Summary of The Finance Curse

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A thriving, dominant sector that draws money from around the world should help a country’s economy and benefit most of its people. But nations that boast abundant natural resources have a long history of passing profits to the wealthy as the rest of the populace becomes poorer. Journalist Nicholas Shaxson asserts that a similar pattern occurs in London’s financial sector, where growing wealth has inflated asset prices, promoted tax dodges and enriched a small segment of the population. His call for change may raise some eyebrows, but it may also open some policy makers’ and taxpayers’ eyes to a significant economic imbalance.

In this summary, you will learn

  • Why the dominance of banks and other financial institutions in London is not necessarily good for the British economy;
  • How these firms actually drain wealth from economies, rather than help support them; and
  • Why regulators should consider measures to curb the influence of the financial sector.
 

About the Author

Nicholas Shaxson is a journalist and the author of Treasure Islands and The Finance Curse

 

Summary

The United Kingdom and Angola may not appear to have much in common, but one feature unites them: the impact a dominant sector has on wealth distribution and the economy. In Angola, wealth from oil and other abundant natural resources trickles through to a small part of the population, while the fortunes of most people deteriorate. The pattern is so predictable that economists call it “the resource curse.” In London, a thriving financial sector has long attracted vast wealth. But like the resource curse in Angola, the “finance curse” in Britain hurts the economy in a number of ways: It draws the brightest workers away from careers in science or academia and into high-paying financial jobs, and it raises the prices of housing and other assets. The laser focus on finance means that other parts of Britain’s economy take a back seat, and it exacerbates the impact of a financial crisis. Instead of fostering broad-based wealth creation, financial institutions pour effort into investments that benefit relatively few people and extract wealth from the overall economy. Banks’ business lending is devoted almost entirely to housing, commercial real estate and other banks, while manufacturers now receive less than 4% of British business loans. 


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