Mother Jones
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In the course of a general critique of the US economy over the past few decades, Brad DeLong says this:
The US today spends 8% of GDP on finance. That is twice as much as 40 years ago. Once again, the U.S. gets nothing for it—gets, in fact less than nothing, because the lion’s share of responsibility for the 10% growth shortfall of the past decade rests on the shoulders of the hypertrophied dysfunctional finance system. It is not as though anybody claims that the plutocrats of high finance and of our corporations are doing a materially better job at running their organizations and allocating capital by enough to justify their now even-more outsized compensation packages. It is not as though we can see the impact of paying more to financiers in the tracks of faster economic growth. Rather the reverse.
I know I’m probably revealing more ignorance here than I should, but how did this happen? Finance isn’t a monopoly. In fact, it’s one of the most globalized, fluid, and competitive industries on the planet. Why haven’t its profits long since been reduced to zero, or close to it? I can understand occasional blips as markets change—CDOs and SIVs get hot for a while, so experts in CDOs and SIVs make a killing—but the overall industry? How has it managed to hold onto such outlandish rents for such a sustained period?
Real answers, please, not buzzwords or conspiracy theories. What’s the deal here?
Continued here:
