The skies darken for France’s Sun King, Emmanuel Macron

His imperious manner and lack of emotional intelligence make him vulnerable

Philip Stephens

web_Macron and Le Pen
© Ingram Pinn/Financial Times

Emmanuel Macron has just passed the halfway mark of his presidential term and France’s metropolitan elites are already falling to despair about the next election. The omens, they say, are far from encouraging. As elegantly as he dances on the global stage, he is no longer applauded at home. Mr Macron could lose in 2022. Dangerously, the far-right Marine Le Pen could win the Elysée.

Now that would be a political earthquake. The shockwaves would be felt well beyond the borders of France. Whenever I am in Berlin I hear complaints about the French president’s habit of seizing the agenda. But Germany cannot afford to see Mr Macron lose. That would damage German as well as French ambitions for a Europe that holds its own amid great power rivalry between the US and China.

Visitors to France should always remember that it is rarely cheerful about itself. That said, the present mood seems particularly dyspeptic. The gilets jaunes protests, essentially about the careless disregard shown by metropolitan France for small provincial towns, have shrunk. Yet deep resentments linger. They are overlaid with union anger at the reform of the public realm.

Strikes against plans to modernise a costly and byzantine pension system are set to enter a third month. Until recently, Paris was gridlocked by strikes on the railway and subway systems. Teachers, nurses and lawyers have joined the protests. Blockades of incinerators see rubbish piled in the streets.

Mr Macron can probably ride out such action. The numbers are getting smaller. Government concessions have defused the opposition of some moderate unionists. But if Mr Macron can win, at what price? The strikes have halted the upturn in growth that had set unemployment on a downward trend for the first time in more than a decade.

The president’s approval ratings have fallen to the low thirties. Taking a run of polls back to 1980, only François Hollande, Mr Macron’s ill-starred Socialist predecessor, had consistently lower scores during his first two years. There has been a collapse of trust. More than three quarters of those polled believe that a pensions overhaul is overdue. But more than half support the strikes.

La République en Marche, the movement created by Mr Macron in 2017, is likely to be trounced in next month’s municipal elections. A dispute over its choice of candidate means the ruling party may lose even in Paris, where Mr Macron secured 90 per cent support in 2017.

Many of the criticisms of Mr Macron focus on style more than substance. The reforms of the employment market, tax, education, training and latterly pensions that he made his political mission have antecedents in the efforts of previous governments of left and right. What raises concern is his imperious manner, his lack of emotional intelligence and the sense he is out of touch.

Behind such critiques lie the real fractures in French society — between the big cities and provincial towns and between insiders and outsiders in the labour market. In a curious way, Mr Macron has mapped Ms Le Pen’s path to the Elysée. He laid waste to the traditional parties of right and left in 2017 after framing the presidential contest as between progressive, pro-Europeanism and reactionary nationalism. Neither the Republicans nor Socialists have recovered from the shock. But Ms Le Pen can redraw the line as one between “globalism” and nationalism. This is a fight she thinks she can win.

The president’s allies admit that he has haemorrhaged support among erstwhile Socialist voters who fear the destruction of France’s unique social contract. The changes to the pension system are actually progressive — they shift benefits from those with entrenched advantages — train drivers, say, who retire at 50 — to those on low wages in precarious jobs. Yet Mr Macron has done little to counter the populist narrative that the reforms represent the march of neoliberalism.

Ms Le Pen has sanitised her Rassemblement National. It now presents itself as the standard-bearer of tradition and stability. She has shed some of the more extreme positions of her father, the party’s founder Jean-Marie Le Pen. Associations with Vichy and virulent anti-Semitism have faded with the passing of her father’s generation, if only to be replaced by Islamophobia.

Hostility to the euro and the EU has been tempered. The party, she claimed in a recent interview with the Financial Times, is now “profoundly reasonable and pragmatic”.

In truth it is anything but. Voters angry with the status quo, however, may not look too closely. Ms Le Pen has drawn support both from the gilets jaunes and from hard-left backers of the populist Jean-Luc Mélenchon. She is targeting a broader span of left-leaning voters. The UK Conservative prime minister Boris Johnson’s success in winning over lifetime Labour supporters in December’s British election is part of the model. A similar shift in France would probably put Ms Le Pen in the Elysée.

