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Why No Stock Market Can Ignore Geo-Politics

17 August 2007 - Features - Editor

Relations between big business and government are matters of great controversy, though the stock market has steered clear of any direct stand on the matter. It could be fair to say that most small investors believe that politics and economics do not mix, and every nexus between influential owners of corporations and people who run countries, is at the cost of citizens. Certainly, no administration will admit to liaisons with powerful executives, and there are stringent punishments for corrupt managers as well.

Globalization calls for a review of old norms for the distance between the stock market and cornerstone policy formulation at the national level. There are some symbolic trade delegations which accompany Heads of States on ceremonial visits abroad, and seminars as well, at which leaders of industry and commerce interact with governments in power. A somewhat sleazy version of such contacts occurs at campaign time, with vested interests backing candidates through large dollops of funds. However, none of this translates in to an active role for stock market interests in policy and strategic matters at the geo-political level.

It is known that emerging countries use their purchase budgets to curry favor with supplier countries. This kind of bias also reflects in tariff structures on imports and exports, which can adversely affect countries which specialize in certain categories of goods and services. The World Trade Organization has a tortuous and slow process to deal with such issues, for which the stock market can have no patience. It would be better for business leaders to deal directly on vital matters of international trade. A related issue is of currency holdings, since countries such as China have such vast reserves of dollars.

A strong example of the new paradigm emerging on active roles for powerful stock market circles is the deal for uranium supplies and reactor construction between India and the United States. Technology, construction, and energy companies in both nations stand to make major gains from the agreement, and have played important roles in countering ideological obstacles in negotiating the deal. Many other sectors can benefit by following this pattern, and bringing their home countries and nations with interesting markets together.

 


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