Feature

The mythical knights of Wall Street

There’s a Wall Street fairy tale that needs debunking.

Paul KrugmanThe New York Times

There’s a Wall Street fairy tale that needs debunking, said Paul Krugman. “Once upon a time,” the story goes, “America was a land of lazy managers and slacker workers.” Productivity was weak and our global competitive edge had dulled. But then “square-jawed, tough-minded buyout kings like Mitt Romney” came to the rescue and made our wayward industries more disciplined and efficient, bringing a great economic revival to the kingdom, with trickle-down benefits for all. “You can see why Wall Street likes this story.” Too bad none of it is true, except the part about the financiers making lots of money—for themselves. The productivity surge they allegedly fostered “never actually happened.” Output in the U.S. grew faster in the decades after World War II, when banks were regulated and private equity was rare, than it has over the past 30 years. The U.S. had no big trade deficits until “the era of runaway finance.” And few gains from Wall Street’s boom have been passed on to American workers. It’s one thing for the Masters of the Universe to amass vast wealth while the economy suffers. It’s quite another to ask us to believe their self-serving fables.  

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