Taking the "P" out of "GDP"

Recorded in our humble blog of record:

The financialization of the American economy has been a disaster. Forget all that stuff about the hollowing out of our manufacturing base or increased global competition or waves of immigrants taking away our jobs. Those are all legitimate issues of one stripe or another, but the far bigger issue is that a gigantic chunk of our productive capacity — Wall Street — is deployed almost solely to make money for one sector of our economy: Wall Street. Until that changes, until the financial industry is focused primarily on providing capital and services toother people, we're always going to suffer from either (a) underperformance in the real economy or (b) an endless boom and bust cycle. Take your pick.

There's one key metric that will tell us whether financial reform is working: the size and profitability of the FIRE sector. (That's Finance, Insurance, and Real Estate.) If it shrinks considerably, it means financial reform, despite all the watering down, has basically done its job. But if the FIRE sector remains enormous, it hasn't. We'll know in a few years. | Drum, emphasis mine |

It is an enduring mystery to me how we have sufficiently abstracted our economy to the point that a huge segment of our economy is devoted to producing exactly nothing. "Services" are a legitimate segment of the economy, but "services" are there to serve people, not rob them.

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