting season III
- Business figures from Commerzbank, Uber, General Motors, Hugo Boss, Siemens Energy, Toyota, Intesa Sanpaolo, Schaeffler, Sony.
Expand Thursday area
Frankfurt -
German model industry
- New figures on incoming orders from the VDMA mechanical engineering association.
Reporting season IV
- business figures from Siemens, Adidas, Deutsche Post, Merck, Bayer, Continental, Lufthansa, Beiersdorf, United Internet, Kuka, Dürr, Hannover Re, Evonik, Crédit Agricole, Banca Montei dei Paschi, Glencore
Open area Friday
Reporting season V
- Business figures from Allianz, Vonovia, Covestro.
