Weekend Economists Take a Chance and Call a Bluff July 26-28, 2013

[Demeter]

46. How Big Finance Crushes Innovation and Holds Back Our Economy

http://www.alternet.org/economy/economy-innovation?akid=10727.227380.VLwjRR&rd=1&src=newsletter873647&t=6&paging=off

...The U.S. used to be the envy of the world when it came to innovation, making things that dazzled the world and enhanced the lives of millions. But the Information Technology & Innovation Foundation, a bipartisan think-tank that ranks 36 countries according to innovation-based competitiveness, tells us we’re getting pushed aside on the global innovation stage. In 2009, to the surprise of those conducting the study, the U.S. ranked #4 in innovation, behind Finland, Sweden and Singapore. In 2011, the U.S. ranking was unchanged. Worse, the U.S. ranked second to last in terms of progress over the last decade....

...we’re now taking money out of our productive economy instead of investing in it. The shift has happened over time, but the mechanisms of extraction have become dangerously efficient. A giant financial sector and wealthy class are sucking money, vampire-like, out of the productive sector, where the goods, technologies and services that we want are created.

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.

To get the economy humming, argues Lazonick, you want to fuel the kind of growth that allows people to enjoy higher living standards. You want an economy that is stable and allows everyone to share in prosperity. But nowadays, the executives who are running large industrial corporations like GE, Dupont, Cisco and Microsoft are focused on making as much money as they can in the short-term for shareholders, and more importantly, themselves....