"William Lazonick, an expert on the history of the American business corporation, points out that the U.S has enjoyed, over its history, an extremely productive economy. We still have important productive assets, but we’re now taking money out of our productive economy instead of investing in it. The shift has happened over time, but the mechanisms of extraction have become dangerously efficient. A giant financial sector and wealthy class are sucking money, vampire-like, out of the productive sector, where the goods, technologies and services that we want are created. Yes, the rent-seeking Vampires are pulling out income that could have gone to financing innovations. Worse than that, Wall Street directs economic activity to rent extraction rather than production–so we do not even use the productive capacity and innovations that we already have. Instead, Wall Street buys up and dismantles the productive capacity. Or, like Goldman Sachs, they hoard scarce resources and shuffle them between warehouses. They layer households and firms under mountains of debt so that they cannot afford to buy the output that does get produced. As you might remember, the last time that Wall Street ran the whole show was in the 1920s. That didn’t work out so well—financial institutions like Goldman Sachs buried the economy under mountains of debt and created financial scams that sucked away life savings in the Great Crash of 1929. Sound familiar? Yes, déjà vu all over again—read John Kenneth Galbraith’s The Great Crash and all of the financial shenanigans sound eerily familiar because those of the 2000s perfectly mirror the earlier episode. Indeed, you do not even need to change the names of the guilty—Galbraith titled one of the chapters after Goldman Sachs, as the investment bank had played a pivotal role in destroying the economy. And Goldman is doing it again, and will keep doing it until we euthanize the firm."
Posted on: Wed, 31 Jul 2013 15:26:57 +0000
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