A friendly post by Corey Robin picks up on a discussion about what counts as financialization and what does it mean politically. Robin argues that a key feature of the “financialization of political discourse” is to assume that the financial industry is the natural constituency in a debate about financial regulation. As if everyone else didn’t have a stake in how financial markets are organized and regulated. This speaks to one of the more perplexing features of the post-crisis politics. Despite a great deal of resentment aimed at bankers, and despite their role in increasing rather than managing systemic risks, they have played one of the largest roles in shaping post-crisis oversight. It would seem that it takes more than a crisis to shake the tendency in the US to allow those who appear to be experts to rule their domain.
For those who think this debate is lacking in concreteness, it is worth recalling that financialization is about more than what happens at the level of discourse. Crunching a few numbers, we plotted data found over at the Bureau of Economic Analysis (hat-tip Doug Henwood) on value-added per sector from 1947 to 2010 in the United States. This is a graph vividly illustrating the financialization of the US economy (click on graph to enlarge)
While in 1947 manufacturing accounted for 25.6% of GDP and finance, insurance, real estate, rental, and leasing accounted for 10.5%, those quantities are now almost reversed. In 2010 manufacturing accounted for 11.7% of the value-added, while the above financial activities accounted for 21.1%. There is undoubtedly more to the story than one graph can tell. Value-added, for instance, may not be the best way of presenting changes by sector. But the lines still tell a story, and that is of a social choice to make financial activity dramatically more important – and manufacturing less important – as a part of our economy.
Of course, the above figures alone don’t tell us about the desirability of the choice. But its stated benefits – more efficient allocation of resources, better management of risk, superior management of the economy – have not stacked up. There are wider questions to which we shall have to return – how financialization was linked to the stagnation of living standards for the working class but rising wealth for the upper class, how it was linked to industrialization and thus improvement of living standards in China, and the concrete relationship between financial and industrial sectors. For now it is clear that financialization is not just about allowing a new group of ‘experts’ a share in ruling, but about dramatically restructuring the economy itself. That is a choice that might need some rethinking.