Either ;-If the body politic is not cured of Anglo-Disease
Or;- if the anglo-disease is not removed/expelled from the body politic.

keep to the Fen Causeway

This 'promise of insight' should be based on the following:

The model of financial capitalism is thus all-encompassing, not only grabbing an increasing share of the economic pie, but also dominating all politicial and economic discourse.

The reality, unfortunately, is that a massive inequality, declining or stagnant living standards for the majority, which spend more than they earn, and, as a consequence, a massive bill pushed out into the future. Well, that future is now, and the imbalances will only be unwound if incomes match spending, which can happen via lower spending or via higher incomes.

This is the core message. The paradox of capitalism.

Sorry i don't have time for more at the moment....

You can't be me, I'm taken

I think we should make versions in several languages, like we are doing for the petition, and send them to prominent newspapers like "Le Monde".

Here are a few remarks:

First, I think that, for a wider audience and to avoid knee-jerk nationalist rejection, we should avoid to use the term "Anglo Disease". I propose to use "Financial disease" and "Financial feudalism" instead.

Some suggestions (in bold):

The dominance of the financial world can be readily seen in the growth of the share of financial firms in total corporate profits (from below 20% in the 70s to above 40% today), in the capture of a large chunk of the net growth in total incomes by the richest few - most of them directly working in the financial industry, or benefitting from financial investments - and by the concentration of foreign investment in the UK in mono-activity London.

We are not against profit and return on equity, but against excessive profit and unrealistic ROE, so:

Thus the financial world imposes its unrelenting focus on short-term profits and shareholder value on all economic activities; the domination of unrealistic (or unsustainable) "return on capital" criteria ensures that many activities outside finance are in decline, as they struggle to reach the required returns on potential investments.

Financial analysis sees any regulation as bad, not only government ones.

Financial analysis sees labor as a cost, reducing profits, and pushes for its reduction, either via outsourcing, offsorisation offshoring or wage stagnation. Similarly, government regulations are seen as restrictions on profit to be fought and eliminated, as, naturally, taxes.

Here, I think we should mention the decrease in labour income share of the GDP, too.

To boost domestic demand in the face of flat stagnant incomes, debt has been pushed on households as the way to keep on increasing their spending, leading to negative saving rates to the further benefit of the industry that provides the loans.

Just like the Dutch disease was caused by a new sector providing temporary windfalls, the Anglo disease was made possible by the combination of technological progress in the financial world, the loosening of regulations in the financial sector, the long bond bull market created by Volcker's successful fight against inflation and the successful promotion of the ideology of greed by the right (with the timely fall of the Berlin Wall providing an additional boost by discrediting the other extreme of the ideological spectrum).

In the 70s, the Economist coined the label "Dutch Disease" to describe the economic travails of the Netherlands as the country's export-oriented industrial sector struggled with increased exchange rates. These were caused by the rapid growth in gas exports following the discovery and development of the massive Groningen field. The extractive sector was so profitable that it captured a large share of new investment, and its export volume was large enough to alter the trade balance and boost the currency, further rendering other activities less attractive.

Today, a similar phenomenon, but on a larger scale, concerns the financial industry, the high profitability of which over a number of years has weakened other sectors of the economy. As this has developed around the money centers in New York and, in an even more concentrated way, London, I suggest calling this the "Anglo Disease."

Along the lines of the "oil curse" that has struck many oil exporting countries,  the Anglo Disease carries its own curse, of which the early symptoms can be observed in the current financial crisis.

The ascendancy of the financial world can readily be seen in the growth of the share of financial firms in total corporate profits (from below 20% in the 70s to above 40% today), in the capture by the richest few - most of them directly working in the financial industry, or benefitting from financial investments - of a large chunk of the net growth in total incomes, and by the concentration of foreign investment in the UK in mono-activity London.

Financiers, with their ability to monetize future revenue streams today, generate instant profits which they and, to a lesser extent, their clients and employers, can capture. That capacity to create apparent wealth out of thin air cannot be matched by any other sector in the economy. It is not surprising that it sucks in talent, resources and money. Meanwhile, the investors who have made those immediate profits possible still want to ensure that the future flows that underpin them do in fact materialise. To this end, they will impose their rules and discipline on the underlying economic activity.

