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From the resource curse to the finance curse (trust.org)
51 points by ekm2 1610 days ago | hide | past | web | 9 comments | favorite

It has seemed to me (for a long time) perverse that the most profitable industries, and the ones where people have the most ridiculous salary and bonus structures, are the ones that involve shuffling figures around. The ones involved in moving and speculating with and on money itself. None of this activity produces actual goods or services, yet those that play get to acquire and consume a lot of both because of their games.

I'm not saying "all finance is parasitical!" or anything puritan/socialist like that, it's just always struck me as odd.

"Finance" in the US pays well because it's on a national scale. Wall Street holds the money of the whole country, and some of the rest of the world's. So, like anything else that has a national market, people at the top are going to be paid well. Local bankers in Topeka aren't drowning in cash.

Look at NBA stars, famous film actors, top musicians, CEOs of national retail stores, etc. Anyone that can scale their abilities to the national/global market is going to be paid more money.

No, silly! "Finance" pays well largely (most certainly not exclusively, but largely) because the of the opportunities for smart and unscrupulous people to exploit the systems they themselves helped to create, for personal gain. Often using methods of uncertain legality. The fact that the same people have a big say in what rules they should operate under makes things worse. If you think I am overstating the case, google "Libor scandal" (eh... here you go: http://en.wikipedia.org/wiki/Libor_scandal) or read "Where are the customers' yachts?" or "The wolf of Wall Street".

There are many examples of people who matter on a national scale not being well paid (certainly not by the finance sector standard). Physicists (and other scientists) for example. Top law eforcement officials, army generals. Perhaps people like Snowden fall into the same category.

Of course I expect you to claim "That is not what I meant when I said whatever it was I said!" Well... feel free to restate your point more clearly.

"Anyone that can scale their abilities to the national/global market is going to be paid more money."

Sure, but when (as someone commented below) 40% of the profits in the US economy come from this one sector, you're going to get quite a lot of people that are able to take home the silly money, compared to other sectors.

The salary and bonus structure is because there is not much else to pay for other than people (and the shareholders who put up the money at risk, but they managed to get away with paying them very little, another interesting story).

If money is the product you deal with, you take some of it. If there is little competition you take a lot. The more the money passes you the more it adds up.

> "Oversized financial sectors also “capture” the economies and the political systems of finance-dependent countries, crowding out alternative sectors. The political “capture” is particularly strong in small financial centres and tax havens, where I have seen it veer towards authoritarianism."

Surely "capture" is not unique to finance though - in fact it seems that political opportunists line up corporations with similar financial interests from across sectors. It doesn't take just finance to make a plutocracy with narrow interests.

This is definitely true of the UK. I'm surprised to hear its true of the US though which has a much wider economic base. Is it true of Singapore or Hong Kong?

From memory 40% of the profits of US businesses (public I presume) are in financial services. That's a huge sector.

I think Singapore still has a smaller financial services business than you might think, although growing.

(Need some references but on train)

Data on Singapore: http://www.guidemesingapore.com/incorporation/introduction/s...

Wholesale & Retail or Manufacturing is bigger

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