A Great Leap Forward

Part A

The trouble with financialization

Abstract

In Part A, we examine a defining feature of our modern economy: it has become financialized. What we mean is that finance's reach extends to virtually every part of our economy. Its share of corporate profits hovers around 40%; its share of value added (a measure of production) is about a fifth. Behemoth financial institutions on Wall Street hold assets of 3   trillion and more—each! They engage in risky and even fraudulent behavior, and when they get into trouble, Uncle Sam bails them out. A dozen years ago, they caused the worst financial crisis the world had seen since the 1930s. But after their rescue, they resumed the dangerous practices and they are actually bigger today than they ...