A Healthy Economy Requires Fewer People Working on Wall Street, Making Much Less Money
http://www.alternet.org/economy/american-economy-recover-we-need-fewer-people-working-wall-st-making-much-less-money
I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth one shred of evidence. Paul Volker (2009)
All of us suspect the obvious that Wall Street not only is too big to fail, but also just too damn big. But where's our evidence? It's one thing to direct our anger at financial elites and the top one percent. It's quite another to make a factual case that Wall Street, indeed, is much too big, and therefore should be radically reduced in size. So here's some data.
1. Explosion in Financial Sector Incomes But No Rise in Economic Growth
Check out this chart: Between WWII and 1980, the wages of financial workers were the same as those who worked in non-financial industries. Then the two lines split apart with Wall Street extracting an enormous premium. Do the financiers deserve it? And how would we know if they do or don't? The answer should depend on how much value the financial sector, in fact, produces for our economy. Is there a correlation between the explosion in Wall Street incomes and economic growth?
2: The Decline of Workers' Share of the Economy
Wall Street apologists argue that financiers are responsible for boosting U.S. productivity and creating new, decent-paying jobs. Well, we're still waiting. In fact, in the decade following the early 1990s, labor's share of our national income actually declined by 7.2 percent. Why?
The usual suspects include globalization, technology and too much government spending on the social safety net. You know the arguments: we are falling behind the global competition; we are losing our jobs to new technology; government "entitlements" are crippling the economy; and so on.
Not quite.
The International Labor Organization (ILO) produced an eye-popping study concluding that the biggest factor in the decline in workers' share of income is financialization that it accounts for almost 50 percent of the decline in labor's share (from ILO, Figure 38).