In the midst of a global pandemic, the stock market year will have been a full-scale demonstration of the disconnection between the real economy and the financial markets, argues the former vice-president of the New York Stock Exchange Georges Ugeux in his new book, Wall Street on the assault on democracy. The diagnosis is critical: finance is sick and it must be treated, quickly, analyzes the author.
“On November 24, 2020, in the middle of the second phase of containment, the Dow Jones index exceeded the 30,000 point mark for the first time to the delight and delirium of Wall Street”, writes straight away. author in his book.
The contrast is striking, considering that “the real economy had to face a brutal recession”, he explains in an interview with the To have to.
It is this observation that prompted Mr. Ugeux to take up his pen, guided by the gravity of the crisis and the urgency to propose a remedy. “I had started writing this book before the pandemic, but I started it all over again,” he says.
To respond to the crisis, central banks quickly came to the aid of states with massive loans, and “in the space of six weeks, at the end of March 2020, we injected an amount equivalent to that of ten years of measures to revive the economy after the Lehman Brothers crisis, ”explains the financier.
If part of the colossal sums injected into the economy has allowed a large part of the population and businesses to keep their heads above water, another part has taken refuge in the stock market, he underlines.
“However, the mechanism of the functioning of the markets excessively favors the shareholders and all those who are in the financial markets. So this has contributed to increasing inequalities, which are already considerable in the population “, specifies Mr. Ugeux, while recalling that” the markets bring together at most 10% of the population and 90% of the world’s wealth “.
The excesses of capitalism
Without being anti-system, the specialist in international finance pleads for “a united capitalism” to replace “everything for the shareholder”. According to Mr. Ugeux, finance has no other choice but to reform itself to reconnect with its economic and social vocation. “For this, we must rebalance the economic and social relationship between markets, governments and the population. “
“In particular, we must free ourselves from a short-term vision. For example, companies must think about their responsibility and the role they have to play in the medium to long term within society, ”he believes.
Finance must no longer only seek “its own interest”, satisfy shareholders and aim for good stock price performance, it must also be more equitable and consider the importance of sound governance and climate risks, argues the author. .
In the short term, what are the solutions to put an end to the financial haemorrhage that the author denounces? “Interest rates must be raised, and central banks must reduce their intervention,” argues Georges Ugeux. “It is also fundamental that finance, economics and politics put the human being at the center of their concerns”, to prevent “democracy from taking to the streets”, he believes.
Georges Ugeux was Vice President of the New York Stock Exchange from 1996 to 2003, before founding Galileo Global Advisors, an international investment bank located in New York. He teaches at Columbia Law School, where he gives a seminar on European banking and financial systems. His latest book, Wall Street on the assault on democracy (2021), is published by Editions Odile Jacob, just like the previous ones, namely The descent into hell of finance (2019) and The betrayal of finance: twelve reforms to restore confidence (2009).