The financialization of the American economy, Homo economicus run amuck

Oren Cass, The Finance Industry Is a Grift. Let’s Start Treating It That Way. NYTimes, Feb. 6, 2026.

From the article:

Less than 10 percent of Goldman’s work in 2024, measured by revenue, was helping businesses raise capital. Loans of Goldman’s own funds to operating businesses accounted for less than 2 percent of its assets. At JPMorgan Chase the figures were 4 and 5 percent; at Morgan Stanley, 7 and 2 percent. Even the efforts at helping to raise capital are misleading, because less than a tenth of it goes toward building anything new. The rest funds debt refinancing, balance sheet restructuring and mergers and acquisitions.

These are symptoms of financialization. That’s the term for making financial markets and transactions ends unto themselves, disconnected from — and often at the expense of — the societal benefits that support human flourishing and are capitalism’s proper purpose. Chief among those benefits are good jobs that support families, and products and services that improve people’s lives.

In a financialized economy, businesses become mere sources of cash, assets to be manipulated and then operated for maximum investor returns. Workers become just another cost, like lumber. Customers are just revenue streams to be tapped.

Financialization has made American businesses less resilient, less innovative and less competitive. It has been a major cause of slow wage growth and rising inequality. It has fueled the loss of manufacturing jobs across the heartland. It has corrupted sectors in which the profit motive was never meant to reign supreme — veterinary practices, funeral parlors, campgrounds, residential treatment services, youth sports, hospitals and nursing homes, even suppliers for volunteer fire departments — consolidating and managing them with ruthless efficiency, squeezing their vulnerable customers and then pointing to the higher cash flow as “value creation.”

Later:

It’s the absurd endpoint of financial nihilism: an entire business model built on gaming the system without knowing or even caring what’s being traded. Along the way, it increases market volatility and risk without producing any larger benefit.

Private equity firms control trillions of dollars, very little of which is invested directly in companies that will use the funds to grow. (Venture capital is the exception to this general rule; that’s real investment in growing businesses, though concentrated in a few industries and places.)

Homo economicus at work:

The Excel spreadsheets have always seemed to give the same answer: Do not invest in shipyards, or semiconductor fabs, or research and development for a new airplane. Do cut costs, offshore to Asia, increase the dividend or invest in the social media company that could be the unicorn worth billions in a matter of months.

There's much more at the link.