Makers and Takers

Makers and Takers, by Rana Foroorhar, Crown Business 2016

Is Wall Street what's wrong with the US economy?  Did the US economy somehow move out of small agriculture and manufacturing into customer service and money-moving, money-taking, money-making wayyyy above the heads of most US citizens?  Hard to say, but author Rana Foroohar, Time economic columnist and CNN global economic analyst, has some nagging pictures - in the form of stats and history - to show us explaining how we came to what she calls "the financialization of America."

First of all, "the financial sector" only accounts for 4 percent of all US jobs, although it accounts for a quarter of all profits. Further, Foroorhar reminds us that the tax code continues, despite the 2008 meltdown, to favor debt over equity, making it easier for companies, indeed making it almost a necessity that they sit on cash overseas and seldom bring it home for domestic reinvestment or growth.  Think Apple.   And there's more - contributing causes coming from financial experts and some corporate stars that add up to a mixed bag of corporate/governmental brand capitalism.  Like a jenga wood game, it's hard to decide which block to move, which one to keep, and how far up the column can take a shift without the whole stack tumbling into a formless pile of wood.

What's the solution, we all ask.  Well, here Foroorhar offers some astute and maybe even approachable recommendations well-considered during this election season:

 - Build a new growth model, one that extends beyond what journalist Fareed Zakaria called "The rise of the rest," the economic growth of emerging markets that put pressure on US growth.  Offshoring cost us bigtime in terms of infrastructure and loss of manufacturing intelligence; hopefully it won't do the same to electronic innovation.  "America," she says, "needs a new moonshot goal for economic growth, something that will galvanize the country and create the kinds of productivity gains and innovations that the short-term high of finance never will."  More protein, fewer carbs and sugar.

China, what to do about China.  Well, here the author's stats prove interesting.  She says "China may be the toughest part of the economic mix in terms of reform.  It is attempting to make a transition from being a place that manufacturers cheap shoes and light fixtures to being a sophisticated service-driven economy... that's a transition that only four other Asian markers have made:  Japan, South Korea, Singapore, and Taiwan."

 - Less debt, more equity

 - Rethink who companies are for - at a scant two paragraphs, it's unclear to me what the solution is here.

Read this book with an eye to understanding the research and the big picture better - the stats themselves are worth the read.  Foroohar reminds us "As in medicine, so in finance - first do no harm...... Understand what happens when finance grows at the expense of business..." But hard-core solutions that take on the Wall St. behemoth are in short supply and for some politicians, unthinkable.  Kind of leaves us in a place of uncertainty....