The Breakdown | Explaining Southern California's economy

Good rich people v. bad rich people: Whom to hate

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At the Nation, Jamelle Bouie pretty well summarizes not just what the Occupy Movement stands for, but what lots of everyday Americans are feeling:

It’s hard to look at the wealth worshiping of American culture and conclude that Americans hate the rich. Rather, Americans hate people who become rich through rent-seeking, and then use their power and influence to pull up the ladder for everyone else. Financial elites crashed the economy, but rather than suffer any adverse consequences for their reckless behavior, they’ve prospered. Worse, they’ve yet to show any contrition for their actions, even as millions of Americans—who had no part in the sideshow—languish in a wounded economy.

This is the end result of what some have called the "financialization" of the U.S. economy, with the financial-services sector accounting for a historically disproportionate share of GDP. 

The U.S. yearly GDP is about $14.5 trillion. Financial services, at its pre-crisis height, accounted for close to 2 percent of that, $290 billion. That's more than the entire market cap of IBM.

Financial sevices is by its nature not a broad-prosperity type of industry. According to the Bureau of Labor Statistics, about 8 million people worked in "financial activities" in 2008 — a change of nearly 700,000 over 1998. During the same period, jobs in manufacturing fell by more than 4 million. This isn't a completely fair comparision, as the U.S. service economy has been expanding, and the manufacturing economy contracting, for decades.

But jobs in finance have distributed much more GDP to a smaller cadre of people. And within that sector, there has emerged a hyper-rich segment that are determined to make sure that their enormous slice of the pie doesn't get smaller. This is why we've seen so much push-back on bank reform. 

Finance obviously has a role to play in a productive, modern economy. But it should really be the servant of productivity, not the servant of itself.

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