An effective financial sector is vital to a well-functioning market economy, but in America the sector has metastasized. Its share of corporate value added has risen from 4% after WWII to 6% in the 1960s to 9% in the 1980s to a record 14% last year. Its share of corporate profits, once less than 10%, reached 40% in the early 2000s and has remained consistently above 25% since.
Top business talent has followed. In 2020, 34% of graduates from Harvard’s MBA program entered finance, as did 34% from Stanford’s. At both schools it was the most popular industry and offered the most generous compensation packages.
In theory, Americans might just love themselves some great financial services. A finance-dominated economy might deliver extraordinary value to consumers and businesses, drive investment and innovation, and shift upward the nation’s economic trajectory. In practice, this is obviously not the case.
Recommended Reading
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Sen. J.D. Vance on Financialization, Labor, and Rebuilding American Capitalism
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