Fight On, Goldman Sachs!

While reading the New York Times' culture critic Frank Rich on the continuing and perverted love affair between Washington and Wall Street, this little observation stood out:

That “financial alchemy,” as Zuckerman calls it, explains why the finance sector’s share of domestic corporate profits, never higher than 16 percent until 1986, hit 41 percent in the last decade.

As many have said — though not many politicians in either party — something is fundamentally amiss in a financial culture that thrives on “products” that create nothing and produce nothing except new ways to make bigger bets and stack the deck in favor of the house.

More here.

In 1963, President Kennedy defended a federal dam project that had been criticized as pork barrel spending by saying that "a rising tide lifts all the boats." That is, Kennedy was asserting that general economic improvement is good for everybody in the economy. According to Wikipedia, the phrase was co-opted years later by both Democrats and Republicans alike who champion free market policies which obviously benefit the rich, but do not so clearly help everybody else. Indeed, this phrase about boats and tides describes well US conventional wisdom on economics, you know, "Wall Street is Main Street" and other such claptrap.

In other words, everybody who matters, as far as managing the economy goes, believes that helping the big boys is the same as helping the entire country. I mean, Democrats aren't quite as dogmatic about it as Republicans, who never saw a tax cut for the rich they didn't like, but this kind of thinking is widespread and common in Washington. The rhetoric is big on Wall Street, too, but I don't think anybody there gives a shit one way or the other whether their fortunes translate into general prosperity--that is, they give lip service to the idea, but probably don't believe it.

Whatever. The point here is that the financial sector, a bunch of middlemen who perform a very valuable service for the overall economy, have used their unique position as guardians of the nation's wealth to bleed the country dry. I'm not sure how "41 percent of domestic corporate profits" translates into percentage of GDP, but you can be sure it's a large number. If you subscribe to the conventional wisdom, soaring corporate profits can do nothing but boost the economy. As the excerpt above observes, however, the financial sector doesn't really produce anything. I mean, yeah sure, financing business ventures, brokering loans and other deals that allow companies that actually create things to expand and hire more people, that's actually a worthwhile service, one that has profoundly important ramifications for millions of real Americans. But in the end, they're just a bunch of middlemen. And they've used their place in the middle of the business world to suck much more money out of the system than they're actually worth, and that money does nothing but build mansions and buy yachts.

Economists talk about how, in developing nations, bribery, of petty officials, cops, and others with power, sucks money out of local economies, which would be much better spent for legitimate business purposes. They call it "corruption," and it is believed to be one of the main reasons that poor countries remain poor. It's why organized crime taking payoffs from businesses they intimidate can slow economic development to a standstill. But when the financial sector does the same thing in the US, it's somehow supposed to be good for the economy. Go figure. Personally, I can't see the difference.

Finance in the US has gone far, far beyond its actual usefulness and is now a counterproductive drain on the overall economy. The financial sector sucks in buttloads of money which is then not used for any productive purpose. Sure, they deserve to be paid for their services, but this is nothing short of a shakedown. Clearly, a rising tide does not lift all the boats. Indeed, in this case, a rising tide actually lowers the tide. And our leaders in Washington are on the take.

We really are looking more and more like The Godfather or Goodfellas everyday.

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