The development of financial markets

Somehow in the vastness of the vast Internet I got a strange theory of the concept of public safety. Everything would be fine, but the author persistently tried to convince me that financial markets are an evil that generates inflation and unreasonable income for traders and investors. With this I can not agree.

When capitalization of assets (land, forests, real estate, industrial equipment) occurs, then, as a rule, owners become political actors and seek protection of property rights. As soon as the quality of laws and law enforcement reaches a certain quality, a fracture point occurs and securitization begins - the process of valuing assets and issuing securities (IPO, ICO, etc.). Securities get on the market, their purchase - sale begins, so the financial market is formed. Almost immediately in developed countries, there appeared regulators of financial markets and laws that protect investors from abuse of unscrupulous speculators.

Financial markets reached their maximum in 1913, the wars of the last century stopped the process of their development and only by 1990 the level of the beginning of the 20th century was reached. After that, an avalanche of financial markets began. So why is not the author of the Public Security Concept? Information on the effective use of resources is dispersed between the owners of assets, when the securitization process is underway, it is on public display, and bidding makes it publicly recognized.

Companies that trade shares receive payment just for the performance of their public functions. Moreover, a new wave of development of financial markets has involved a huge number of people, not only with average income, but also quite low. This became possible due to the legislative protection of investors, the diversification of investment portfolios, which led to a reduction in risks and many people were able to use financial instruments.

There was an infrastructure, rules of game were established and, that is especially important, execution of these rules began. The appearance of financial derivatives (derivative assets) further reduced the price of capital. But again, derivatives in themselves do not bring stability and do not reduce the price of capital until an appropriate institutional environment has been created.

As soon as securitization became profitable, there immediately appeared additional incentives for its growth. Capitalization began to bring even more returns, and the market was able to assess the securities from intangible assets, this gave impetus to the development of Internet companies. Even more interesting was when the blockade appeared, thanks to him, new forms of financial instruments appeared on the horizon.

A reliable fact is the relationship between high rates of economic growth and the development of financial markets. Sly economists have established this dependence through research into the development of tobacco companies and pharmaceuticals. It turned out that the tobacco company is successfully developing without financial markets, they are growing at their own expense, while pharmaceutical companies can develop exclusively in the conditions of developed financial markets. This is due to the high costs of developing drugs, licensing procedures and so on.

All this requires attracting significant funds from investors. Only a highly developed institutional environment can effectively attract investors' funds. Thus, the difference in the development of tobacco and pharmaceutical companies speaks of the level of development of the institutional environment of financial markets.

Chicago economists Baghuram Rajan and Luigi Zingales compared the relative growth rates of these industries in countries with different levels of development of financial markets in Malaysia, Korea and Chile. As a measure of financial development, accounting standards were used.

In Malaysia, which is ahead of Korea and Chile in financial development, the growth rate of pharmaceuticals exceeded the growth rate of the tobacco industry by 4%, and in Korea, with its average development of financial markets - by 3%.Finally, the growth rate of pharmaceuticals in Chile was 2.5% lower, which confirms the hypothesis about the role of financial markets. Rajan and Zingalis found that highly developed markets give an increase to the economic growth of 1% of GDP.

And the weak development of financial markets blocks the growth of pharmaceutical companies, microelectronics, machine building, and especially the growth of companies with intangible assets, which include IT. And what about Russia? The problem begins with the fact that almost the entire population, with the exception of the Putin environment, the governors and the leadership of the siloviki, is completely barred from access to the country's resources.

This allows the masters of life to restore virtually serfdom in the country. Limited access to resources allows you to form a monopoly rent and cash in at its expense. All this removes the majority of the population from the capitalization of the country's resources. And class partitions make it impossible for the financial markets to develop normally. A lot of undetermined agents of influence, corruption distort the real values ​​of company capitalizations. According to Sergei Guriev, many Russian companies are undervalued 4 times.

Financial markets in this century, thanks to IT and block technologies, self-organized into an electronic herd. They react sharply to changes in the institutional environment, run to where it is safe, the sun is shining and the juicy cabbage is green. In countries with unprotected private property with a poorly developed institutional environment, they do not run.

To develop financial markets in Russia, it is necessary to create an institutional environment. Protection of private property, an independent court, equal access of citizens to the country's resources are the measures by which any country can become on the path of sustainable economic growth and the well-being of citizens.