19 July 2010

And if we shut the Stock Exchange...

Following Frog2's posting of this earlier, have had a crack at putting it into English. The writer is Frédéric Lordon, and I must stress that this is in no way meant as an accurate translation but a reasonable (I hope) approximation of his ideas - and it is only the first third (up to D’autres promesses, d’autres menaces) of the article - in case peeps are interested. Will attempt to get more up in a bit...

Et si on fermait la Bourse...

It was a little over a year ago : governments shored up the banks using taxpayer money. Mission accomplished. But at what price ? The OECD estimates that the amount involved in that rescue at $11.4 trillion ($1676 for ever human on earth)... but finance is not only the affair of bankers, but also shareholders . One proposition would not please them – close the stock market.

The chaos of the last two years nearly made us forget : the speculative finance market (working in a closed universe, far away from the rest of the economy) was dumped on the back of businesses – and, as ever, in the final analysis, the workers.

It took this ‘suicide’ to remind us of the daily damage done by the share market, in which the injunction to make money is converted by businesses into crazed cutbacks on salaries, the systematic destruction of collective bargaining, intense increases in productivity combined with a continual decline of working conditions.
Against these degenerative attacks it is necessary to restate the cause and effect that drives ‘share power’, in which none of the structures presented by capitalism can rein in the reduction of salarues. And if the distinctions between the two ends of the ‘chain’ often cause us to lose sight of the whole picture, and that the suffering at one end is caused by pressures at the other, if the distance between them allows the denial or distinction of the two in the media debate, nothing can completely cover up the existence of one systemic causality.

If the game of the speculative market has been reset, with bullish vehemence by governments, and has taken over the public debate, it is important not to forget that the share market is also trying to return to its previous position.

Few alternatives are coming from the left (OK, Liberation and the Socialist Party, but we still call it ‘the left’) – you might think there are no alternatives. But SLAM (Shareholder Limited Authorized Margin) is one, and the abolition of continuous quotation and its replacement by a monthly (or longer) ‘fix’ is another. And sometimes one considers if we can pose a different question : what if we closed the Stock Market ?

In the debonair coverage of the late Jean-Pierre Gaillard, longstanding financial journalist at France Info, the appearance of ‘rolling’ share market information, with its incessant repeptition of « CAC 40 – Dow Jones – Nikkei », means that the market has already ceased to be a social institution and become almost a fact of nature, the suppression of which is simply unthinable. It is true that two and a half decades of this continuous bludgeoning has lead to this sort of normalisation, notably to express the ‘modern’ economy which cannot be conceived otherwise than by the share market.

To continue this [normalisation ?], necessitates ignoring the manifold destructive correlations resulting from this share power – viewing its supposed economic advantages and actual social costs as something entirely separate from the institution of ‘the market’. It would also be necessary to question the division between these economic advantages and social costs because the trend towards the ongoing compression of salaries which follows the reduction of dividend revenue are not macroeconomic effects. The chronic under-consumption which results has pushed the nice strategists of finance to propose that households pay using credit, becoming a permany crutch supporting missing demand. It is obvious that an assessment is easier if there is one column of figures rather than two, particularly if you ignore the worst one. But if the ‘good’ then shows itself also to be breaking down, how to keep it together ?

And yet it is not enough to say that the positive claims of the market are doubtful. Without it, it seems, there would be no financing in the economy, no funds for businesses to call on when up against insolvency, and less support for start-ups.

But Investers Pump in Money !

On paper, the system doesn’t lack allure. Agents (savers) have excess financial resources and seek to use these, and businesses are on the search for capital – the market is the institutional form that brings these two together to mutual advantage matching the capacity of the former to finance and the needs of the latter for financing. And even better – by providing permanent resources (capital funding based on shares), it stabilises financing and minimises cost. But crash – and nothing at all can keep it on track.

Does the market finance business ? At the point we are now at, it is more that business finances the market ! To understand this unexpected reversal, we must not lose sight that the financial flows between business and investers go in two directions – when the latter subscribe to the share issues of the former, dividends flow back symetrically and there is the ‘buy back’, a characteristic ‘innovation’ of share capitalism by which business are driven to buy shares in themselves to articifially increase the profit per share, pushing the share market (and thus the gains of investors) to the highest point.

As a result of this incoherent system, some attain the peaks, but the exorbitant dividends expected mean that a large number of industrial projects are abandoned as unable to provide them, leaving these businesses with unused resources – ‘idle capital’ which is then supposed to be returned immediately to its ‘proper owners’, the shareholders. Thus, capital leaves the businesses to go to the investors, a ‘backwards motion’...and gives legitimacy to the share market. But the capital raised by the business is actually less than the volume of cash pumped in by investors, and the net contribution of the share market to the economy has become negative (nil effect in France, but colossally negative in the US, the model for all.)

