“Without equality there can be no democracy.” Eleanor Roosevelt, 1944 Bill Gates famously said at the World Economic Forum in 2008: We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well. This book is an attempt to make financial markets a critical element of this news and capitalism. On November 24, 2020, in the midst of the second phase of COVID lockdown, the Dow Jones Industrial Average surpassed 30,000 points for the first time ever—to the delight of Wall Street. It was an increase of more than 100% from the beginning of the pandemic. It would peak at 37,500 a year later. This historic increase was not only the result of economic or financial performance but also from a dollar injection of more than USD 10 trillion of liquidity by governments and central banks that would fuel a surge of inflation in 2022. While it was intended to avoid an economic collapse around the world, liquidity sought refuge in the equity market, making shareholders wealthier while the population was suffering. The purpose of this book is to examine how the international financial market can reform themselves to reduce their inequalities and threaten democracy. It is neither a populist nor a capitalist book. Its underlying philosophy is humanism: The economy must be at the service of the people and the communities, not the markets or shareholders. Inequalities became obscene. With global indebtedness exceeding USD 300 trillion in 2022, -of which one quarter issued by sovereign borrowers- financial stability is at risk. In order to rebalance these inequalities, it is the mindset that needs to change. Recent events have demonstrated that a set of reforms are needed to reduce inequalities and improve democracy. It is not a coincidence that, even within democracies, we see the dangerous emergence of elements of dictatorship and autocracy. The corporate world obtained a halving of the corporate tax rate; in the OECD, corporate tax income represented less than 10% of the budget revenues. It fueled returns to shareholders and bondholders. The correlation of the remuneration of the corporate executives with the stock price of their company created a bias towards the increase of the stock price, sometimes to the detriment of financial stability. Until interest rates increased under inflationary pressure, dividends became an ever-growing revenue and were yielding more than long-term bonds. Capital markets became the place to boost capital without any equivalent for salaries. It is purely and simply unsustainable. The book presents twelve realistic, yet challenging, reforms that will improve capital markets and reduce their ability to exacerbate inequalities. They include the reduction of collusion between governments, corporations and central banks, a drastic review of corporate governance but also the introduction of ethical standards in the management of capital markets. Hopefully, it will feed the debate that has already started by providing practical suggestions and robust reforms. It should make our democracies more robust.
