Here comes another book deploring the brain drain of America’s elite into banking and finance. But this one comes with the conviction that the moneyed forces these men and women create and serve do more than distract the country’s top minds from finding a cure for cancer or making important medical advances. They are willing, or unwitting, conspirators in impoverishing most of the world.
Nicholas Shaxson’s “The Finance Curse” may seem radical — and indeed some elements do have more than a whiff of the far left — but in fact his arguments are at base an expression of, and a plea for, moderation. “The central problem isn’t finance, but too much finance,” he maintains, “the wrong kind of finance, and finance that is too powerful, unchecked by democracy.”
The thesis at the heart of this volume is simple, artfully presented, easily digested. It is not a jeremiad against capitalism or commerce. It is an argument for restraint. It preaches what the top business schools preach but that many of their students defy: that finance can been a force for good, not greed.
It is a helpful, useful argument. But the great virtue of this book isn’t in the conclusion so much as it is in the elucidation of it, for this is an anecdote-filled, approachable history of (big) business. It is an engaging read, though some readers will stumble over terms like “rehydothecation,” “repo,” and the “Opco-Propco Shuffle.” No matter. The argument has its own momentum, and the book mixes humorous sides with scholarly studies. Here, for example, is how Shaxson describes Eurodollars:
“It’s a lot like helping someone escape from their conservative family home environment in the suburbs and taking them to Las Vegas, then offering them whiskey and champagne. They’re the same person but also different — more fun but also more irresponsible. This is a good way to understands not only Eurodollars but also offshore tax havens.” .
In these pages the reader meets Thorstein Veblen, John D. Rockefeller, Mafia dons, French kings, the Iowa Farm Bureau, and Mark Zuckerberg. Some of the figures who stride through this book are heroes. Most are villains.
Shaxson’s business here is story-telling, to be sure, but it is also myth-busting, and a principal target is the notion that big businesses really, truly, need concessions — tax breaks, deregulation — or they will bolt and relocate elsewhere. It’s almost always bunk, “one of the most confused and dangerous economic myths,” he tells us, “of all time.” In this and other ways he sometimes sounds like Elizabeth Warren. But there is a whiff of Paul Samuelson in these pages as well.
By tracing the effect of tax havens, offshore banking, and what he calls stateless hot money, Shaxson sets out a conspiracy, mostly of silence, that enriches the rich and impoverishes the poor, through the unregulated machinations of financial institutions whose creepy credo he sets out crisply: “You can trust us not to steal your money, but if you want to steal someone else’s money then you can also trust us to turn a blind eye.” Maybe the best line of the year on an economic topic.
It is a notion uttered, sotto voce, by the big financial players — and by the governments of, among others, the United States and Great Britain. The result: “a rising global wall of money and debt in the nooks and crannies of our economies and our political systems, driving a gravitational shift...toward the needs of finance and delivering a payload of financial techniques and methods that have transformed the way we think about businesses, our homes, our public services, and even the people we love.”
There is a cost to all this far beyond finance. It is the missed opportunity of the captains of Wall Street and of private equity, who make money rather than scientific advances. The cost is cultural, and it comes at a time when there is growing discussion about the nature of the American meritocracy and its own disruptions in the economy.
“High wages on Wall Street suck talented, educated people out of often more genuinely productive areas of the economy,” he argues. “Instead of finding a cure for malaria, our best and brightest are betting rich as high-frequency traders.”
Here’s a way Shaxson wants us to transform how we think about business: The real competition may not be between the United States and China but instead between consumers and workers on the one hand, and those who profit (mostly wealthy stockholders in glittering urban settings) on the other. “We’ve exchanged Adam Smith’s invisible hand of the well-functioning market for the invisible fist of monopoly power.”
This is an argument that ties together bankers, leaders of industrial countries, Colombian drug dealers, and North Korean nuclear smugglers in a vast conspiracy of deregulation and financial manipulation. He recommends, in the final pages, a series of measures to address these distortions: driving “big money out of politics”; curbing “corporate tax cuts [that] tend to reward the profit-gushing share flipper more favorability than the low-margin job-creating business”; and “taming the megabanks."
Good luck with that. That because of books like this one, no one will say it all happened the way a well-loved notion suggests the British Empire was assembled: in a fit of inattention.
THE FINANCE CURSE
By Nicholas Shaxson
Grove Press, 384 pp. $27
David M. Shribman, for a decade the Globe’s Washington bureau chief, is a nationally syndicated columnist.