ABC radio’s PM programme has a good little interview with Jim Standford regarding how people incorrectly think of economics as part of the finance industry rather than the finance industry being just a part of the economy:
JIM STANFORD: … I mean the financial sector is a part of the economy but it’s not the most important part of the economy. In fact in many ways it has very little to do with what the true economy is about, which is about average people getting up, going to work, producing something useful, a good or a service that has inherent value, and then how we pay people for it and how they buy stuff.
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JIM STANFORD: I think that this meltdown in some ways is the culmination of say three decades or so of a trend where we glorified finance, we privileged finance, we even subsidised finance through a tax system that favours paper investments over real production. And we came to equate the ups and downs of the markets with what the real economy was all about and that was wrong.
The financial sector doesn’t produce anything of real value in and of itself. It is supposed to facilitate investment and growth in the real economy but it ended up serving its own purposes. It became the tail that wagged the dog and as a result of 30 years of over-financialisation we had this inevitable breakdown and now we’re all paying the price.