American Capitalism’s Great Crisis

Young Americans no longer perceive benefits from capitalism, and such sentiments will influence the outcome of the US presidential election. The system of US market capitalism is broken, explains Rana Foroohar, author and Time magazine’s assistant managing editor for economics and business. Only about 15 percent of wealth from individual and corporate savings is invested in businesses for adding new jobs, wealth and economic growth. Once, business investment represented the majority of bank financing and, instead, banks direct funds toward housing or existing stocks and bonds. Academics describe an era of “financialization” with excessive speculation, debt, focus on short-term profits as well as stagnant growth for jobs and wages. The financial sector represents about 7 percent of the U.S. economy, up from about 4 percent in 1980, and takes about 25 percent of corporate profits while creating about 4 percent of jobs, she reports. Foroohar concludes that financial institutions are no longer providing clear, measurable economic benefit. The US election offers an opportunity for serious debate and new policies for education, taxation, retirement and more. – YaleGlobal