One of the perplexing questions of modern society is how the discovery of riches, particularly things like oil and diamonds, can make a country less well off. (the “resource curse”)
So now we have people wondering why the outsized role of finance in the UK does not create prosperity.
This one is pretty easy: Finance is not wealth you dig up from the ground, and it is not meaningful productivity, though it can help getting actors with capital in touch with actors who need capital.
It produces nothing, and when it dominates an economy, as it does in the UK, it is actually highly parasitic.
No one asks why bank robbers don’t benefit society, and as William Black has noted, “The best way to rob a bank is to own one.”
To argue that the City hurts Britain’s economy might seem crazy. But research increasingly shows that all the money swirling around our oversized financial sector may actually be making us collectively poorer. As Britain’s economy has steadily become re-engineered towards serving finance, other parts of the economy have struggled to survive in its shadow, like seedlings starved of light and water under the canopy of a giant, deep-rooted and invasive tree. Generations of leaders from Margaret Thatcher to Tony Blair to Theresa May have believed that the City is the goose that lays Britain’s golden eggs, to be prioritised, pampered and protected. But the finance curse analysis shows an oversized City to be a different bird: a cuckoo in the nest, crowding out other sectors.
I would also note the the international finance sector has much to do with creating the “resource curse” in places like Angola, where they finance grandiose projects, launder money, and foment destructive speculation.
Why would they do anything different in the City of London than they do in Luanda?
Unfortunately, modern politicians want to negotiate with them, which makes as much sense as negotiating with a tapeworm.
