Financialization & Equal Opportunity

Source: Wallace C. Turbeville, Dēmos, February 2015

From the summary:
….The coming of this second Gilded Age has coincided with a number of important structural changes in our political economy—today our tax code is significantly less progressive, our higher education system is less accessible and much more unequal and our unions and labor rights are comparatively much weaker in the struggle for a fair distribution of wages. These structural changes have been justified as strengthening the private sector to encourage growth—growth that supposedly would lift up middle- and low-income households.

Exactly the reverse has unfolded: the rich have gotten vastly richer, while the majority of Americans have seen no real gains or lost ground. The rationale behind these changes was market-libertarianism and the belief that markets are far more efficient at allocating capital among alternative uses than the government.5 If the 2008 financial crisis did nothing else, it should have taught us that the market is not a freestanding, efficient machine that should be set free to work its magic….

….Whether and how America addresses this problem is extraordinarily consequential for our society: Current trends, if left unabated, will likely reduce the median living standard of future generations for the first time in American history. Further, as Piketty’s elegant historical model of growth and income distribution suggests, the compounding force of extreme income inequalities will create dynastic wealth, passing between fewer and fewer hands across generations, challenging our fundamental political values. …

….In the following report, we make a case for “de-financialization” of our economy, from a standpoint of equal opportunity, increased middle and lower incomes, job creation and sustainable economic growth. First, we examine the conditions that have emerged over the last three and one-half decades in the section entitled “A Faltering Economy.” The major findings and conclusions of this report are summarized under “Financialization and Its Impacts: Basic Observations.” Next, in the section entitled “From Finance to Financialization,” we propose a new, more useful definition of financialization and identify its scope and characteristics. In “Financialization in Society: Inequality and the Dynamics of Capitalism,” we explore income and wealth inequality and their connections with financialization. From that base of inquiry, we then move on to the two elements of inequality, increasing wealth and income of the wealthiest and stagnating wealth and income of the great majority of households. We analyze the role of financialization in the growing wealth of the very wealthiest Americans under the heading “Financialization and Inequality: Wealth Accumulation and Capital Returns.” Finally, we explore the relationship between financialization and weak growth of the economy and stagnating income from labor in “Financialization and Inequality: Employment and Economic Growth.” At the end of this report, findings and conclusions are discussed under “Conclusions.”…