How We Can Break the Power of Finance
An important new book, Sabotage: The Hidden Nature of Finance, skewers the destructive role of finance in our economic system. But its authors shy away from the radical implications of their analysis and end up peddling technocratic illusions about the necessary cure.
Traders work the floor of the New York Stock Exchange (NYSE) on March 5, 2020 in New York City. David Dee Delgado / Getty
Big finance is sabotaging the real economy — that’s the central thesis of Anastasia Nesvetailova and Ronen Palan’s new book, Sabotage: The Hidden Nature of Finance. Far from being a few isolated incidents of malpractice, the lying, cheating, and stealing exposed during the financial crisis constitute the main source of the sector’s huge profits. Sabotage is woven into the fabric of modern finance — only extensive and well-designed regulation can prevent it.
The story told by Nesvetailova and Palan is not new. Earlier works like Nicholas Shaxson’s The Finance Curse, Oliver Bullough’s Moneyland, and Michael Hudson’s Killing the Host have all made broadly similar arguments: although the finance sector is not inherently extractive, it has now grown so large, so monopolistic, and so corrupt that it has become a drain on productive economic activity. According to these authors, financial “rentiers” — those who make their money by extracting economic rents from the production process — are enemies of the healthy functioning of an otherwise efficient capitalist economy.
Keynes and Veblen
Most of these writers base their analysis on the work of John Maynard Keynes, who famously called for “the euthanasia of the rentier.” Nesvetailova and Palan, on the other hand, draw upon the work of one of Keynes’s predecessors, Thorstein Veblen, a nineteenth-century political economist most famous for his theory of conspicuous consumption, laid out in a book called The Theory of the Leisure Class.
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