WELCOME PARTY, MR. SOBOLEWSKI - A friendly polemic Does it matter or not?

MAKE dixit!

" Sobolewski doesn't matter, Farmache doesn't matter, Anghel... it would be redundant to say he doesn't matter. The "major listings" don't matter, foreign brokers don't matter, and the state's support for the market doesn't matter either. The < major listings > don't matter, foreign brokers don't matter, and the state's support for the market doesn't matter either. You yourselves don't matter and I am saying that in every meaning of the term, including the fact that the BSE market plays no role in the country's life. I don't know what you're hoping for".

These words were posted in a comment, signed "MAKE", on an article about the BSE, on the website of the BURSA newspaper. I don't know if this is the real "MAKE" or not, but I think these statements deserve some comments.

First of all, I will note that the only statement I will consider valid is the one that the BSE doesn't play a role in the life of the country. Most of the people don't even know what the BVB initials mean (most of them would probably think they have something to do with the initials of some politician's name), and among those who understand these initials to mean the Bucharest Stock Exchange, very few are there who know and understand what a stock exchange is. From the perspective of the fact that a stock exchange is a capital market, whose main role is first and foremost the allocation of the capital resources in a competitive manner in an economic system, in Romania the stock market doesn't matter. When considering the fact that the stock market brings together demand and supply for securities and sets the reference prices for the most important companies in an economy, the BSE doesn't matter. When considering the fact that the stock market represents a viable alternative to bank financing for companies that need financing, the BSE doesn't matter. When considering the fact that the evolution of the stock market indexes represents a gauge of the health of the economy and the overall prosperity, the BSE doesn't matter.

I could go on like this with many of the functions of the stock market in an economic system, but ... it doesn't matter, what needed to be proven has been proven. Besides, I don't think I could find anybody who could contradict the statements above. But the problem lies somewhere else: the BSE could matter, it could play a part in the life of our country!

What concerns me now is how could we get to the point where the stock market could play an important role, the role that a stock market should play in a market economic system. From that point of view, I disagree with MAKE: Sobolewski matters, Farmache matters, the major listings matter, foreign brokers matter, the support of the government matters! Many other things matter: the structures and manner of organization, the quality of the staff, education and the dissemination of information, the taxation system, the regulations, the oversight, the cost of trading, the cost of the market etc. I will not insist on the multiple requirements of a batch of measures that would spark the growth of the BSE but I think that, just like in a far more difficult period than the one we have now, a group of people thought that the BSE can play a part in the Romanian life succeeded in making it exist, the reinvigoration of the BSE is possible this time as well.

I don't know what other people are hoping for, but I am hoping that I will get to see the Bucharest Stock Exchange develop, as Romania slowly overcomes the post-communist swamp and integrates itself into the normal world. The stock market is an important component of a non-planned, centralized, economic system. It is very important to say that this kind of market, in the form of the stock exchange, is not essential to the good functioning of the economy. There are countries where the stock market plays a far less important role than it does in the United States, Great Britain or other developed countries. Still, I know of no "capitalist" country of any significance that doesn't have a functioning stock market. The development of a company by raising public funds (issuing shares and bonds) and the secondary trading of securities issued in this process represents a fundamental mechanism of the market economy, and the development of Western would not have been possible without this mechanism. If we want capitalism we need to want the stock market as well! If we don't want capitalism ... then that is a different discussion. From that point of view, the BSE matters. The weakness of the BSE, the insignificant role it plays in the life of the country, even the infighting for the management positions (that is for privileges, not to do something for the common interest) do nothing but reflect the same "stagnation in transition" that describes the Romanian society in general. The failure of a quick transition (we didn't have a "older sister country" to take us over and fully implement a system different from the communist one, like the East-Germans did) makes it so that, almost 25 years after the fall of communism, the overall Romanian economy is still working based on obsolete criteria. Financial intermediation is still in a primitive and insignificant level, the majority of resources (including, or maybe especially the financial ones) are still being more or less "directed" to economic players that aren't always the most competitive but have "influence" or play a political or image role. The obsession (among companies and entrepreneurs) for the EU funds, the state aids (including the de minimis one), the guaranteeing of loans by the state (which is actually a way for the government to in fact support banks and real estate developers - see the case of the "First Home" program), the concern with facilities or tax breaks, are all parts of the same characteristic of the Romanian economy: the absence of a financial market somewhat developed and efficient. If we stick to whining about what we don't have (see the also recent Dumitraşcu case) we need to understand that we are also limiting ourselves to the status of a semi-colony, namely with the freedom to muddle in our domestic politics, and to keep our religion, culture and national specificity. In other words a kind of independence and sovereignty for most areas (less the economic and military-strategic one) somewhat similar to the longest period in the history of the three Romanian states, when obedience to the Turkish Empire allowed us to do as we wanted here among ourselves. I am not saying it's bad. We can live very well as a colony. But if we want an economic system that stands on its own feet, we need to end this neverending transition, to accept the contraction of the role the state plays in the economy, and to do something so that we can have a somewhat efficient stock market.

From that angle, everything matters, even the compensation package promised to the Polish manager. It also matters that my friend Farmache understood too late (if he actually did) that society is changing and that institutions need to adapt as well, it also matters that my (not)friend Anghel doesn't understand that the BSE must communicate and that the Chairman of the Board of Directors of the BSE should not be living in an ivory tower, away from the unleashed press. It also matters that director Dumitraşcu wants to go on a trip to London, it also matters that the ASF... well, what exactly does the ASF do?

There are a lot of things that matter and I think that MAKE should also hope. Let's hope that it will get to the point where he wants the number of readers at least equal to the number of accounts active on the BSE.