The Democratic debate last Wednesday was much more informative than the previous ones. What we learned, in particular, was that one of the presidential candidates, Michael Bloomberg, is a great entrepreneur, and that Elizabeth Warren is a force that must continue to be counted.
Both lessons largely contradict the story that the media has been telling us in recent weeks. On the one hand, there has been an undeniable desire on the part of some news media and many analysts to raise Bloomberg; on the other, the complaints of the supporters of Warren that this one had been "erased" of the informative cover and of the surveys were not mistaken.
What does all this mean for the appointment of the candidate? I have no idea. But perhaps the Warren-Bloomberg confrontation helps to separate the debate from the so-called "Medicare for all" - which is not going to be approved, whoever wins - to focus it on an issue that matters very much which democrat prevails. That is, if we are going to do something to control the financialization of the US economy.
During the largest generation of the US economy (the era of rapid and widely shared growth that followed World War II), Wall Street occupied a very peripheral part of the picture. When citizens thought of business leaders, they imagined managers of companies that really did things, not people who got rich based on tricks.
But all that changed in the 1980s, largely thanks to financial liberalization. Suddenly, the money in a big way came from buying and selling companies, not from directing them.
In many cases, these financial operations charged companies with suffocating levels of debt that often ended in bankruptcy and job destruction, a process that continues to this day. There was also an epidemic of fraud and organized crime, exemplified by the career of Michael Milken, the king of junk bonds that Donald Trump has just forgiven. And the financial sector itself doubled its participation in the economy, which meant separating a lot of capital and many intelligent people from productive activities.
Because there is no evidence that the megaexpansion of Wall Street made the rest of the economy more efficient. On the contrary, the increase in household income slowed as finances grew, although a few became immensely rich. And the rampant growth of the financial sector laid the foundation for the worst economic crisis since the Great Depression.
He also made Michael Bloomberg a billionaire. I wasn't being sarcastic when I said that Bloomberg is a great businessman. It is. And in his favor it must be said that he has not dedicated, as far as I know, to destructive financial scams. It was enriched, however, by selling equipment to destructive chanchulleros.
For those who don't know what I'm talking about, I mean the famous Bloomberg Terminal, a proprietary computer system that gives subscribers real-time access to large amounts of financial data. This access is incredibly expensive: a subscription is around 24,000 dollars a year. But it is essential for the financial sector, because agents that have Bloomberg terminals can react to market events a few minutes faster than those that do not.
It is an extremely profitable business. But is it good for the economy? Do not.
After all, does obtaining financial information a few minutes before improve the real-world business decisions that affect jobs and productivity? Certainly not. In fact, Bloomberg has earned his billions of dollars thanks to a financial arms race that costs huge amounts of money, but leaves everyone in virtually the same place.
Which brings me to Elizabeth Warren. Warren gave a huge setback, reducing his chances for the election, trying to ingratiate himself with the followers of Bernie Sanders. He supported proposals for a radical reform of health care that is practically unlikely to come true, and the payment of those proposals was recriminated, despite the fact that Sanders has also not given many clues regarding his own plans.
But before all that, Warren had carved a name in the crusade against fraud and excess financial sector. And it wasn't mere talk. A key element of the reforms instituted after the financial crisis of 2008, the creation of the Office of Consumer Financial Protection, was Warren's idea. Moreover, the office was clearly a huge success, and has saved billions of dollars to ordinary families, until the Trump administration decided to gut it.
And here's the thing: financial reform, unlike the health one, is an area in which it could make a big difference what democrat reaches the presidency. It is true that other candidates - Bloomberg included! - have endorsed reforms of the style proposed by Warren. But it is fair to ask, I think, what effort they would put into practice, and also if they would waste their political capital on struggles impossible to win, which is what worries me most about Sanders.
Again, apart from the clear damage to Bloomberg, I have no idea how the debate last Wednesday will influence the Democratic race, if it influences. But perhaps it has helped remind Democrats that Wall Street corruption, fraud and excesses in particular can be powerful political issues, especially against a president who is personally corrupt and very clearly friends with scammers.
Paul Krugman is a Nobel Prize in Economics. © The New York Times, 2020. Translation of News Clips
