The Ethics of Banking: Conclusions from the Financial Crisis (Issues ...

Tasks of the Capital Market and Duties of Capital Market Actors 43
and converted into cash. But liquidation of long-term investments and conversion
into cash is only possible if there is professional speculation and professional stock
trading, because otherwise investors would run the risk that no supply of buyers
would be on hand in the event that they wanted to sell.
For both reasons, owing to the inevitable uncertainty about future corporate earnings
and owing to the need to create liquidity in the market for corporate shares,
speculation in the stock market is unavoidable, and without speculation an efficient
capital market is unthinkable. Therefore resentments against stock exchange speculation
have to be qualified. It is no coincidence that in Germany under the National
Socialist regime, the Nazis directed polemic at speculation and prohibited parts of
the capital market, the options market for instance.
Speculation is useful and fits the purpose of the capital market. It should not
therefore be prevented. Comments made in autumn 2001 by the then German
Minister of Finance, Hans Eichel, that speculation ought to be prohibited, find
no justification in the functional conditions of the capital markets. Similarly the
German government’s proposal in connection with the privatization of Deutsche
Telekom and Deutsche Post to offer the public “people’s shares” (Volksaktien) is
open to criticism, given the insight that speculation is unavoidable. Since the equities
market is necessarily speculative, there can be no “people’s share” that is not
subject to speculation and uncertainties about the future. Any shares, even shares
in former state monopoly firms like Telekom or Deutsche Post, are subject to price
risk and stock-exchange volatility. It is one of the weaknesses of small investors that
they usually underestimate the risks of share price development. Risk is also a moral
problem, and realism or a sense of reality is a moral imperative.
Instead of advocating and issuing “people’s shares”, a more useful aspiration to
strive for than a “people’s share” would have been the goal of developing a “people’s
capitalism”. In a democratic society it is desirable that as many people as possible
take part in decisions about investments and companies, and hence about future
economic strategies, and that ideally the entire economic knowledge of a nation and
the individual assessments of all economic subjects flow into the capital market.
In this regard, the goal of a “people’s capitalism” which is serviced by the capital
market is certainly worth striving for. In order to achieve the function of the efficient
management of capital allocation, however, it is desirable not to concentrate on a
few “people’s shares” but on a broad range of investment activity in the equities of
many innovative companies, not forgetting smaller firms.
If one sums up the purposes or functions of the capital market, it is clear that
the efficient channeling of capital into investible purposes under the condition of
information efficiency and liquidity, the convertibility of the investment into liquid
funds, are the central functions of the capital market. 15
This makes it possible to answer the question of what ethical and economic values
must be given consideration in the globalized capital market. In order to meet
15 Cf. also GERHARD PICOT: “M&A aus Sicht der Kapitalmärkte”, in: G. PICOT: Handbuch
Mergers & Acquisitions, Stuttgart (Schäffer-Poeschel) 2000, pp. 33–52.