11/28/2019

Rubio is Channeling Wilhelm Röpke, Not Elizabeth Warren

"The postliberal indictment goes more broadly than this. Its criticism of “financialization” focuses on the outsized proportion of financial sales exchanging existing securities relative to those securities raising capital for new production. The vast proportion of financial activity that simply rearranges ownership of existing financial instruments, the argument goes, represents only social waste relative to activity deploying capital into new production. After all, the sales support no new productive investments.

The criticism, however, is myopic in the extreme.

That financial markets trade existing securities far more than raising capital for new projects is certainly true. But much of the demand for new securities derives from the ability to sell those securities to someone else when one needs money. What criticisms of “financialization” miss is the connection between willingness to fund new investments and the subsequent ability to trade those investments later on the secondary market."