[W]e have lost sight of the crucial difference between productive investment and gambling, between the banker and the bookie, and between the insurer and the speculator. Productive investment in a farm… education, physical infrastructure… increases the real wealth of the society. The proper function of the banker is to convert savings into productive investment. The role of the bookie is to calculate the odds and hold the bets of people who are gambling on the outcome of a race in which they have no other skin in the game. Gambling on which horse is going to win the Kentucky Derby produces no new value for society.
Wall Street defenders commonly argue… speculation stabilizes markets and protects real producers and real consumers from disruptive price swings. Beyond the mounting evidence that Wall Street speculation often creates and accentuates price volatility, this represents a failure to distinguish between the function of the insurer, who serves a vitally important social function by pooling risks to folks who have real skin in the game, and that of the speculator who has no other skin in the game beyond the bet placed with the bookie…
Conventional banking and insurance are… essential… functions and they merit the support of public policy. These functions, however, are of little interest to Wall Street bankers who find gambling, bookmaking, usury, financial fraud, extortion, and the inflation of financial bubbles to be more profitable lines of business. With the benefit of massive public bailout funds, Wall Street is back to business as usual. Productive Main Street businesses continue to be starved… because Wall Street is not in the business of funding productive investment.
Whether Wall Street banks have a right to engage in purely predatory activities may be subject to debate…. however…. such activities should not enjoy the support of public subsidies and guarantees. [C]onventional banking and insurance functions are essential to the health and function of the society… [W]e must take steps to create and strengthen specialized institutions designed and managed to perform these functions in response to the real needs of healthy Main Street, real-wealth economies.
"Skin in the game" is Korten's figure for a person's material stake in an outcome, and part of what interests me in his formulation (apart from my agreement with him), is that it connects to the larger critique of definitive and fraudulent neoliberal de-materialization of human enterprise.
From digitization, to financialization, to logo-ization, to strategies of labor outsourcing and crowdsourcing, profit via cost-externalization, reckless loans bundled into phony solidities, promotional re-packaging of the status quo as novelty and progress: Time and time again neoliberalism indulges in fraudulent schemes in which insubstantial wishes, notions, promises are peddled through deceptions and misdirections of attention as if they were substantial products, or, to the contrary, misdirects attention away from substantial costs and risks onto comparatively insubstantial geographical or futurological distances, where devastating labor conditions and environmental impacts and tragic person dislocations of market volatility vanish from our concern.
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