The two most important contributions of the commercial legal profession are the development of the concept of the joint stock company with limited liability and transferable shares and the development of the concept of establishing and protecting real (ie registrable) rights in property, including Intellectual Property, with the freedom to transfer such rights from one party to another.
The enormous growth in western economies since the start of the industrial revolution would not have been possible without these basic legal constructs. They have served as the essential mechanism for bringing together capital and innovation to create new wealth from which everyone in western civilisation has benefitted over the past two hundred years with an astonishing increase in living standards.
From railways to steam ships to the motor car to the aeroplane, from the humble telegraph to the latest advances in digital technology, from the Gutenberg press to the Amazon Kindle, from the basic discoveries of hygiene and anaesthesia to the latest advances in transplant and robotic surgery, from wood burning fires to nuclear power stations, from a world of squalor to sanitation and clean running water mankind has benefitted in an extraordinary way from the simple formula expressed above.
It is more than a little unfortunate that those who are responsible for the allocation of capital have become increasingly risk averse so that investment is increasing is less to do with the simple formula expressed above and more to do with trading paper in the aftermarket and buying and selling Government bonds and derivative products. Collectively it all amounts to a zero sum game which does nothing for the process of wealth creation.
Europe is rapidly going to become less relevant in the great global race and if we wish to stop falling further behind, it is essential that those who are responsible for managing our savings and the allocation of capital are given a clear message that we wish them to have the wisdom and foresight to invest in our future, not simply to trade bits and pieces of paper meaninglessly round the aftermarket chasing their quarterly bonuses.
Innovation will become even more important to resolve the challenges presented by increasing energy, food and water shortages encountered in a world of finite resources and rapidly increasing population. For those who are responsible for the allocation of capital it is more important than ever that they understand the basic premise that capital + innovation = wealth creation.