To my mind it is much too soon to despair of Mr Macron’s prospects. Those now predicting his demise were often wrong in 2017 about his capacity to break the old system. The president will seek to lure the traditional right as well as a sizeable part of the old left. But if not despair, then beware. Mr Macron has been right on his prescriptions for France; and wrong in the way he has administered them.

A Pandemic of Deglobalization?

At this stage, there is no telling how bad the COVID-19 epidemic will become before the contagion subsides or an effective, widely available vaccine is rolled out. In any case, we should not be surprised if the crisis leads to far-reaching, historically significant global change.

Harold James

james165_DANIEL LEAL-OLIVASAFP via Getty Images_coronavirusairport

PRINCETON – The outbreak of the new coronavirus, COVID-19, that began in Wuhan, China, may well turn into a global pandemic. Nearly 50 countries have confirmed cases of the virus, with the precise nature of the transmission mechanism remaining unclear.

Pandemics are not just passing tragedies of sickness and death. The omnipresence of such mass-scale threats, and the uncertainty and fear that accompany them, lead to new behaviors and beliefs. People become both more suspicious and more credulous. Above all, they become less willing to engage with anything that seems foreign or strange.

Nobody knows how long the COVID-19 epidemic will last. If it does not become less contagious with the arrival of spring weather in the northern hemisphere, nervous populations around the world may have to wait until a vaccine is developed and rolled out. Another major variable is the effectiveness of public-health authorities, which are significantly less competent in many countries than they are in China.

In any case, factory closures and production suspensions are already disrupting global supply chains. Producers are taking steps to reduce their exposure to long-distance vulnerabilities. So far, at least, financial commentators have focused on cost calculations for particular sectors: automakers worried about shortages of parts; textile makers deprived of fabric; luxury-goods retailers starved of customers; and the tourism sector, where cruise ships, in particular, have become hotbeds of contagion.

But there has been relatively little reflection on what the new climate of uncertainty means for the global economy more generally. In thinking through the long-term consequences of the COVID-19 crisis, individuals, companies, and perhaps even governments will try to shield themselves through complex contingent contracts.

It is easy to imagine new financial products being structured to pay out to automobile producers in the event that the virus reaches a certain level of lethality. The demand for novel contracts may even fuel new bubbles, as the money-making possibilities multiply.

History offers intriguing precedents for what might come next. Consider the famous financial crisis following the “tulip mania” in the Netherlands between 1635 and 1637. This episode is particularly well known because its lessons were popularized by the Scottish journalist Charles Mackay in his 1841 book, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds.

To Mackay, the tulip crisis seemed to prefigure the speculative surges of capital into railroads and other industrial developments in North and South America during his own time.

Throughout the book, he milks the episode for all its humor, recounting stories of ignorant sailors literally swallowing a fortune by mistaking tulip bulbs for onions.

But as the cultural historian Anne Goldgar reminds us, Mackay neglected to mention that the mania coincided with the exceptionally high mortality of the plague, which was spread by the armies fighting the Thirty Years’ War. The plague hit the Netherlands in 1635, and reached its peak in the city of Haarlem between August and November 1636, which is precisely when the tulip mania took off.

The rush of speculative capital into flower bulbs was fueled by a wave of cash windfalls accruing to the surprised heirs of plague victims. Tulips served as a kind of futures market, because the bulbs were traded during the winter when no one could examine the character of the flower. They also became the subject of complex contracts, such as one that stipulated a price to be paid if the owner’s children were still alive in the spring (otherwise, the bulbs would be transferred gratis).

The financial speculation in this wild, apocalyptic environment was born of uncertainty. But it has often been reinterpreted as evidence of craven materialism, with the bust representing an indictment of godless luxuries and foreign exotica. Tulips, after all, originally came from the alien culture of Ottoman Turkey.

Like today, early modern Europe’s plague epidemics spawned vast conspiracy theories. The less obvious the origin of the disease, the more likely it was to be attributed to some malign influence. Stories circulated about sinister hooded figures going door to door “anointing” surfaces with contagious substances. Outsiders – foreign merchants and soldiers – as well as the marginalized poor were fingered as the culprits.

Again, a nineteenth-century source offers powerful lessons for today. In Alessandro Manzoni’s 1827 novel, The Betrothed (I Promessi Sposi), the plot reaches its high point during the plague outbreak in Milan in the 1630s, which was considered a scourge introduced by foreigners, not least the foreign Spanish Habsburg monarchy that ruled Milan. The novel became a potent catalyst for Italian nationalism during the Risorgimento.

