Here's how we got into this mess: Finance grew much bigger than anybody who doesn't work in the field really needs it to be.
That's the theme of a
provocative article published on Thursday in a well-regarded British magazine called Prospect. In a critique that will resonate with many who work outside the sector, the piece points out that banking, broking and insuring went from 10% of all corporate profits in the 1960s to nearly 35% in 2005. As the article puts it:
We used to think that finance performed a useful role, shunting capital to the most profitable outlets. Its growth was thus a function of success. But after the crunch, a new generation of critics, such as Paul Woolley, are challenging this thesis.
So who is Paul Woolley? Besides being the critic most cited in the piece (another is George Soros) he is the founder of the Paul Woolley Centre for the Study of Capital Market Dysfunctionality at the London School of Economics. According to
his bio he's worked in academia, at the International Monetary Fund and in money management, having retired as chairman of GMO Europe in 2006.
He started the Capital Market Dysfunctionality center at the LSE Financial Markets Group Research Centre in 2007. Even if you don't buy his diagnosis, you have to admire his timing. -
Kenneth Klee
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