WASHINGTON, DC – Concerns about state capture are nothing new. Special interests hold undue sway over official decision-makers in many countries, and regulators are always prone to see the world through the eyes of the people whose activities they are supposed to oversee. But the rise of finance in industrialized countries has cast these issues in a new, much harsher light.
Before 1939, wages and profits in the financial sector in the United States amounted to less than 1% of GDP; now they stand at 7-8% of GDP. In recent decades, financial assets have expanded dramatically relative to any measure of economic activity, as life expectancy increased and the post-WWII baby boomers began to think about saving for retirement. Compared to the size of the US economy, individual banks are now much bigger than they were in the early 1990’s. (The precise numbers are different in other industrialized countries, but the rise of finance is a general phenomenon.)