Image: City of London skyline. Credit: David Iliff, CC 3.0
In the decade since the financial crisis something has gone badly and obviously wrong with the UK’s political economy. Stagnating wages, low productivity and rising living costs have marked Britain out as an outlier in the developed world. Yet its globalised financial sector continues to generate lavish fees and windfall gains for a brilliant few. Now however, some sense of the downside of hosting an overactive financial sector is becoming clearer. The vigour of finance derives precisely from its ability to capture resources from the rest of the economy. Even as the host sickens, the City of London glows with unearthly health. The proposition that Britain suffers from a financial curse needs to be taken seriously.
Over the next two years in a series of short articles addressing the theme of Lifting the Finance Curse, we will investigate in more detail the costs of accommodating an oversized, rent-seeking financial sector. We will also set out how to alleviate and reduce this drag on the economy. We begin by setting out what we mean by a finance curse, and how to take the first steps to tackle it, by framing it as a problem of political economy. In other words, a problem of the way that politics and economics in Britain combine to promote the interests of favoured insiders.
