Are We Repeating History by Letting Our Financial Sector Get Too Big?

Since 1950, the financial sector has expanded dramatically as a share of the overall U.S. economy, more than doubling in GDP terms and roughly tripling in profit terms. Meanwhile, financial deal-making and trickery have become much larger priorities across the rest of the corporate world. Financialization, the word for this development, was coined in the early 2000s. But the syndrome — of economies preoccupied with making money out of money — dates back at least as far as the downslides of 17th-century Spain and 18th-century Holland. Around the time that Americans declared their independence, Adam Smith, the father of modern “free market” economics, was arguing for strict regulation of the financial world in recognition of its pivotal economic role and its already clear ability to wreak havoc.