speaking as one ... what do we do? financiers contribute to wealth creation, a bit. We help provide liquidity to people who have investments (which are of necessity in long-term projects) but who want the cash now. We also provide consulting services to people wanting to carry out corporate mergers (some of which are actually quite useful) and we help people raise capital because we have good contact books and are thus well placed to act as matchmakers between pools of savings and demands on capital (this is a service, just like the more conventional kind of matchmaker). I don't know why so many of us claim to be "allocating capital" as if we were the equivalent of the Soviet planners, but the things we do are useful and would probably need to be done in most kinds of society not based on household production.
why are we so well paid? a more interesting question and an easier one. the explanation given by Sherman McCoy's wife in "Bonfire of the Vanities" (that we provide the service of slicing up a golden cake, and are allowed to keep the crumbs) is basically the right one. We are very well paid because our slice is a small percentage of a very big number. In other words, we are very well paid because our customers are very very rich. The guy who sells cream buns to Tom Cruise probably makes a lot more money than the baker at the end of my street, but I doubt that his eclairs are any better. So my guess is that under socialism, my job would still exist, but would be much less well paid because it would involve providing services to a bureaucracy representing the workers, rather than to extremely wealthy capital-owners. I would probably still do it though because it is fun. best dd -----Original Message----- From: PEN-L list [mailto:[EMAIL PROTECTED] Behalf Of Charles Brown Sent: 23 March 2007 14:12 To: [email protected] Subject: Financiers' activities and wealth creation This is not a new topic, but it seems to me pertinent to progressive economics to continue to ask dialectical questions like: How is wealth created ? What is the source of wealth ? How do the activities of financiers contribute to wealth creation ? Or do they ? We have to challenge the legitimacy , the generally accepted notion , that it is appropriate to compensate hedge funders, for example, on the scale that they are compensated for their activities. For those who disdain the labor theory of value, ok. What's your theory, and how do you legitimize the levels of compensation in value, in wealth, that financiers have ? Charles
