3c hapter - Index of

Blue Skies, Pipe Dreams, and the Lure of Easy Money 29
In its place has arisen an industry that creates little of real value
and contributes only to the prosperity of a few. Manufacturing
accounted for just about 30 percent of GDP in 1950. By 2003, it had
shrunk to less than 13 percent, and by 2009, 11 percent. Over the
same time frame, the fi nancial services sector has doubled, from
10 percent of GDP in 1950 to around 20 percent today. Its profi ts
have grown even faster; fi nancial services generated a whopping 40plus
percent of U.S. corporate profi ts in recent years. 19 As Arianna
Huffi ngton writes in Third World America, the fi nancial sector is
“supposed to serve our economy, not become it.” 20 At the same time,
power in the fi nancial sector has concentrated to a degree not seen
since the days of the robber barons—a fact the fi nancial reform bill
has done nothing to address. Bank of America’s assets are equal to
16 percent of GDP, and JPMorgan Chase’s, 14 percent. 21
Economists have a term for this: fi nancialization. The word
refers to the reduction of nearly anything of value—from home
mortgages to life insurance—to a tradable commodity. But it also
describes the dangerous degree to which the fi nancial sector has
come to dominate our economy. The broader economy is now
subservient to fi nance. Public companies march to the tune of
maximizing shareholder profi ts and short- term results, prompting
them to seek the lowest cost labor, even if it means slashing benefi
ts and shipping American jobs and expertise overseas. Over the
past decade, we have imported $4.3 trillion more manufactured
goods than we have exported, and 5.6 million manufacturing
jobs have vanished. 22 The ballooning trade defi cit (excluding oil
imports) has caused the displacement of 5.6 million jobs in 2007
alone, according to one study. 23 Meanwhile, American wages have
actually declined even as productivity has soared—defying a historic
relationship under which the two measures have moved in
more or less lockstep. Real average hourly earnings (not including
benefi ts) are at roughly 1974 levels. 24
This is not a path to prosperity. We are destroying the middle
class and outsourcing our future. The credit has stopped
and there is no economic engine to pull us out of our malaise.
Without a more diversifi ed, productive economy, we will not be
able to grow ourselves out of our economic rut.