Requiem for the American Dream Page #4

they had literally 40%

of corporate profits...

Far beyond anything in the past.

Back in the 1950s,

as for many years before,

the United States economy

was based largely on production.

The United States was

the great manufacturing

center of the world.

Financial institutions used

to be a relatively small part

of the economy

and their task was

to distribute unused assets like,

say, bank savings

to productive activity.

The bank always has

on hand a reserve of money

received from

the stockholders

and depositors.

On the basis of

these cash reserves,

a bank can create credit.

So besides providing a safe

place for depositing money,

a bank serves a community

by making additional credit

available for many purposes.

For a manufacturer to meet

his payroll during slack selling periods,

for a merchant to enlarge

and remodel his store,

and for many other good reasons

why people are always needing

more credit

than they have

immediately available.

That's a contribution

to the economy.

Regulatory system

was established.

Banks were regulated.

The commercial and investment

banks were separated,

cut back their risky investment

practices that could harm private people.

There had been, remember, no financial

crashes during the period of regulation.

By the 1970s, that changed.

You started getting that huge

increase in the flows of speculative capital,

just astronomically increase,

enormous changes

in the financial sector

from traditional banks to risky investments,

complex financial instruments,

money manipulations and so on.

Increasingly, the business

of the country isn't production,

at least not here.

The primary business

here is business.

You can even see it

in the choice of directors.

So, a director of a major

American corporation

back in the '50s and '60s

was very likely to be an engineer, somebody who

graduated from a place like MIT,

(Massachusetts Institute of Technology

maybe industrial management.

More recently, the directorship

and the top managerial positions

are people who came out

of business schools,

learned the financial trickery

of various kinds, and so on.

By the 1970s, say General Electric

could make more profit

playing games with money

than you could by producing

in the United States.

You have to remember

that General Electric

is substantially

a financial institution today.

It makes half its profits just

by moving money around

in complicated ways.

And it's very unclear that

they're doing anything that's

of value to the economy.

So that's one phenomenon,

what's called financialization

of the economy.

Going along with that

is the off-shoring of production.

The trade system

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