Jeff Madrick is an Economics columnist and author of Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present (2011). He wrote a great piece for The Washington Post last year that still captures my sociological imagination today. Madrick argues that while America cannot live without Wall Street, it has moved away from its primary function, to support small businesses and to engender economic growth to serve the public, rather than personal interests of an elite few. No sociologist – or ordinary member of the public – is likely to argue against this notion. The entire Occupy Movement has been built around this premise. What I like about this is that Madrick is not arguing for the demise of Wall Street. Like it or not, Wall Street remains an important economic institution. Instead, Madrick argues that American society needs to shift its thinking about Wall Street – to start thinking of it as “expendable”. Why is this view relevant to applied sociology? Theories of social change and revolution are important but we cannot simply wish away the current world order without a firm, concrete plan for change. I see that applied sociology is about working within the confines of reality as it is today, so that institutions can be repaired and later reconfigured once we fix the present. Calling for the abolition of Wall Street has an attractive allure of a fresh start – but what goes in its place? I find Madrick’s analysis useful for thinking about: what does Wall Street look like if it was working as an equitable, transparent and well-regulated social institution? What social policies and social practices are required in order to shift its current practices? The first step is to go back to what Wall Street should be doing, then working out how to ensure that begins to happen.
Consider this excerpt of Madrick’s writing:
We can’t do without Wall Street. Even the Occupy movement wouldn’t argue for its extinction. Someone has to keep our money safe. Making loans with savers’ money to businesses that need it is generally a good idea. Someone has to enable us to make check and credit card transactions, not to mention provide us cash. And someone should offer opportunities for small investors to buy stock and other investments at low costs… And, most important, there should be ways to channel Americans’ savings into investment in business.
But that’s not the Wall Street we have. It has used Americans’ savings to make wildly risky trades that fed bankers’ profits. It has not abided by free-market practices. It has traded complex securities in secret; it is rife with conflicts of interest; it has charged monopoly fees to underwrite securities, advise on takeovers, manage portfolios and make loans. Wall Street has paid its workers to take risks and hasn’t penalized them when they were wrong….
If we began to believe that Wall Street is expendable, perhaps we would regulate it properly so that it would do what it should do, and only that. It should provide a place for Americans to put their savings and channel those savings into the most productive investments, not a round-robin of one casino-like speculation after another.
The Washington Post, 19 Nov 2011.
I recommend this article despite the little slur to sociology at the beginning: “How nice it would be if the 99 percent had never heard of Wall Street — perhaps if it didn’t exist at all. There would be no need to be jealous of your college classmates’ $10 million paydays while you
majored in sociology“.
This point aside, Madrick provides a good discussion point as to why the American economy needs Wall Street, but not in its
current form. What do you make of this? Do you work within an economic institution and if so how does your role as a sociologist fit in? How can applied sociology help in reforming the way Wall Street and free markets currently work?