CityAM carries an interesting article this morning on the contrast between Capitalism, Corporatism and Social Democracy. Allister Heath skilfully contrasts the merits and demerits of each. His theory contends that too much corporatism or too much state intervention is bad for capitalism, therefore business, wealth creation and jobs.
On reflecting on the article it struck me how the experience of Lloyds and RBS supports the theory that healthy functioning capitalism must not be captured either by corporatist self interest nor the imposition of State control.
RBS is 82% State owned and has not yet begun a repayment programme in respect of State backed investment, Lloyds in contrast is 40% State owned and has begun repaying capital to UKFI, the agency managing public stakes in the respective institutions.
How have they fared?
One with a large majority State holding, the other with a minority stake. The chart illustrates their respective share price performance over the last two years.
Lloyds has proceeded along the path to recovery with a near doubling of its share price.RBS in contrast has had a slower recovery.
Of course there will be a whole host of factors influencing their respective performances but there can be little doubt that the Chart tells the story, with the market expressing a clear view on the model it sees as the most effective.