[Three months after writing the preface to this book, Jacques Bichot took the opportunity of information to publish the following column. DM]
According to recent information (Les Echos, 18 November 2016), the number of natural persons holding shares seems to have halved since 2008. Parallel to the disaffection that affects the trust granted to political leaders, this disaffection is worrying: it shows that the population is distancing itself from both economic and political institutions.
Not investing directly in at least one enterprise is a bit like not going to vote: you leave it to others to take care of choices over which you feel you have little influence. Of course, owning a few shares, like a ballot slipped into the ballot box, does not make it possible to change the course of things on one's own, but small streams make great rivers, and if streams dry up, rivers quickly turn pale.
This is a problem of collective action. Let us consider a crowd that gathers to shout its indignation after a serious attack: each participant in the demonstration is, like the shareholder, like the voter, a mere drop of water, but he wants to be that drop of water, he wants to participate in this current. What for? Because this action makes sense, because it creates a link between these human atoms that aspire to form a community, a society, or even a people. Participating is a rewarding process. Feeling solidarity is more than a pleasure, it is the satisfaction of an existential need.
Less participation in elections, less direct participation in the capital of enterprises, less participation in religious ceremonies, all these "minuses" go in the same direction, that of a weakening of the bond. What unites human beings is to have something in common, whether it is a good, a goal, a feeling, a collective action. Sometimes this "something" is an ideology, but it is more often a reality that is both ideal and tangible, like this "carnal homeland" celebrated by men as different as Charles Péguy, Marc Augier, Jean-Luc Mélenchon and Jean Raspail. This "something" must have a consistency, a somehow palpable attraction.
Disembodied finance kills the link
The problem with stocks is that they have become abstractions. The majority of large groups have lost what could have aroused a kind of corporate patriotism among shareholders and employees alike. During its recent capital increase, Air Liquide saw a flood of requests well beyond the amount proposed: why? This is not only because this enterprise is well regarded by rating agencies and by the majority of financial analysts; It is also because it has for several decades associated its shareholders with an industrial and commercial history in which each of them can be proud to participate, and that the purpose of the operation
– acquiring an American enterprise operating in the same sector – corresponded to his image of competence and seriousness. But Air Liquide is unfortunately an exception.
The rule that increasingly governs the business world is that of abstract, disembodied financial markets. In these markets, "financial products" are bought and sold. Regardless of what these products correspond to, the only thing that matters is the hope of returns, and especially of surplus value, that they arouse. As in the minced meat served by fast food restaurants, the consumer does not have to know the ingredients. The saver is directed towards fast-saving where he will be sold a product that is not necessarily bad, but devoid of character, purely utilitarian, incapable of arousing a real attachment.
The fall in individual shareholding is due to the unstoppable rise of fast-saving. No need to know what you are financing, you are immersed in an abstract universe where the prospects of return and surplus value are provided by econometric models that the client will obviously not evaluate. All you need to know is what you're promised: it's up to you to choose the most advantageous, the most appropriate for your needs, without worrying about what your money is used for.
Fast-saving merchants have proliferated in the manner of McDonald's and Speed Burgers, and the result has been a significant replacement of direct ownership as well as traditional restaurants. But there the similarity ends. Because you can have a pleasant conversation, with family or friends, in a McDonald's: the destruction of the link with the producer has not led to the destruction of a very important bond, the one that unites the commensals. Whereas Burger savings weaken, or even destroy, the economically and socially important link between investors and enterprises.
The saver was a provider of capital to enterprises; He has become a client of the financial industry that sells him services. This reversal of the situation of savers is harmful: if we want to give direct shareholding a real chance, it is this that must be stopped being promoted.
Let us begin by examining a very important case of shareholding other than the ownership of shares by individuals: that of pension funds, institutions that are essential for organizing funded pensions. These funds can act either as stable shareholders or as businessmen who stock exchange. Unfortunately, they have evolved, on average, from the first formula to the second, considerably increasing the speed of turnover of their portfolios. What for? This is largely because managers are judged on their short-term results: they must therefore realise their surplus values quickly, and hedge against capital losses, instead of acting as loyal shareholders of enterprises with which they would establish lasting relationships. Tackling this problem of short-termism of pension funds is a priority, as they have the size to lead by example.
Regarding household shareholding, it is first necessary to understand why it has declined. It is not inherently less efficient than the savings channeled by institutions that manufacture financial hamburgers intended for savers transformed into consumers of financial services. To increase their market share, these institutions have an interest in the direct shareholding being less efficient; And they have found an effective way to do this: to make the markets technically complicated, and very volatile, which goes hand in hand. These two characteristics distance households from direct shareholding and lead them to become customers of intermediaries, who employ specialists and practice hedging techniques.
The vicious circle works very well: more volatility leads to more hedging, therefore to more recourse to derivatives, therefore to more complexity and more mimicry causing crazes followed by sudden disaffections, in other words more volatility.
To break this vicious circle, it is necessary to focus on returns rather than surplus values. Of course, investors in young shoots and start-ups are forced to bet on the strong surplus values of a few enterprises, which compensate for numerous and often total losses. But the Dupont household does not invest in start-ups: it provides resources to fairly large enterprises, or to a small enterprise that it directly manages. The strategy to follow is then not to favor surplus values over returns.
An enterprise that distributes most of its profits, and issues shares when it wants to increase its equity, will have "quiet" shareholders and therefore – if it is listed – a less erratic stock market behavior than those whose reference shareholders rely on surplus values, favoring the use of self-financing. The first thing to do is therefore to introduce a tax system that does not disadvantage dividends Dividende compared to self-financing, nor the distribution of free shares compared to the hope of surplus values, nor capital increases compared to borrowing.
Other measures must be taken, in particular to limit the use of derivatives, which have become a kind of drug of the financial markets and more generally of business. Without going into technical details, let's say that these products, which are increasingly sophisticated, have become much more harmful than useful by proliferating: they create more instability and risk overall than security.
Weaning is always a difficult operation, but it delivers from a kind of slavery. This is one of the efforts to be made to establish what Dominique Michaut calls Yield Capitalism as opposed to surplus-value capitalism, which is too inclined to flirt with speculation.
Jacques Bichot, November 2016