Content area
What the rest of the world could use, strange though it may sound, is a few more people like Michael Milken, the man whose "junk bonds" blew apart the old, staid system of corporate finance in the United States. Milken got a little too creative with his financing-- downright criminal, in fact--but along the way he helped create the conditions for America's explosion of wealth and creativity during the 1990s.
The London-Frankfurt-Nasdaq exchange is an opening wedge for what will be a transforming event--the development of a truly global financial system, which will give an entrepreneur in Cairo or Jakarta the same shot at building his dream as the one in Palo Alto. The enemies of globalization ignore this liberating possibility--that through global markets, good ideas won't have to carry a flag anymore. Smart people will be able to create jobs and wealth around the world, not just in the handful of countries where an entrepreneur can today launch an IPO.
Another innovation is the Euro.NM alliance, established four years ago. It's a network of five capital markets to help fund start-ups-- the Nouveau Marche in France, the Neuer Markt in Germany, the Nuovo Mercato in Italy and Euro.NM in Brussels and Amsterdam. According to the Wall Street Journal, the Euro.NM markets sponsored more than 180 IPOs last year, and on average Euro.NM stocks have risen 516 percent during the past three years (though, like tech stocks in the United States, they've taken a tumble recently).
One sad fact of business life abroad is that smart people with good ideas too often can't get financing for their companies. So their good ideas die, or they take them to America--where the money window is open 24 hours a day.
What the rest of the world could use, strange though it may sound, is a few more people like Michael Milken, the man whose "junk bonds" blew apart the old, staid system of corporate finance in the United States. Milken got a little too creative with his financing-- downright criminal, in fact--but along the way he helped create the conditions for America's explosion of wealth and creativity during the 1990s.
To grow and prosper, the world needs the kind of flexible financing that's available for U.S. companies. That can come only through modern capital markets that allow the risks and rewards of innovation to be shared.
That's why last week's best (but least noticed) piece of financial news was the merger of the London and Frankfurt stock markets--and their alliance with the Nasdaq market in the United States. One goal of this partnership is to create a 24-hour global market in new- economy stocks.
The London-Frankfurt-Nasdaq exchange is an opening wedge for what will be a transforming event--the development of a truly global financial system, which will give an entrepreneur in Cairo or Jakarta the same shot at building his dream as the one in Palo Alto. The enemies of globalization ignore this liberating possibility--that through global markets, good ideas won't have to carry a flag anymore. Smart people will be able to create jobs and wealth around the world, not just in the handful of countries where an entrepreneur can today launch an IPO.
There are other signs that U.S.-style capital markets are spreading. Stock exchanges in Paris, Amsterdam and Brussels announced six weeks ago that they will create a combined bourse to be known as "Euronext."
Another innovation is the Euro.NM alliance, established four years ago. It's a network of five capital markets to help fund start-ups-- the Nouveau Marche in France, the Neuer Markt in Germany, the Nuovo Mercato in Italy and Euro.NM in Brussels and Amsterdam. According to the Wall Street Journal, the Euro.NM markets sponsored more than 180 IPOs last year, and on average Euro.NM stocks have risen 516 percent during the past three years (though, like tech stocks in the United States, they've taken a tumble recently).
More evidence of the capitalist pandemic can be found in the special "Global Investing" section that appeared in Monday's Wall Street Journal. It included lots of titillating factoids--that the percentage of stock trading conducted online is higher in South Korea than in the United States, for example, or that Brazil has 55 venture capital funds to finance Internet start-ups, or that 54 percent of Australia's adult population owns stock, well ahead of the United States.
They are harbingers of what's likely to be one of the biggest trends of this decade: the democratization of investing around the world. Europeans and Asians are likely to discover, by the hundreds of millions, what Americans learned during the 1990s: that it's fun and rewarding to buy stock in good companies.
New technology will fuel this global investing boom (in addition to providing specific investment opportunities). Investors from Shanghai to Bombay to Riyadh will follow their investments through wireless devices that connect directly to the Internet. There will be some of the same lottery mentality--and "irrational exuberance"-- around the world that we've seen in the United States. But global investors will become more sophisticated over time and will learn, painfully, to make prudent decisions.
The most important aspect of the coming global investing boom is that it will represent a shift in the risk-tolerance of ordinary people. In many cultures, people remain frightened of buying stocks. In Germany, for example, just 13 percent of adults own stocks, and in Japan the number is a timid 7 percent. But that's beginning to change, as evidence mounts that over the long run, stocks are actually less risky than bonds.
Much of the world remains frightened of American-style risk- taking. It's seen as part of the dangerous "liberalism" of our culture--part of the Wild West, laissez-faire mentality that drives the American economy.
But as the rest of the world sees the fruits of our risk-taking, innovative culture, attitudes are beginning to change. Even in France, where "liberalism" has become a dirty word, the government is moving to endorse the idea of stock options. Of course, the French seem likely to apply punitive rates of taxation, to make sure nobody profits too much from innovation. But over time, that will change, too. Ready or not, we're heading for a single global capital market-- a money window that's always open everywhere.
ILLUSTRATION; Credit: TIM BRINTON
Copyright The Washington Post Company May 10, 2000