From Forbes' Messy Capitalism column:
HT: Money & Co.
Is The Financial Sector Gobbling Up The U.S.' Would-Be Entrepreneurs?
When the financial sector grows too large, it drains talent from entrepreneurial ventures.
Meet a banker today, and you can be certain that within minutes he will be complaining about the epidemic of "banker bashing." How unfair it is of politicians and media populists to blame the financial industry for the Great Recession. Don't they understand what it is the bankers bring to an economy? Not just all the financial products, which grease the wheels of global business, but also all those jobs and all that wealth.
Take a drive through Greenwich, Conn., the home of the hedge fund industry, and see for yourself what a formidable service the financial sector has done for the town's roofers, pool builders and hedge trimmers.
There can be no doubt that a healthy economy and society depend on a healthy financial system. But what do we mean by a healthy financial system? Is it one that provides simple intermediary services to the so-called "real," or nonfinancial, economy? Or can it be more than that without cannibalizing the rest of the economy's vital organs?
The Kauffman Foundation recently addressed this issue in a paper by Paul Kedrosky and Dane Stangler, "Financialization and Its Entrepreneurial Consequences." The authors recognize that the financial services sector plays a key role for entrepreneurs, providing systems for obtaining funding and managing cash flow, which might otherwise be inaccessible. But when the financial sector becomes too large, as they argue it has in the U.S., it drains talent from entrepreneurial ventures, thereby depleting our economic strength....MORE