Not surprisingly, the COVID-19 epidemic is already playing into today’s nationalist narratives. To some Americans, the Chinese origins of the disease will simply reaffirm the belief that China poses a danger to the world and cannot be trusted to behave responsibly. At the same time, many Chinese will likely see some US measures to combat the virus as being racially motivated and intended to block China’s rise. Conspiracy theories about the US Central Intelligence Agency creating the virus are already circulating. In a world flooded with disinformation, COVID-19 promises to bring even more.

As the Dutch historian Johan Huizinga showed, the period following the Black Death in Europe turned out to be the “waning of the Middle Ages.” For him, the real story was not just the economic aftereffects of a pandemic, but the mysticism, irrationalism, and xenophobia that eventually brought an end to a universalist culture. Likewise, it is entirely possible that COVID-19 will precipitate the “waning of globalization.”

Harold James is Professor of History and International Affairs at Princeton University and a senior fellow at the Center for International Governance Innovation. A specialist on German economic history and on globalization, he is a co-author of the new book The Euro and The Battle of Ideas, and the author of The Creation and Destruction of Value: The Globalization Cycle, Krupp: A History of the Legendary German Firm, and Making the European Monetary Unión.

Bloomberg’s coming Waterloo

By Edward Luce

America may be about to get its most memorable lesson to date on how money cannot buy elections. Having spent more on television than Donald Trump and Hillary Clinton combined in 2016, Mike Bloomberg (pictured below) is running a distant third or fourth in the national polls. That number has been falling since his disastrous Las Vegas debate last week even as his spending has risen.

Moreover, his numbers are running at or below the key 15 per cent threshold in the big windfall states such as Texas and California, which vote on Super Tuesday next week. If you fall below 15 per cent, you get no delegates. Though a large share is apportioned by congressional district, this could severely limit Bloomberg’s haul. In his rosiest scenario, Bloomberg will come a distant second to Sanders on Tuesday.

In the worst case, he could easily come fourth. Should that happen, the second and third place candidates — presumably Joe Biden and Elizabeth Warren — could legitimately call on Bloomberg to drop out and put his money behind the best-placed rival to Sanders. Either way, half a billion dollars in spending does not get you as far as Bloomberg might have imagined.

What was he thinking?

Rana, I know you’re a Bloomberg fan. I can see his virtues, including a record of genuine competence. That quality is even more important in a crisis, such as the potential spread of the coronavirus in the US.

Today’s voters are clearly in the mood to take a flutter on burn-down-Washington candidates when the risks are low, or where they feel they have nothing to lose, as is the case with Trump, and in different ways with Sanders.

A global pandemic could change that sentiment overnight.

Qualities such as calm, empirical competence and executive assurance would suddenly seem a lot more valuable. This would surely benefit Bloomberg and possibly Warren.

Let us hope that proposition will not be tested.

SALT LAKE CITY, UT - FEBRUARY 20: Democratic presidential candidate, former New York City mayor Mike Bloomberg speaks to supporters at a rally on February 20, 2020 in Salt Lake City, Utah. Bloomberg is making his second visit to Utah before it votes on Super Tuesday, March 3. (Photo by George Frey/Getty Images)

Even if the US suffered a serious outbreak of coronavirus, it would probably come too late for Bloomberg to overcome the maths.

By next Wednesday, Sanders is likely to be on course to win a plurality of the delegates.

The next question is who would be best placed to take him on in a second ballot at a contested Democratic convention in July.

Biden, Buttigieg and Klobuchar are too centrist for the Bernie base even if Bloomberg agreed to get behind one of them.

My guess is that Warren is the only candidate who could plausibly win Sanders’ voters in a general election without alienating Bloomberg, though she would have to modify some of her positions.

In another note, I’ll look at whether Warren has the dexterity to execute a manoeuvre that sensitive. There are signs her political ear is becoming less tinnish.

The question remains: how could Bloomberg have so misread the politics? For the same reason as everyone else. He underestimated the depth of anti-establishment feeling. There is a world of difference between Sanders and Trump. But they share a critical trait — each personify contempt for politics as normal.

