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The Financialization of the American Elite

americanaffairsjournal.org

31–40 of 85 posts

Re: The Financialization of the American Elite

#31
post #4

He's missing a big change since 1949 or 1974 - the demise of communism. It's not that communism was all that successful, but it was competition for capitalism. Capitalism had to do better for the voters than communism. From about 1920 to 1980, American business was scared of communism as an alternative system. In the 1950s and 1960s, when the USSR looked to be surging ahead, there was heavy PR about how capitalism de…

Is the US run under capitalism? Seems much closer to some kind of capitalist-socialist hybrid with regulatory capture becoming more and more of an issue.

Health care and education are two prime examples of markets that have been regulated into the ground.

Re: The Financialization of the American Elite

#32
A considerable amount has been written about the financialization of the American economy. Less understood is the financialization of America’s business talent. Klarman, his alma mater, and its peer institutions are all part of this story. What we confront today—a business elite dominated by financiers and their squires, presiding over a disordered economy gutted of both its productive energy and the ability to generate mass prosperity—is a direct result of this economic and cultural evolution.

To some degree I think we see this in the startup world where a lot of the aspiration seems to be: Operator -> Angel Investor (on the side) -> VC.

Re: The Financialization of the American Elite

#33
post #5
post #3

Earlier quoted context omitted.

Maybe so, but please don't post unsubstantive comments to HN. Especially not generic ideological comments, which tend to lead to generic ideological flamewars, which we want to avoid because they're so predictable. https://news.ycombinator.com/newsguidelines.html

I felt it was substantive; lots of people worship the market blindly and this article is an excellent deep-dive into exactly what's wrong with that mentality. I was also drawing an analogy to the common refrain about communism, which is true in that case as well. The world's most prosperous societies know how to strike a balance.

If you had posted that instead it would have been a fine comment!

Re: The Financialization of the American Elite

#34
post #25

Earlier quoted context omitted.

We don’t need to create a new system. Capitalism is perfectly fine with a few tweaks.

The same who say that never gets around to the tweaks

This reminds me of a lot of devs who don’t bother understanding a working but old system and immediately declare it’s crap that needs a total rewrite :)

Re: The Financialization of the American Elite

#35
post #25

Earlier quoted context omitted.

We don’t need to create a new system. Capitalism is perfectly fine with a few tweaks.

The same who say that never gets around to the tweaks

Reminds me of the people who say that regulations strangles innovation, and is the reason why $HUGE_COMPANIES dominate, we must remove the regulations and promote a free market where quality goes up and prices come down, except the second part rarely seems to end up happening, but not before the controls that helped mitigate the abuse of the large players get removed.

Re: The Financialization of the American Elite

#36
Very interesting article.

I think what a lot of these articles lack is a discussion of the role that monetary policy plays in the financialization of the American (and, indeed, global) economy. While I agree that there are other factors that lead to the rise of shareholder primacy, I think the most important one is the distortion of relative capital proportions in the economy largely caused through the mechanism of monetary inflation.

I find it odd how there is so little literature on this apart from books and papers from the relatively fringe (but no less accurate) Austrian school of economics. Inflation is not something that happens everywhere in the economy at the same time (the Cantillon effect). Inflationary central banking policies benefit those who are closest (relatively) to the money printer, and in modern Western economies this is almost always financial firms and those who marshal capital. Large inflows of money (inflows that have vastly increaed sinced 2008 after the advent of extensive quantitative easing) allow those close to the central bank to have a larger purchasing power than the rest of the economy as inflation has not "trickled down" yet. This allows said financial firms to purchase assets, invest in companies, and capture value in ways they would otherwise not be able to do and in scales that are completely unnatural. And yes, this includes venture capital firms (for many of us who work in startups, we are among those who are relatively closer to central banks, hence the ridiculous salaries). As there is much more money flowing in the system but less "real" wealth, much of this money heads to equity markets to chase returns, and the result is what is described in the article.

This distortion of the capital base allows financial firms to hold and direct more capital than they otherwise would, so it is no wonder that the financialisation of the American economy and increases in general economic inequality globally largely began after the gold standard was abolished in 1971 and central bank printing presses were set free.

Indeed, I would go so far to say that the real fix to this problem is to abolish inflation targeting (and by consequence the central planning of the money supply through central banks).

Re: The Financialization of the American Elite

#37
post #8

Earlier quoted context omitted.

Suppose you could create a system to compete with capitalism. What would it be like?

It feels like we aren't really in a capitalistic system as much as we used to. The moral hazard of zero percent interest seems to have infected the way we allocate capitol. One example is the We Company S1 where basically, like FB and Snap, investors no longer have a say in how the business is run because the founder(s) control all the voting shares. Basically in the past, capital was scarce and so investors could de…

Also, see the book Cornered by Barry C. Lynn, who argues that over the last couple decades, the U.S. economy has been mostly taken over by monopolies, so we don't have much open free market competition anymore.

The monopolies generally aren't obvious. For example, we have three major car companies, but they all get their parts from the same suppliers. In 2009 Ford asked Congress to bail out Chrysler and GM, because if either of them went down, so would Ford's suppliers.

Re: The Financialization of the American Elite

#38
post #25

Earlier quoted context omitted.

The same who say that never gets around to the tweaks

This reminds me of a lot of devs who don’t bother understanding a working but old system and immediately declare it’s crap that needs a total rewrite :)

And sometimes an old system actually does need a total rewrite because it's leaking PII everywhere, prone to completely crashing every couple of years and struggles to interface with automation.

Re: The Financialization of the American Elite

#39
post #36

Very interesting article. I think what a lot of these articles lack is a discussion of the role that monetary policy plays in the financialization of the American (and, indeed, global) economy. While I agree that there are other factors that lead to the rise of shareholder primacy, I think the most important one is the distortion of relative capital proportions in the economy largely caused through the mechanism of m…

I think the firehose we have now of unconstrined fiat currency will go down in the history books as an aberration in the history of money. Money and the economy are part of the bedrock of modern society and the human interactions that happen on a macro and micro level. When you get down to it fiat currencies like the USD became uncoupled from reality when it went off being pegged to a physical amount of gold/silver. I always see a lot of hand waving when I bring this up. I am betting that our current system of fiat is smoke and mirrors and we will return to money based on something concrete.

Re: The Financialization of the American Elite

#40

Earlier quoted context omitted.

This reminds me of a lot of devs who don’t bother understanding a working but old system and immediately declare it’s crap that needs a total rewrite :)

And sometimes an old system actually does need a total rewrite because it's leaking PII everywhere, prone to completely crashing every couple of years and struggles to interface with automation.

And very often it would keep working nicely with just a few minor changes.
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