There is something cultural about capital. Different cultures use different narratives when they commonly talk about capital. In Western capitalist societies it is common practice to cite “capital is a fugitive dear”, meaning that people who command sizeable amounts of capital tend to flee places once they become to agitated, especially by politicians. The Eastern narrative surrounding capital is more focused on “patient capital”. The newspaper “China Daily” has more than 6.000 entries referring to this term. On 2024-9-26 (p.9) the Japenese economist Kazuyuki Motohashi praised the Japanese economic system and its specific form of patient capitalism as based on” long-term, stable investment, which enables companies to achieve sustainable growth in the long run”. The Chinese economy suffers as Western capitalism from excessive focus on short-term profit seeking and this causes huge market flucturations shifting quickly from shortages to oversupply and back again. Short-term rent seeking is driving whole industries into fluctuations that are hard to attenuate through other economic (fiscal and monetary) as well as labour market policies (training, re-locations, internal migration).
It is interesting to witness that recently in Germany an example of a bank that had benefited from a patient capital approach of the German government for more than a decade (Commerzbank) is now prone to a bit of a hostile takeover from another bank probably more interested in the short-term rent-seeking. After all, banking and the varieties of capitalism approach highlight that at the very heart of economic rationale there remains a little bit of a cultural twist to understand what is happening in international economics and competition.(Image: Musée Rodin Paris 2024, Le Penseur”)
Too big
Too big to fail. We all thought that after the financial crisis some fifteen years ago, we would not deal with the same kind of problems again. The banking sector in Switzerland has proven us wrong. One of the 2 big banks Credit Suisse in Switzerland was about to default and asked for 170 billion state guarantee middle of March 2023. Only after a forced merger with the other big bank UBS (which was rescued in 2008 already) and the huge state guarantee the solvency of the even bigger bank was re-established. Tax payers were expected to foot the bill. Less than 6 months later the Finance Minister Karin Keller-Sutter announced that there is no longer a risk for tax payers to pay for the mismanagement of the bankers involved. This is a relief for the political system which is going to the polls next year.
Many unresolved questions remain. Financial market supervision is faulty to say the least. Banking left to bankers as controllers is risky. Apparently fines do not work only prohibition to exercise similar functions (internationally) again is likely to be effective (NZZ 2023-8-9 S.19). Other remedies lie in a complete overhaul of the governance system of banks and beyond. Supervisory boards should in theory be able to assess the risks incurred by the management board. Failure to do so has no consequences for them either. Representatives of the employees in the board is likely to introduce more longer term concerns into decision-making. Saving jobs is a valuable goal not necessarily in the interest of investment bankers. Capitalism is at high risk of survival and with it our democratic systems. It was not a bank in Niger that got into trouble, but at a major European financial center. Too big to fail in a tiny country still sends shivers throughout Europe. And the other big bank is growing even bigger now, probably un-savable now. If I had a bucket of Swiss Franks, I would rather sell them.