Alas, Bloomberg is too much of a technocrat to see that, let alone embody it. He performed a little better in this week’s South Carolina debate than he did in Vegas. As one wit tweeted, his finest moments came during the advertising breaks when his glossy videos were aired.

Most of them have very high production value. Sanders would be a fool to reject Bloomberg’s money (as he said he would) should he be the nominee.

Money cannot turn a bad candidate into a good one. But it can still make the difference between winning and losing.

Rana, am I writing Bloomberg’s campaign obituary too soon?


The culture wars between economists and markets practitioners

The latest spat is over whether the Fed is doing QE by the back door

Shove hard and any group can be sorted into contrasting stereotypes: larks and owls; thinkers and doers; conservatives and progressives. Shove again (or simply stir), and you have the makings of a clash. There is a culture war of this kind even in finance. The two bickering tribes are economists and practitioners, such as traders and fund managers.

Economists use formal models based on theory. They are rigorous, sometimes to the point of pedantry. Practitioners’ thinking is looser and more intuitive.

The battleground, invariably, is monetary policy and its effects. To outsiders their latest spat—over whether the Federal Reserve’s large-scale purchases of Treasury bills since October counts as a stealthy revival of quantitative easing (qe)—seems obscure. Yet it is part of a broader question that has important implications. For a vocal group of practitioners, central-bank policy has grossly distorted financial markets for a decade. For central bankers and their economist outriders, asset prices are a sideshow.

Who is right? Everybody likes to think they exhibit the best attributes of both schools—the rigour of the economist and the market-smarts of the practitioner. In fact they may borrow the worst habits from each. So, allow Buttonwood to walk into the trap that has been set for him: both camps are wrong.

There is certainly no love lost. For economists, a lot of market talk is shallow and naive. A decade ago a charge heard mainly from practitioners was that qe would lead to hyperinflation. The context seemed not to matter: that qe was pushing against powerful deflationary forces; that the huge increase in central-bank reserves met a deep need in financial markets for safe and liquid assets.

Central bankers and economists have not been forgiven for getting that one right. Yet it also the case that a lot of central-bank speak is disingenuous. One of the many talents of Mario Draghi, the former head of the European Central Bank, was to keep a straight face whenever he claimed the sole aim of the ecb’s bond-buying programme was to meet its inflation mandate. Why, you would be a fool to think that capping borrowing costs for indebted euro-zone countries, or devaluing the euro, was the goal.

Mr Draghi is excused, because his policies kept the euro zone intact. But the slipperiness of the Fed is a harder for practitioners to stomach. The roots of their latest spat go back to the end of 2017, when the Fed began to reverse qe. It was keen to put the process on autopilot, shedding so many bonds from its balance-sheet each month. This would be plain sailing, it said. Many practitioners were unconvinced.

The markets had got used to functioning with ample central-bank liquidity. Sure enough, last September, money markets were suddenly short of cash. Overnight interest rates spiked. The Fed responded by liberally lending overnight cash. It has since bought truckloads of t-bills. Its balance-sheet, which had shrunk from $4.5trn to $3.8trn, has been expanding again ever since. Reserves are up, shrieked the practitioners. qe is back!

Case closed? Actually, no. The Fed has not admitted it screwed things up, which is galling. But it is nevertheless quite correct that the remedy it has fixed on is not qe. When the Fed adopted the policy after the financial crisis, it had run out of room to cut short-term interest rates, and so decided to drive long-term interest rates down by buying longer-dated bonds. The goal was to extend the stimulative effect of monetary policy by depressing the term premium—the reward investors get for holding long-term bonds instead of a series of short-term bills. In essence, it was a swap of cash for assets.

This is very different from what the Fed is now doing. It is essentially swapping cash (central-bank reserves) for its closest substitute (t-bills) in order to keep the Fed’s key policy instrument (short-term interest rates) where it wants it to be. This is monetary policy as described in textbooks. It is not qe by the back door.

The practitioners are paying the Fed a strange compliment. They attribute an almost mystical quality to the size of its balance-sheet. In fact central banks are mostly responding to events, not shaping them. Despite some extraordinary monetary loosening, inflation has hardly budged.

In their own peculiar ways, practitioners and economists are anxious about what this long period of low interest rates might eventually entail. The economists deal with the uncertainty by clinging to their models; the market types by trashing the economists. qe or not qe is not really the question.

