The open conflict between Western democracies and the Russian Federation is also that of two economic models. For the former entrepreneur Xavier Fontanet, the market economy of Western countries is based on the social utility of the savings invested.
The characteristic aggression of Ukraine by Russia allows us to highlight a confrontation between two visions of the world and should lead us to reflect on the foundations of our society, particularly with regard to the economy. Europe, the Americas, Japan, Korea, Taiwan, India trust the market, free competition, individual initiative and private ownership of capital to sustain their economies. These countries are democracies: they are constantly animated by debates aimed at questioning various aspects of their functioning.
Ownership of capital
With regard to the economy, the most frequent debates relate to the legitimacy of the possession of capital, its social utility and the risks that an excessive concentration of its ownership poses to society. The activism of certain despisers of the inequalities observed in the West now makes one smile when one discovers the fortunes of the Russian oligarchs and their relationship to the country’s GDP (more than 60% of Russian GDP in 2000 according to an estimate by the World Bank) . It is very difficult to have the true figures but everything suggests that the concentrations in this country are much greater than what exists in the market economies. Moreover, these fortunes were mostly made up of embezzlement carried out at the end of the Yeltsin years. It is also a good example of rents, because the political connections with which they have been associated prevent the regulatory mechanism of competition from operating.
Another essential difference relates to the origin of wealth: in Europe or America, it is the creativity of the holders of capital who have created new professions or the accuracy of their investments when it comes to taking the leadership in existing jobs. Wealth has always passed through the “risk box” and it is constantly questioned, because the number one is always in competition with his entire profession. Even if everything is far from perfect in the West, we can also remember that its per capita GDP is five times that of the Russians, who are nevertheless holders of precious raw materials, which is not the case in Europe.
The social utility of capital
We must go further and explain the social dimension of capital in a market economy. For this, it is necessary to work on pedagogy and to recall certain economic mechanisms. A little-explained rule is the concept of asset rotation: clearly, if you want to produce 1 million cars, you need 5 billion euros of investment; to produce 2 million cars you need twice as many, ie 10. The relationship between activity and investment is a constant; investment, activity and employment are therefore irremediably linked. The money does not fall from the sky, it necessarily comes from savings which made it possible to constitute the initial capital, the reinvested result increasing it thereafter in order to allow the company to grow and hire. Business profitability determines the health of any society immersed in a market economy. Capital is accumulated savings that are constantly put at risk.
An invested savings
The truth is that the social utility of capital is considerable, which the Germans have understood perfectly for twenty years with the famous phrase of Chancellor Helmut Schmidt, already mentioned here: “Today’s profits are tomorrow’s investment and the job of the day after tomorrow. In France, the equity capital of 3 million companies supports 22 million jobs and their families; through their taxes, companies finance the public service, whose mission is to create the framework within which economic activity can function as satisfactorily as possible. Our companies are therefore pillars of society, we can never stress this enough. In this competitive world, the role of capital is central, even if it is poorly accepted, whereas it cannot be understood without reference to the concept of the universal destination of goods. It is unfortunate that the words have been distorted or even destroyed. If a vocabulary closer to reality was needed, rather than using the word “capital” which tends to overheat people’s minds, why not speak of “invested savings”?