No wonder it has felt so hard to get investment!!

Last evening I attended the first meeting in 2012 of the City branch of MAG-net, the networking group supporting the work of The Mine Action Group (MAG). This organisation is usually the first into areas of conflict to locate and nullify mines and other ordinance, an action that makes it safe for other organisations to follow and for the local population to start repairing their lives safely.

Tonight's talk was by Ha Joon Chang,a reader in economics at Cambridge University, author and contrarian. His talk was drawn from his recent book, "23 Things They Didn't Tell You About Capitalism." it is no surprise that it is built around 23 statements,such as there is no such thing as a free market, financial markets should be less efficient rather than more, companies should not be looking to maximise shareholder value, that people in the rich countries are paid more than they are worth, etc.. 

Ha Joon illustrated a number of the "truths" and subsequent informal discussions showed that the majority of the audience, if not all, after a little reflection thought them self-evident. The big question was generally who could and more importantly would break ranks and try and deal with the issues they raise. I am afraid I cannot offer any answers, at least not yet.

One things that really struck me were some statistics Ha Joon quoted from research by another economist (I think) and that was having looked at data from major companies in the US and UK, between 2000 and 2010, after considering dividend distributions and share buy-backs/repurchases those companies paid 94% and 88% respectively of profits straight back to shareholders. These are staggering numbers and way up from historical levels nearer 30%.

Now I am no economist, but my financially understanding leads me to believe that retention rates of 6% and 12% are unlikely to even cover the increases needed in working capital in that time. The implication is that the investment has been covered by increasing debt. It is no surprise that finding funding for necessary change has bee hard and that many companies have under-invested. The problems created by these behaviours are coming home to roost.

In the networking afterwards there was a general view that the political cycles were an issue for this and other problems or at least there short terms were; how does one take a 20 year view when re-election is never more than four or five years away. This is compounded by how joined up the issues are across geography and regimes.

As I said I wish I had the answers, but at last some are starting to recognise and talk about the issues. 

Comments please.