Tesla’s Manic Rally Isn’t the Only Sign of a Market Bubble

By Randall W. Forsyth

The swings in Tesla stock are more akin to bubbles in Bitcoin in recent years or the epic surge and collapse of silver in 1980. Photograph by Spencer Platt/Getty Images

When the gyrations in the financial markets attract the attention of those not normally concerned with such matters, market lore says it’s time for the cognoscenti to beware.

Supposedly, when Joseph Kennedy Sr. started hearing stock tips from his shoeshine boy in 1929, he figured it was time to get out of the market. More recently, celebrities such as Barbra Streisand were angling for allocations of initial public offerings at the peak of the dot-com boom at the end of the past century.

So when our Gen Z son, who’s off at college, texts us to ask what’s going on with the Tesla(ticker: TSLA) stock chart he received on Instagram, alarm bells naturally go off. We had tried to stimulate his interest in investing by pointing to companies whose products fill his closet, for instance contrasting the fortunes of Nike(NKE) and Under Armour(UAA), but with little success. The swings in Tesla were something different, however, as Alex Eule discusses in this week’s Streetwise column, akin more to bubbles such as Bitcoin in recent years or, for graybeards, the epic surge and collapse of silver in 1980.

Arguably even crazier things are happening away from the gaze of apps and cable news. Real, long-term money is being put down, and not just frenetic day-trading dough from erstwhile videogame players who get in and out in a day, maybe even more often. In the junk bond market, some of the riskier behaviors that were thought to have been abandoned since the Great Financial Crisis are making a comeback.

Case in point: the return of particularly speculative paper called payment-in-kind, or PIK, securities. Instead of paying interest in cash, the borrower simply issues more debt to the investor. During the crazy days of the mortgage bubble that led to the financial crisis, home buyers would take on interest-only mortgages to get into houses they couldn’t afford. With PIK securities, corporate issuers don’t even have to pay interest; they just issue more paper, effectively going deeper into hock.

Husky III, a holding company for Husky Injection Molding Systems, a machinery supplier backed by private-equity sponsor Platinum Equity, plans to issue $450 million in five-year PIK bonds. What’s the attraction of the securities, rated CCC by Standard & Poor’s and an equivalent Caa2 by Moody’s Investors? The yield being talked about in the market is 12%, more than twice the 5% or so offered on exchange-traded funds such as iShares iBoxx $ High Yield Corporate Bond(HYG) or SPDR Bloomberg Barclays High Yield(JNK). Proceeds from the financing will pay a dividend to the private-equity backers of Husky, which they purchased in 2018 for $3.9 billion.

Such deals, in which backers extract their equity, weren’t uncommon in 2005-07, before the financial crisis, notes Cliff Noreen, head of global investment strategy at MassMutual. The big insurer is a major investor in corporate credit, with $567 billion under management. The return of PIKs reflects investors’ hunger for yield in today’s low interest-rate environment, which includes negative yields abroad.

“As an investor, I believe these are great for the issuer but not the bond buyer,” he writes in an email. In essence, buyers are getting bondlike returns for private-equity-like risks, he adds.

Adding to the dangers of what Moody’s notes is a highly leveraged transaction: The bonds are issued by a holding company, not the operating company itself, Noreen points out.

All of which would belie the specter of risk seemingly presented by the spread of the coronavirus and its implications for the global economy. Yet despite the headlines, the Dow Jones Industrial Averageand the S&P 500index both rose about 3% on the week, their best weekly showing since the five days of trading ended on June 7, and a sharp reversal from the previous week’s slide. Meanwhile, the Nasdaq Compositeadded over 4%, its best gain since the week ended Nov. 30, 2018.

That was despite some backpedaling on Friday, following January’s employment report, which was less spectacular than the 225,000 increase in nonfarm payrolls would suggest. Relatively warm weather helped construction jobs rise by 44,000, after seasonal adjustment, four times their average gain of the past year, notes TLR on the Economy. The unemployment rate ticked up by 0.1 of a percentage point, to 3.6%, but for the positive reason that more folks entered the labor force.

Markets will probably continue to watch news from both the pandemic and the primary in New Hampshire this coming week. Meanwhile, investors’ risk appetites are high, as reflected in manias for highflying stocks or demand for speculative debt.

Limited Liability Is Causing Unlimited Harm

The original purpose of limited-liability protection was to encourage investment in – and risk-taking by – corporations, whose resulting innovations would benefit society. Yet by allowing shareholders to profit from the harms caused by corporations, limited liability has evolved into a source of systemic market failure.

