The Great Financialization Swindle

Wealth Inequality and the Ecological Emergency

Apparently, a person, on average, thinks between 12,000 - 60,000 thoughts per day. That is a staggering number of little flashbulbs going off constantly. We each cultivate our own inner ecology of thoughts, in some way or other. For some of us, this is a pruned garden and, for others, an untamed wilderness.

Among the recurring thoughts I replay every day, there is my ongoing freak-out — a veritable avant-garde jazz jamboree of panic, shock, fury, grief — about the ecological emergency. I find it unbelievable, eerie, we are, for the most part, ignoring, avoiding, dissociating, distracting ourselves from this severe situation. I find I need to at least write about it, from time to time, to escape my claustrophobic sense of solitude. But writing about it doesn’t alleviate the pressure for very long.

Each day, I also cycle through many different thoughts closely related to this one. I regularly ponder on the profound inequity of the financial system. This is what I will write about today, inspired by Jem Bendell’s chapters on the financial system in his new book, Breaking Together.

As far as I understand it, we live in a fake economy, to a great extent. Just as we keep pretending that everything is okay with the current ecological situation — I mean, we aren’t pouring into the streets en masse to demand that governments, corporations, and society as a whole radically redirect our productive forces to save our collective asses from rapidly approaching catastrophe — we continue to pretend that this fake economy is real and legitimate. We are, of course, forced into this pretense: If you try to call the system’s bluff, people waving guns and badges will come to your apartment, eventually, and throw you out of your home.

How is it a fake economy? Check out this startling chart on money-creation:

There were a few crucial steps leading to this. In 1971, President Nixon took the US dollar off the “gold standard.” The next decades saw a massive growth in the financial services sector in the US. I often think of the World Trade Towers, constructed in the early 1970s, as a giant tuning fork for the new hyper-financialized economy. The financial sector became the biggest part of the US economy, as industrial manufacturing declined and moved to cheaper countries, particularly China.

Complex financial instruments were able to generate spectacular returns via speculative projections. This includes trading in derivatives — financial contracts that derive their value, however distantly, from an underlying asset. Today, speculative trading dwarfs the availability of actual goods and services in the “real economy.” As Bendell writes:

At one quadrillion dollars, it is estimated that the global financial derivatives sector is 10 times greater than annual world GDP. I had to look it up, and now know that a quadrillion is a million billion, or 1,000,000,000,000,000. … Global daily foreign exchange transactions have been recorded at nearly 3 times greater than global daily GDP. The Bank of International Settlements (BIS) reported there is $7.5 trillion transacted every day in foreign currency exchanges in 2022. That was reported as a “historically modest 14% increase” from the $6.6 trillion recorded in 2019.

Money-creation accelerated with the 2008 crash — a structural response to the “financialization” of the US economy as it moved away from industrial production and turned personal debt, aggregate mortgages, into a tradable asset — and “Quantitative Easing,” where the government authorized the Federal Reserve (an institution made up of private banking interests who control the levers of money-creation) to hand out gigantic sums to banks and corporations. The same thing happened again during the Covid pandemic, which constituted the largest handout in history to corporations, at a time when the fortunes of a small number of tech billionaires were skyrocketing.

Along with this development, the gap between CEO compensation and worker pay also grew exponentially.  Back in 1960, the disparity between the compensation for a CEO and average worker was around 20X. Now it is over 300X, as this graph shows:

Many of us can feel the difference between the recent past and how things are today in our actual, real lives. In the 1950s in the US, one member of a typical middle or working class household (back then, it was almost invariably the man) would work. On that one salary alone, a “nuclear” family would be able to support children and purchase a home of some value. Today, both parents usually work (if they can find work), and they can’t afford a home, often plunging deeper into debt. Increasingly, people put off getting married and having kids.

Wealth concentration has reached historic proportions. In the US, three individuals — Warren Buffet, Bill Gates, and Jeff Bezos — own more wealth than the bottom 50% of the US population, according to Forbes. The Washington Post reports that the top 10% of income-earners hold over two-thirds of total wealth in the US.

Please read through (and share widely) this OxFam report, ‘Survival of the Richest,’ which tracks the shocking increase in wealth inequality over the last decades, a process which continues to accelerate. The authors note:

Over the last 10 years, the richest 1% of humanity has captured more than half of all new global wealth. Since 2020, according to Oxfam analysis of Credit Suisse Data, this wealth grab by the super-rich has accelerated, and the richest 1% have captured almost two-thirds of all new wealth. This is six times more than the bottom 90% of humanity. Since 2020, for every dollar of new global wealth gained by someone in the bottom 90%, one of the world’s billionaires has gained $1.7m.

I find it amusing that bizarre QANON conspiracy ideas fester while people ignore the logic of the system, as well as the actual culprits who make the masses miserable while enriching themselves, exacerbating the planetary ecological crisis in the process.

The great promise of industrial civilization was to liberate our human family, eventually, from drudgery and various kinds of pointless misery. Earlier generations — European immigrants in the late 19th Century, the Depression era — had the belief they were sacrificing themselves for a better future that their kids and grandchildren would hopefully get to experience. There was the sense of a trajectory toward a better future — an idealized vision of progress. The sense of a shared social project — the dream of collective betterment — has disintegrated over the last decades, largely due to the gaming of the system by the financial elite for their enrichment.

Personally, I believe we need to understand the direct relationship between the private accumulation of capital and the ecological crisis which threatens our world with annihilation. I am a a bit of an extremist in this regard.