Finance and Insurance Industry Growth.
In 1950, finance and insurance in the United States accounted for 2.8% of GDP, according to US Department of Commerce estimates. By 1960, that share had grown to 3.8% of GDP, and reached 6% of GDP in 1990. Today, it is 8.4% of GDP, and it is not shrinking.
The problem raised by this statistic is that if the finance industry were doing what it and its captured economists tell us, – that their activities were necessary to provide the financial resources to grow the economy – their percentage share in GDP should have remained the same or even decreased. Instead their share of GDP increased at a greater rate than any other sector of the economy, even greater than government, whose share of GDP actually decreased during most of this time.
What this tells me is that the financial industry rather than contributing to the growth of the economy, is focused instead on its own growth at the expense of the economy. So is it needed? An argument can be made for certain forms of insurance. An even better argument can be made for their regulation. Private banking is a good thing perhaps where depositor safety is assured by adequate reserve requirements and investment risk rules are stringent and conservative.
Investment banks and other financial service entities seem to be as much engines for producing fees for bankers as funds for industry or commerce. There seems to be little market discipline here since the interests of the bankers are short-term and unrelated to the interests of investors. Mutual and hedge funds are even worse. I simply do not see where the casinoization of the financial system has much to do with production, national wealth, trade or for that matter society. We can probably do better without much of it.
Perhaps instead of simply obsessing on reducing the size of government, we should also try to reduce the size of the finance industry and put most of their management and workforce to work at something more productive like or making things needed and that may be useful in trade or even into teaching.
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This and that from re Thai r ment.