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Financialization and equal opportunity

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Financialization and equal opportunity

  1. 1. Demos.org Financialization and Equal Opportunity How the Financial System is Undermining Jobs, Wages, Innovation and Enterprise Growth February 2015 Wallace C. Turbeville Senior Fellow, Demos
  2. 2. 0.300 0.320 0.340 0.360 0.380 0.400 0.420 0.440 0.460 Income Gini Ratio of Families by Race of Householder, All Races, Ratio, Annual, Not Seasonally Adjusted Source: Census Bureau, 2014
  3. 3. -20% 0% 20% 40% 60% 80% 100% 120% The Bottom 90% The Top 10% 1933-1973 1975-2010 Fraction of Growth Accruing to Each Income Group Source: Thomas Piketty and Emmanuel Saez, 2013
  4. 4. Financial Sector Share of GDP (%) 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 1859 1863 1867 1871 1875 1879 1883 1887 1891 1895 1899 1903 1907 1911 1915 1919 1923 1927 1931 1935 1939 1943 1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 Source: Thomas Philippon, 2012
  5. 5. Investment Short-Termism Liquidity dominates the modern capital intermediation system and this leads to short-termism among investors and corporations. The increasing emphasis on short-term market price returns on decisions by investors in securities and by corporations to the detriment of investments with long time scale social benefits.
  6. 6. Short-Termism and Investment Capital Intermediation in Trading Markets Shareholder Value Theory/Executive Compensation Increasing Size and Concentration of Finance The Rise of Managed Money Investment Decisions Increasingly Based on Short-Term Returns
  7. 7. 8 9 10 11 12 13 14 15 16 Private Investment in Equipment, Structures and Intellectual Property, as a share of GDP (%), 1980 - 2013 Source: BEA, 2014
  8. 8. Gross U.S. nondefense public investment as share of GDP, 1947– 2011 3.56% 2.46% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 1947 1957 1967 1977 1987 1997 2007 Total Federal State and local Source: Josh Bivens, “Why the Bipartisan Commitment to Public Investment Should Go Beyond Mere Rhetoric,” June 2013. Figure G.
  9. 9. Nondefense Public Investment as a Share of GDP Actual and Proposed, 2000-2023 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% House alternative budget Ryan budget Senate budget Congressional Progressive Caucus budget Obama budget Actual spending Source: Josh Bivens, “Why the Bipartisan Commitment to Public Investment Should Go Beyond Mere Rhetoric,” June 2013. Figure G.
  10. 10. Source: US Census Bureau; Litan and Hathaway 2014
  11. 11. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Share of National Wage Income Accruing to Top .1% Source: Piketty and Saez, 2012
  12. 12. 44% 46% 48% 50% 52% 54% 56% 58% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Wage Share Wage Share Without .1% Wage Share of National Income, Aggregate and Net of 0.1% 1980 - 2012 Source: Piketty and Saez, 2012; BEA, 2014; Demos calculations
  13. 13. Demos.org

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