Hi Anayo,

Seems you have already very succinctly identified the costs; to-wit "fear and anxiety about the future, and the disruption of social solidarity"  as well as incidences of "psychiatric morbidity".

Therefore, the only contribution I can make is to try to balance the costs against the benefits.  The importance of the financial sector was made apparent by the 2008 financial crisis when banks just stopped making loans and one needed to walk on water (without getting her heels wet) in order to get a home mortgage. Moreover,  because of our interconnected world, the financial crisis spread from the U.S. to most parts of the globe.

Another point in favor of financing is the fact that in lands where financing is not readily available, common household appliances like refrigerators and stoves are absent in the homes of families living hand-to-mouth as they must save for years in order to enjoy these expected comforts of the Modern Age. 

I will stop now lest you think I am a hopeless Capitalist -- I am not!  Please see a paper I have uploaded to RG, ”After Shame; Before Corporate Moral Obligation (CMO): Ethical Lag and the Credit Crisis.” 

Gwen

This is a personal opinion - the increasing emphasis on wealth making in purely monetary terms seems to have become and over-riding factor in contemporary societies, and really reflects the growth of the post-Reagan/Thatcher neoliberalism ethic, and this emphasises markets, personal desire and acquisitiveness - humanity, red in tooth and claw- yet in most communities these values previously existed in only a very small minority.  What has happened it seems is that the persistent media glorification of things like celebrity and money, entrepreneurship, and money=success has resulted in a generation with much more selfish values.  What has been lost is the community and shared nature of communities as being of value - the idea of cooperative assets as opposed to private ones, and the monetarization of pretty much everything.  Many neoliberal economists would hail these changes, but the evidence is increasingly obvious from 208 banking crisis onwards that such policies are inherently destructive to communities - see what has happened to Detroit, for example, where Dickensian values of "Devil take the hindmost" now prevail.  Of course, if everyone agrees this is "a good thing" then I suppose that all that is needed is a shift in the definition of good to mean that which benefits some individuals at the cost of the community, because if there are winners, then there are also losers. Neoliberalism benefits a minority at the cost of the majority.  the paradigm as a theory of economics is completely busted empirically, but then maybe it is solely the marketed appearance that has been revealed to have been misleading all along, and that the economic paradigm works exactly as intended - benefiting the elite at the cost of everyone else.  Maybe we were sold a lie.  It wouldn't be the first time politicians have done this.  And given that we are now apparently in the decline of our contemporary "civilisation" it would be a good move strategically for the wealthy to grab as much as they can asap, so they are not the first to suffer, and it gets rid of the plebs.  The question is, do we consider that this is a desirable state of affairs  to move towards?   I think I'll stop here.

Richard:

Excellent comment. Trickle down economics is an imagined reality, a figment of imagination of finance capitalism, sold to modern state. The tragedy of it all is that they bought it hook, line and sinker.

Gwendolyn~

Thank you for drawing my attention to the paper. I will look it up.

As you noted, financial sector is certainly important in any modern economy. At present, there are no proven alternatives to capitalism writ large. However, a variant of capitalism practised in the U.S. and the U.K. is a virulent one; and leads to pauperisation of the majority, bequeaths a new crop of plutocrats on the unsuspecting society.

Several years ago, Joseph Schumpeter--no anti-capitalist by any stretch of imagination--shared his observation with Karl Marx. He confided that capitalism will become a victim of its success. Although both men were in agreement as to the fate of capitalism, but each had a different take on how this would come about. Schumpeter thought that overtime; the ability of capitalism to trigger creative destruction would be hampered on account of paucity of innovation. While Karl Marx believed that the principle of infinite accumulation will be the bane of capitalism.

To date the U.S. government’s intervention--through its quantitative easing--stands at more than $3 trillion dollars. Agreed that any responsive government needs to do whatever it takes to stabilise its financial system which invariably will safeguard its economy--if we are to believe the view of dominant orthodoxy--but things are not always what they seem. Unfortunately, the law of unintended consequences that accompanies any intervention on a complex system was unleashed--by way of Arab Springs--given that the QE II which was meant to increase liquidity in the financial sector and improve credit flow to the main street, to benefit SME and grow the real economy did not go as planned. Instead those in the financial industry went back to their old habits. Speculation and hedging on commodity--particularly wheat and other everyday products--led to the increase in prices in staple food in the Middle East. The rest is history.

My point? The accumulation of privilege by the emergent plutocrats, cor

porate greed and deceit by corporate executives, speculators and their kindred in the financial sector have the unintended consequences of destabilising real economy; and this unfortunate state of affair is unsustainable in the long run. The world has a lot to fear on a man who has nothing to lose; given that a man who has nothing to lose is a dangerous man. Yes, Occupy Wall Street fizzled out, but the germ of discontent has been planted, and for now, remains quiescent.

Hi Anayo,

Absolutely wonderful essay; I agree with everything you have said, except for  "Instead those in the financial industry went back to their old habits."  There was no going back to old habits because they never abandoned their ways.  The reason no one heard from them for a short spell after the infamous Obama Bailout was because they were at a tropical island retreat regrouping and strategizing for the next assault on the economy. And, boy, did they come back strong; we taxpayers who paid for the Bailout are still licking our wounds.

Gwen.