Interesting article about "creative" versus, "distributive" societies and how it is applicable to the current paradigm in the U.S. which I believe, rewards distribution versus creativity.
Here are some excerpts:
"The whole of economic life is a mixture of creative and distributive activities. Some of what we “earn” derives from what is created out of nothing and adds to the total available for all to enjoy. But some of it merely takes what would otherwise be available to others and therefore comes at their expense. Successful societies maximise the creative and minimise the distributive. Societies where everyone can achieve gains only at the expense of others are by definition impoverished. They are also usually intensely violent."
"...do the financial markets do too much of the distributive?” This is in the context of the huge pay cheques the banking industry provides to their executives under the cover of the “they are creating wealth..."
"The reality...is that most of the day-to-day activity in financial markets is not about directing funds to productive investment – that is, building factories, developing new processes, funding research and development etc. Most of the activity is about what I call nominal wealth shuffling – or in less abstract language – common to all – gambling. You construct a bet – find a counterparty to bet with – place the bet – take the gain or loss. Outcome for society – nil. Outcome for players – one wins, the other loses. It is a bit more complicated than that but not much more so."
"It has always amazed me how we extol the virtues of the so-called “wealth creators” (the hedge fund magnates and the big bankers etc) yet we look askance at low-income workers who gamble their meagre family incomes away in their obsessions with a few horses running around a track."
"Much of what goes on in financial markets belongs at the distributive end. The gains to one party reflect the losses to another, and the fees and charges racked up are paid by Joe Public, since even if he is not directly involved in the deals, he is indirectly through costs and charges for goods and services. The genius of the great speculative investors is to see what others do not, or to see it earlier. This is a skill. But so is the ability to stand on tip toe, balancing on one leg, while holding a pot of tea above your head, without spillage. But I am not convinced of the social worth of such a skill."
"It has always amazed me how we extol the virtues of the so-called “wealth creators” (the hedge fund magnates and the big bankers etc) yet we look askance at low-income workers who gamble their meagre family incomes away in their obsessions with a few horses running around a track. This duality in the way we construct events extends to other aspects of life. A hopeless alcoholic lying in the street is reviled by mainstream society yet the wealthy drunken lawyer or banker at the “dinner party” with his hands all over the women (they are usually men) is seen as the epitome of success and just letting off a bit of steam. Of-course, both end up spewing in some corner of their respecitive worlds after their alcohol excess."
Read full article here.