Why Is Europe a Dirty Word? – NYTimes.com.

From Dilbert 01/20/2012

The UK published Financial Times, that liberal bastion read by the entire international financial community, has a series titled, “Capitalism In Crisis.” Contemplating this in the United States is, of course, illegal and socially repugnant. So it’s interesting that a few notable Americans braved ill repute to contribute their ideas. One of them is Mohamed El-Erian, chief executive and co-chief investment officer of Pimco. A non-trivial thinker.

The majority of writers agree that the crisis in capitalism is caused by two distinct failures: the inability of the system to deliver sustained prosperity through economic growth and jobs; and the perception that it is grossly unfair and socially unjust.

The fun reading for me was the clear description of finance as unit of production. We produced too much of it, and thought it would be the new economy’s engine. Like the Dutch Tulip Craze in the 1630s. You know the feeling: “It’s easy money! Everybody’s doing it!”

Finance is clearly one of these [problems]. In the last decade, five countries in particular (Iceland, Ireland, Switzerland and most importantly given their systemic role, the UK and US) lost sight of the fact that finance is not a standalone industry but, instead, depends on its ability to serve the real economy. This failure was compounded by the view held by some that finance could even constitute the next phase in the natural evolution of capitalism (from agriculture to industry, services and, ultimately finance).

Society as a whole produced and consumed too much finance, especially through a disruptive technology [structured finance] that was insufficiently understood and tested. The result was the mother of all capitalistic overdoses, the implications of which are enormous and will be felt for years to come.

My preferred theory has been that this was the culmination of several decades of usually small incremental legislative, judicial, and administrative decisions to displace the ability of skilled labor to organize. Not as a coordinated conspiracy, but because money is influential, and the people with the most money to buy influence are not skilled labor. What could be more debilitating to the value of skilled labor than to have an economy based on minimum wage service jobs, low cost immigrant labor, and an otherwise encompassing finance industry that profits from moving money around?

Now we get to pay for our version of the Dutch Tulip Craze.