Financiers may appear to be simply “making money out of money,” but if you look closely, you can see that they are really getting rich on the backs of people producing useful things, like consumer electronics, and capital goods like factories and equipment. Good jobs, the health of the overall economy and society, growing incomes for the poor and middle class—all of these things have been put aside in the quest for more financial profits. The game is unsustainable. And it’s turning out badly.
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Think about it: what GE product did you recently purchase that enhanced your life? In the era of financialization , big companies like GE have turned their attention to making quick Wall Street profits instead of fabulous products. In the 1980s, for example, GE’s Jack Welch rapidly expanded the company’s business into issuing credit cards, mortgage lending and other financial activities. It wouldn’t be long before financial operations accounted for almost half of the company’s profit.
Eventually we ended up with a situation in which, as my colleague Joshua Holland has noted, a corporate executive will starve the company of needed resources and hinder its ability to be productive in the interest of short-term gains. In his book The Speculation Economy, Lawrence Mitchell of George Washington University points out that a recent survey of CEOs of major American corporations revealed that nearly 80 percent would have “at least moderately mutilated their businesses in order to meet [financial] analysts’ quarterly profit estimates.”