There are those who, at the same time, do not cease to accumulate wealth. The paradox is in fact pretty simple to unwind – failing new share issues to mop up the new available capital, the investors moved to the secondary market (resale of existing securities). Also, the constant development of these [secondary securities] as the effect of taking financing away from new industrial projects, and only inflating the value of securities already in circulation. Value increases and the share market does very well, thank you, but the actual financing of the real economy becomes something more and more unusual : a game restricted only to the speculators and very good for them, as, in fact, the volume of activity in the secondary market crushes that of the primary market.

While the share market as an instrument of financing, rather than speculation, has become useless, there are businesses who still speak well of it. The problem simply doesn’t arise for the small or medum-sized businesses – while not prestigious, we must remember that they represent the vast majority of production and employment – and more surprisingly, the big fish have litle recourse to it, except when they indulge their desire to play the merger game or a public offer. When they have to find financing, the paradox is that they tend to look elsewhere than the flows of the CAC 440 or the Dow Jones, to the bond market or, in a strange archaic approach, to the bank ! By juicy irony this results less from an issue of principle than a self-imposed restraint, not wanting to dilute their ownership. Thus, the triumph of hare power has included dissuading those business that could actually finance the economy from joining in !

15 July 2010

Le Dispatch – 1) Because he’s Woerth it

Liliane Bettencourt, one of the richest women in France, is the bewildered centre of a court case launched by her daughter against a friend to whom the L’Oréal heiress has given large quantities of money, daughter claiming that mother’s generosity has been abused.

So far, so lives of the rich and famous.

But now the focus has shifted away from Mme. Bettencourt to the French Labour Minister Eric Woerth and his boss / current de facto head of the French Football Federation, Nicolas Sarkozy. The first revelations touching on politics involved tax evasion and a butler, so we can all feel very familiar with that, but now they are coming so thick and fast it can be hard to keep up.


  • Woerth’s wife worked for Bettencourt as an investment adviser until resigning on 25 June 2010 – an investigation is under way into alleged tax evasion relating to Bettencourt’s fortune, but the French are having some difficulties reaching an accord with the Switzerland-based Clymene to find out what is going on – she denies any conflict of interest;
  • Bettencourt’s former accountant claims she made payments in cash to the UMP, including a donation of €150.000 to Sarko’s presidential election campaign – she may have a slight ulterior motive, given revelations about additional payments received from her employer including a €400.000 redundancy pay-off and intimations of blackmail – she is now moderating her tone, but MediaPart, which broke the story, stands by the basic facts about the donations story;
  • The law on party financing sets a limit of €7.500 per person per year to a political party, plus a limit on presidential campaign donations of €4.600 – even ignoring the brown envelope bungs alleged by the accountant, there are queries about previous donations made by the Bettencourts, multiple cheques of the maximum amount having been sent to various sections of the UMP to support various ‘friends’ within it – a memo from Bettencourt’s financial adviser Patrice de Maistre suggesting that it was Woerth himself who suggested how this could best be achieved;
  • Woerth has resigned as Treasurer of the UMP (but as of today’s date is still clinging onto his post as Labour Minister – he was Budget Minister before being reshuffled in March) to ‘concentrate exclusively on [the issue of] retirement’ (plans to raise the retirement age are behind the current wave of strikes) – whether he keeps his main job (he has several others – see below) is a bit of a toss-up at present;
  • Woerth was behind the sale of a parcel of woodland (plus racecourse and golf course) earlier this year in the region where he is also mayor, to a racing organisation, who are alleged to be friends of his. Previously tenant of the site under a long lease paying €45.000 per annum (such that the total paid under the lease would be over €5 million without rent uplift), the racing organisation paid €2.5 million to buy the site (which was never held out publicly for sale) outright, despite suggestions that the freehold was actually worth €20 million. Satirical newspaper Le Canard Enchainé (and, they claim, the Agriculture Minister) say this was an illegal sale.

So – everyone (in politics) is denying everything, but I seriously doubt that this is the end of the revelations, and it certainly won’t be the end of the Affair.

16 July update


  • de Maistre (the financial adviser)
  • Goguel (former legal adviser)
  • Banier (the young photographer friend)
  • Vejerano (manager of the island Bettencourt apparently didn't declare to the taxpeeps - no, really)

New question:

  • the ex-accountant (Thibout) who claimed she gave envelopes of cash to various high-ups in the UMP, including the alleged €150.000 donation to Sarko's fighting fund, apparently took out another €100.000 in cash just four months before the election - where did that go? (She has also been interviewed by the police)

Good round-up (for francophiles amongst us) here