Hopefully, this will be the first of 170 stories covering the 170 economic experts who endorsed Bernie a few months back.
Word of caution: I have no idea how to use block quotes, etc…. I have a learning disability, so spelling is crazy difficult. And I’m not a very good writer.
But think it both important and potentially interesting to go down the list of the 170 economic experts who signed the letter in support of Bernies’ Wall Street plan.
As I get more into this, I’ll try to cross reference a similar letter signed by a bunch of economic experts in support of his plan to raise the minimum wage to $15.
I’m not sure Dean Baker is on that list as I haven’t checked yet. Doesn’t matter, Baker wrote a great post today about the need not to just “prevent future fraud”, but to make the financial sector smaller than it is. And this is a different thing than breaking up the largest banks. If you break up the largest banks, but their role is just passed to smaller banks, you haven’t reduced the size of the financial sector.
Of the economists and economic experts that I’m familiar with who signed the letter in support of Bernies’ Wall Street plan, this is a common theme: The financial sector itself, in all its’ forms, is just too large, and its’ size does not add to efficiency, while the size does add to risk.
Indeed, Baker wonders if the size of the financial sector actually has contributed to the slow down in growth.
(Talking of growth: My position of growth is that its’ absolutely necessary — to address climate disaster and ecological collapse. Once we’ve done this, then a no growth economy might be a great idea, and I love reading people who theorize a 0 growth economy. But for me, that’s in the future. For now, we need massive government spending to fund massive social mobilization to address our very ill planet.)
It’s been absurd to hear Krugman pronounce: “The wonks have spoken”. I think the wonks like Dean Baker have taken such nonsense in stride.
Anyway, here’s a summary of his article in Huff Po: www.huffingtonpost.com/...
1) “Finance is an intermediate good like trucking. It does not directly provide value like food or health care, the value in the financial sector depends exclusively on its ability to make the rest of the economy function better. This means effectively getting money to businesses and households who need to borrow.”
We pay the banks to add this value by using government created dollars and t bonds, which, like the rest of us, are bank net financial assets. Banks are just as reliant upon sufficient government spending to fund their net incomes as we are.
2) “ An efficient financial sector provides these services using as few resources as possible. With that in mind, it is hard to make the case that our financial system is efficient. It has exploded in size relative to the rest of the economy over the last four decades, with the narrow commodities and securities trading sector increasing fourfold.
If we were spending four times as much on trucking as a share of GDP in 2016 as we did in 1976, people would be looking for an explanation. If we could show that goods were getting around the country much quicker and we had many fewer problems with spoiled food or damaged merchandise, then perhaps the additional cost of the industry would make sense. But it is difficult to make this sort of case with finance.
Yes it is. Should be obvious.
3) “In this context, Senator Bernie Sanders' proposal for a financial transactions tax makes a great deal of sense. This would reduce the money spent on financial transactions by tens of billions of dollars annually, freeing up the resources used shuffling stocks, bonds, and derivatives for more productive purposes. Downsizing the industry in this way should be a central feature of any serious plan for financial reform.”
There are many very serious economists and financiers who think the financial sector should be radically shrunk, far beyond what a transaction tax would produce. Some, like Adair Turner, have written about the possibility of abolishing banks’ ability to create new money when they make a loan through full reserve banking. positivemoney.org/...
4) “We didn't have these behemoths in the 1960s, 1970s, or even the 1980s. What would be wrong with going back to an era before all the large banks merged with each other? Most research indicates that banks can achieve all economies of scale at sizes that are an order of magnitude smaller than our biggest banks.
We often hear the argument that if we didn't have megabanks we would lose out to foreign competition. This wouldn't make sense even if it were true. We buy cars from Japan and shoes from China, why should we care if we get financial services from Swiss or French banks?”
This is an important issue, as I often see where people simply assert that somehow shrinking our financial industry would shrink its’, and our, ability to compete in the global markets. I’ve never understood what they mean.
Here’s how a trade in real goods happen: www.3spoken.co.uk/…
We need to be thinking much more about the real economy of real things and people and our ill planet.
And reduce the power of the financial system to buy our politics, every single hard asset under the sun, our health, our planet, and our moral duties to both each other and our ecological systems.
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Dean also, of course, supports breaking up the big banks, and sketches out a process for doing so.
So, this is Wonk Blog #1 out of 170 — maybe :)