Austerity may have impoverished millions to save a dying banking sector.

Evidence

Is there any evidence for this bold conjecture? A bit. Banks everywhere are delevering, which will reduce lending, hitting growth and thus the volume of business that they conduct. Bank equity prices and market capitalization have fallen drastically over the past two years. Revenues by asset class are falling. Underwriting has shrunk and trading is not what it used to be. Fixed costs are increasing while bonuses are shrinking and the sector as a whole is getting smaller. Meanwhile, what growth there is seems to be on the retail rather than the investment banking side. But retail depends more directly on the real economy, which is shrinking because of austerity. In sum, we may have impoverished a few million people to save an industry of dubious social utility that is now on its last legs. This is a discomfiting thought that strongly suggests that we really should not have bailed them after all. — Mark Blyth, Austerity, 630

Categorization

• SEED: Angle for an essay: the transfer of wealth from the real economy to a structurally-declining financial sector as a distinct form of sacrifice — who actually got sacrificed for whom.
• XREF: The ‘dubious social utility’ claim connects to the broader finance-critique literature and to the running theme of sacrifices made in the name of stability for the already-wealthy. — connects to: Austerity suppresses consumer demand by starving the population that sustains the economy — Clara E. Mattei, Escape from Capitalism, 349; Austerity transmitted sovereign-risk to the banks that held the bonds. — Mark Blyth, Austerity: The History of a Dangerous…, 31; Austerity is state intervention transferring resources from the many to the few — Clara E. Mattei, Escape from Capitalism: An Intervention, 195 (+2 more)

Broader Connections

• Austerity suppresses consumer demand by starving the population that sustains the economy #expands (0.95) — Clara E. Mattei, Escape from Capitalism, 349
• Austerity transmitted sovereign-risk to the banks that held the bonds. #expands (0.80) — Mark Blyth, Austerity, 31
• Economics escaped crisis blame because the banking sector it protected escaped unscathed #expands (0.80) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 555
• Austerity is state intervention transferring resources from the many to the few #expands (0.75) — Clara E. Mattei, Escape from Capitalism, 195
• Austerity is a counteroffensive that shifts resources from workers to investors. #expands (0.75) — Clara E. Mattei, The Capital Order, 1467