Some basic graphs and statistics, backing up material in the Finance Curse book.
Credit to GDP ratio
One of the key metrics in the “Too Much Finance” literature is the ratio of private credit to GDP, which in Epstein/Montecino study for the UK stood at an average 160 percent of GDP from 1995-2015. This raises an important question: for how long has the UK economy been suffering under an excess of credit? This graph, from the Steve Keen, provides a clear answer, and (among other things) highlights the political nature of financial dominance.
Lending to the “real” economy
Growth of a financial sector may not increase lending to the “real” economy. This graph (source: here) illustrates the scale of problem in the UK.
Here’s a graph of GDP per hour worked, a measure of productivity, from the OECD. Finance-dependent Britain, versus “sclerotic” France, and Germany. You can make your own graph, here.
If you take the dates back to 1970 (the maximum,) Britain starts below its peers and the gap grows larger.
An important element of the finance curse is that entrepreneurship is damaged, by a host of factors including rising monopolisation, and financialisation which turns managers’ attentions away from genuine wealth creation towards financial engineering to increase profits. This graph, from the US Census Bureau, suggests the financial crisis and its aftermath has played a big role. (Their title is “Business Formations within 4 Quarters (BF4Q) – Actual and Projected, Seasonally Adjusted.”)
There is a whole chapter on Ireland in the Finance Curse book. Its central argument is that the Celtic Tiger was not the result of corporate tax cuts, but of other factors. Here is the relevant graph.
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