Macroscope | Stock markets failing to meet changing world’s needs for infrastructure and climate finance

Stock and capital markets are not keeping up with the pace of progress elsewhere, potentially forcing governments to raise taxes to fund needed development

Evolving would enable stock markets to direct savings into areas essential to human and planetary welfare rather than financial wealth accumulation

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A trader work the floor at the New York Stock Exchange in New York City on December 21. Global stock and bond markets are not evolving to keep up with the demands of the modern era, funnelling savings into wealth accumulation rather than human and planetary welfare. Photo: Getty Images via AFP

Published: 5:30pm, 23 Dec 2022

Economist John Maynard Keynes famously suggested that stock markets often behave like casinos, and the many market boom-and-bust cycles that have occurred since then bear out what he said. But now stock markets are faced with the prospect of becoming peripheral to the financing “game”.

As technological progress advances dramatically – as seen in the recent US breakthrough on nuclear fusion, for example – and as bold infrastructure initiatives emerge, it is becoming apparent that stock and capital markets are just not keeping up.

Put another way, market systems of collecting savings and investing them at scale where they are most needed from an economic and social standpoint – be it in energy or health systems, fighting climate change or basic infrastructure provision – require radical overhaul.

These critical socioeconomic challenges demand big-ticket investment responses, collectively running not just into tens but possibly hundreds of trillions of dollars. While global savings can match such needs, stock markets are not geared up to supply long-term funds at scale.

The key point here is that unless private savings assume a more socially responsible financing role, governments will be forced to raise taxes, thus reducing the amount of savings free for private investment. Put bluntly, either the market adapts or it will become less free to invest as it wishes.

This reality has yet to dawn as 2022 bows out amid vain hopes among investment managers for a happy new year in financial markets. In fact, 2023 will be a year of possibly global economic recession and of financial system problems that force a rethink of market economics.

.css-1m2rp1p{color:#34b8b5;}Macroscope | Stock markets failing to meet changing world’s needs for infrastructure and climate finance

Macroscope | Stock markets failing to meet changing world’s needs for infrastructure and climate finance