Is Going Into Finance Good for Society?
Whatever banking’s post-recession connotations may be, the historian William Goetzmann argues that monetary innovations have always played a critical role in developing civilization.
.. So the question I would ask my students over the years is: Why are you doing it? What I was hoping is that they would think about the benefits to society. So the answer is pretty clear, if you take a look at the role that investment banking has played in concentrating capital into enterprises—essentially helping to raise money for businesses.
.. So it was really when capital markets opened up that investment bankers could get money to build railroads around the world, canals, help raise money to electrify cities, and so on. So, that’s the way I think about the benefits of that intermediary role.
.. Even though now, we think about it as a source of great inequality. It’s ironic. You think about Kickstarter now, it’s got that same kind of democratization theme to it.
.. I love the world of asset management, because most of that is devoted to people’s retirement and preparing them for an economic life in the long term, after their working life has passed. The invention of something like bonds and annuities and stock that people could buy with some level of trust—those created this possibility of people being able to save for themselves or for their family members. It created an economic future that they couldn’t really create before. Before capital markets and financial innovations like that, a retirement plan was to have a lot of kids and then make sure enough of them lived long enough to support you when you got old. Finance, on the one hand, reduced the need to have a savings plan that was based on reproduction. Then, also, in some sense, it freed up the children to do what they want.