#56 / Financialization

Until I read Paul Krugman's column published in The New York Times on February 21, 2020, I wasn't aware of the term "financialization." After I read Krugman's column, I tried to find out more, and located a Wharton University blog that discusses the concept. That blog post (from which I got the image above) refers to a book by Rana Foroohar, Makers and Takers: How Wall Street Destroyed Main Street. Here is a quote from that blog post:

According to Time magazine journalist Rana Foroohar’s new book, the "financialization" of banking, and of business in general, has hampered real growth and innovation while exacerbating inequality. The result is an “upside-down” economy where finance, instead of serving as a catalyst, has become a headwind. And in the wake of a devastating financial crisis fueled by excessive debt and credit, we are seeing a smoke-and-mirrors recovery driven largely by more of the same.

Krugman discusses the concept of "financialization" in the following way, as he gives his quick review of the recent Democratic Party Presidential Debate held in Nevada: 

Wednesday’s Democratic debate was far more informative than previous debates. What we learned, in particular, was that as a presidential candidate, Michael Bloomberg is a great businessman — and that Elizabeth Warren remains a force to be reckoned with. 

Both lessons ran very much counter to the narrative that the news media has been telling in recent weeks. On one side, there has been a palpable eagerness on the part of some news organizations and many pundits to elevate Bloomberg; on the other side, complaints by Warren supporters about her “erasure” from news coverage and polling aren’t wrong. 

What does all this mean for the nomination? I have no idea. But maybe the Warren-Bloomberg confrontation will help refocus discussion away from so-called Medicare for all — which isn’t going to be enacted, no matter who wins — to an issue where it matters a lot which Democrat prevails. Namely, are we going to do anything to rein in the financialization of the U.S. economy? 

During the U.S. economy’s greatest generation — the era of rapid, broadly shared growth that followed World War II — Wall Street was a fairly peripheral part of the picture. When people thought about business leaders, they thought about people running companies that actually made things, not people who got rich through wheeling and dealing (emphasis added).

Oh, yes! Those were the days. My father was a businessman, the vice-president of Lenkurt Electric Company, based in San Carlos, California. My dad was working for a company that "actually made things." How about we give that another try?

And... if we do want to try to transform the current realities into what business used to be all about, and to fight back against the "financialization" of the United States' economy, it seems to me that it's a better strategy to pick a president who talks about "working men and women" (who make things), as  opposed to a billionaire who reached his billionaire status by his work on Wall Street. 

Krugman doesn't weigh in on that topic, but I'm not shy!

Image Credit:

https://knowledge.wharton.upenn.edu/article/pitfalls-financialization-american-business/