Anti-capitalism: good for equities

Tory Convert draws attention to this survey, showing that the French are more hostile to capitalism than any other nation.
So, here's a paradox. This chart shows that, over the long-run, the French stock market has (pre-tax) generally out-performed the US, one of the most pro-capitalist countries*.
Had you bought French rather than US stocks at pretty much any time in the last 30 years - barring the late 80s - you'd have made money.
France's out-performance has been especially marked over the last 10 years - the period when the US's productivity surge has excited Anglo-Saxon triumphalism. During this time a sterling-based investor would have made 11.7% a year in French stocks against only 7.9% in US ones.
There are (at least) three possible reasons why anti-capitalist attitudes  are good for shares:
1. They cause people to stay out of the stock market.  That means prices are lower - and subsequent returns higher - than they should be. Some believe limited participation (pdf) in the stock market can help explain why shares out-perform bonds over the long run.
2. They encourage the state to regulate business. As the costs of regulation bear harder upon small firms than large ones, this gives big incumbent firms an advantage. Also, anti-capitalist stop people becoming entrepreneurs, again giving incumbents an advantage. In both ways, profits are less threatened by creative destruction.
3. They create a risk that shareholders will be expropriated. To compensate for this risk, investors need higher expected returns, And if the risk doesn't materialize, higher expected returns lead to higher actual returns.
I take two messages from this. First, anti-capitalists are, in Lenin's phrase, useful idiots - they actually help stock markets.
Second, a healthy economy and a health stock market are two different things.
* Figures are based on Datastream indices, with dividends reinvested.

Comments

[Chris. F. Masse .COM]

Are you talking about the French CAC 40?

These French firms do 80% of their business outside France.

[chris]

No. I mean the Datastream total market index, which has 250 constitutents and a market cap 76% bigger than that of the cap. It has out-performed the CAC over the last 10 years, despite/because of being more domestically oriented.

[jck]

Are you talking real or nominal returns ? in real terms french market performance is one of the worst in the world => less than half that of the usa over 100 years and even worse for bonds.
for stocks fr:3.1% vs usa:6.3% annual real returns 1900/2002
bonds fr:-0.5 vs usa:1.9 annual real returns 1900/2002
source:dimson/marsh/staunton see chart 4 there:
http://www.abnamro.com.au/content/media/articles/123.pdf

[leconomiste]

@jck : look at the time span. Europe has suffered from the two world wars far more than the US. Ans most of the WWI destructions happened on French territory...

[dsquared]

I think your 3) above has it backwards; France is one of the countries where the old mantra of "socialised costs and privatised profits" has been carried out to the fullest. That Datastream index reflect a number of cases where underperforming companies have been nationalised, had their problems sorted out at public expense and then privatised as fully restructured companies.

Also note that the Socialists have actually had very little power over the last thirty years; even the Mitterand era had cohabitation for most of it. The right wing, pro-capitalist party has been in charge in France most of the time.