Katharina Pistor


NEW YORK – In a recent tweet, Olivier Blanchard, a former chief economist of the International Monetary Fund, wondered how we can “have so much political and geopolitical uncertainty and so little economic uncertainty.” Markets are supposed to measure and allocate risk, yet shares in companies that pollute, peddle addictive pain killers, and build unsafe airplanes are doing just fine.

The same goes for corporations that openly enrich shareholders, directors, and officers at the expense of their employees, many of whom are struggling to make a living and protect their pension plans. Are markets wrong, or are the red flags about climate change, social tensions, and political discontent actually red herrings?

Closer inspection reveals that the problem lies with markets. Under current conditions, markets simply cannot price risk adequately, because market participants are shielded from the harms that corporations inflict on others. This pathology goes by the name of “limited liability,” but when it comes to the risk borne by shareholders, it would be more accurate to call it “no liability.”

Under the prevailing legal dispensation, shareholders are protected from liability when the corporations whose shares they own harm consumers, workers, and the environment. Shareholders can lose money on their holdings, but they also profit when (or even because) companies have caused untold damage by polluting oceans and aquifers, hiding the harms of the products they sell, or pumping greenhouse-gas emissions into the atmosphere. The corporate entity itself might face liability, perhaps even bankruptcy, but the shareholders can walk away from the wreckage, profits in hand.

Shareholders have been let off the hook in case after case – from the 1984 gas leak at a Union Carbide plant in Bhopal, India, which killed thousands, to Big Tobacco, asbestos manufacturers, and British Petroleum following the Deepwater Horizon disaster. Since then, shareholders of Boeing, the company responsible for two airplane crashes that killed 346 people, made $43 billion through share repurchases between 2013 and 2019 – precisely the period during which the firm ignored safety standards in the interest of cutting costs. Meanwhile, the families of those who died must make do with a $50 million disaster fund, which amounts to just $144,500 per victim.

Elsewhere, a lawsuit against members of the Sackler family, which owns Purdue Pharma, one of the companies at the heart of the opioid epidemic, is trying once more to hold the beneficiaries of corporate misconduct accountable. Fearing liability, some family members have reportedly sold their properties in New York and moved their money to Switzerland. But they probably need not worry. As John H. Matheson of the University of Minnesota Law School shows, courts rarely allow victims of harmful corporate conduct to “pierce the corporate veil” that protects shareholders from liability.

The stated justification for limited liability is that it encourages investment in – and risk-taking by – corporations, leading to economically beneficial innovations. But we should recognize that sparing owners from the harms their companies cause amounts to a hefty legal subsidy. As with all subsidies, the costs and benefits should be reassessed from time to time. And in the case of limited liability, the fact that markets fail to price the risk of activities that are known to cause substantial harm should give us pause.

Worse, this particular subsidy makes little economic sense. Property rights, every economist knows, are meant to increase efficiency by ensuring that owners internalize the costs associated with the assets they own. But limited liability insulates investors from the externalities created by the companies they own: heads, they win – and tails, they win too.

So long as shareholders can gain from these externalities, they will defend them. They will fight every attempt to force an internalization of costs, including the carbon tax that the European Union is currently promoting. Top-down regulation, they argue, is inefficient, because governments cannot possibly identify the optimal tax rate. But if that is the case, why not enable markets to price risk correctly, by removing the distortion that is currently preventing them from doing so?

The liability rules cannot be changed overnight. But changes could be phased in after a transition period that puts everyone on notice. No new multilateral treaty or complicated harmonization efforts are needed. If just a handful of countries adopted “piercing statutes” and ensured that claimants would have standing in their courts, markets would respond accordingly.

No doubt, shareholders would try to avoid liability by shifting assets to safe-haven jurisdictions, and by lobbying their own governments to protect them with the threat of trade sanctions against countries that do adopt piercing statutes. But the greater the number of countries adopting such statutes, the less successful these strong-arm tactics will be.

In the end, a subsidy that distorts markets and gives investors a license to harm is not only inefficient. It is a threat to both the market system and the natural environment upon which we all depend for our survival.

Katharina Pistor, Professor of Comparative Law at Columbia Law School, is the author of The Code of Capital: How the Law Creates Wealth and Inequality.