WT33 – The capacity of the economic and financial players to take a long-term view

Workshop Presentation

In principle, economic and financial players think and act with a long-term perspective. A business invests in technologies, in equipment, in human resources and in regions. It anticipates the needs, products, technologies and markets of the future. It is the purpose of the financial system, for its part, to redistribute savings towards needs, notably for investment, and to transform the liquid assets available in the short term into long-term investments. This mechanism of transformation from the short term to the long term is more essential today than ever for the development and cohesion of our societies. Indeed these societies are undergoing major transformations, both towards a better distribution of wealth on a world scale and new systems of production, consumption and living compatible with the limits and fragility of ecosystems and the earth’s biosphere.

Both within production companies and for the financial system, long-term involvement requires relations of trust to be established between investors and regions, between lenders and borrowers.

But the reality is quite different from the theory. Companies, under pressure from what is called “shareholder value” are looking for profits in the short term. The increasingly internationalised financial markets are, for their part, dominated by research combined with a minimisation of risk and short-term financial returns. The mobilisation of a significant part of Chinese savings in US treasury bonds to finance the structural deficit of the United States constitutes a kind of vast export credit to maintain an international economic machine based on the compulsive desire of Americans to consume: Savings that aim at the long term serve to compensate for imbalances in the short term.

Now these short-term games in which everyone aims personally at minimising the risks do not enable stable relationships of trust to be established between investors and regions nor the necessary changes to be devised and implemented. Euro-Chinese economic relations, for want of a clear prospect of joint development in the long term, risk turning into a kind of mug’s game in which European companies seek to benefit from Chinese human resources whilst conserving their technological advance, while for their part Chinese companies try to acquire the technologies at any price and to develop imitations to compete with the European firms on their own ground.

Under what conditions can we rethink the commitment of companies and financial markets in the long term so as to prepare for the vital changes and build balanced trading relationships based on trust? These will be the themes looked at in depth in this workshop.