Thus the financial world imposes its unrelenting focus on profits and shareholder value on all economic activities; the domination of "return on capital" criteria ensures that many activities outside finance are in decline, as they struggle to reach the required returns on potential investments. Financial analysis sees labour as a cost, reducing profits, and pushes for its reduction, either via outsourcing, offshorisation or wage stagnation. Similarly, government regulations are seen as restrictions on profit to be fought and eliminated, as also, naturally, are taxes.

But flat incomes debilitate domestic demand. Easy credit -  to the further benefit of the industry that provides the loans - has been the means to keep household spending on the increase. The combination of expansionist monetary policies in the West and mercantilist policies in China has offered rapid asset price increases at the same time as no inflation, thus generating massive (and increasingly less taxed) corporate profits. The reality, of course, was that of huge global imbalances and a massive bubble, but for a long time it looked like the holy grail of perfect growth. That illusion further appeared to validate the policies that underpinned the system.

The model of financial capitalism is thus all-encompassing, not only grabbing an increasing share of the economic pie, but also dominating all political and economic discourse.

The unfortunate result has been massive inequality, declining or stagnant living standards for the majority, who spend more than they earn, and, as a consequence, a colossal bill passed on to the future. Well, that bill is coming due. The imbalances will only be unwound if incomes match spending. There are two ways for this to happen: lower spending, or higher incomes.

In the financial capitalism model, incomes are a cost and should not increase. If that logic prevails - if our body politic is not cured of the Anglo Disease - spending will crash and a recession is not only inevitable but likely to be very painful, as the real economy slows down brutally, and the financial bets that ride it suddenly look highly unreasonable, and turn into losses (as is happening already in the subprime sector).

If, to the contrary, policies cease their focus on profit support and instead seek to increase incomes for the poor and the middle classes, to invest in the real economy (for instance via plans to boost energy efficiency in the household sector, and renewable energies) rather than in monetising its existing activities, to tax today's wealthy rather than tomorrow's citizens, then there is a chance of limiting the crash.

Just as the Dutch Disease was caused by windfalls from a new sector, the Anglo Disease was made possible by the combination of technological progress in the financial world, the long bond bull market created by Volcker's successful fight against inflation and the successful promotion of the ideology of greed by the right (with the timely fall of the Berlin Wall providing an additional boost by discrediting the other extreme of the ideological spectrum). The great middle classes created by the Keynesian policies of the New Deal have now been exploited for the past 30 years, and they are depleted. The economy will need to find another, more real, way to grow and prosper.

I see your critique running parallel to an earlier critique of capitalism.  It was informed by ideas of class struggle but was not Marxist; it is a history I have been trying to understand.

Hannah Arendt in the chapter The Political Emancipation of the Bourgeoisie in Origins of Totalitarianism writes of imperialism in foreign lands by economically motivated capitalists:

Here, in the backwater regions without industries and political organization, where violence was given more latitude than in any Western country, the so-called laws of capitalism were actually allowed to create realities.  The bourgeoisie's empty desire to have money beget money as men beget men had remained an ugly dream as long as money had to go the long way of investment in production; not money had begotten money, but men had made things and money.  The secret of the new happy fulfillment was precisely that economic laws no longer stood in the way of the greed of the owning classes. Money could finally beget money because power, with complete disregard for all laws- economic as well as ethical- could appropriate wealth.

For Arendt this was the reason capitalists fought against the state's control of wealth accumulation and why capitalists seeking markets and resources overseas fought the state for the control of the means of violence.  She would have seen the Iraq war with Bush's planned transformation of Iraq and his resistance to national institutions, and the well-being of the national common wealth, as a classic example of expansionistic capital.

Financiers, with their ability to monetize today future revenue streams, are able to generate instant profits which can be captured by them and, to a lesser extent, their clients and employers.

I don't know how to work it in or even if it is worth 'going there' but once the stream of payments have been incorporated using PV or NPV calculations the entire future has been included in the present.  The problem is the ignoring of the actual cash affect on the future.  

Let me explain.

Borrowing $100,000 over 10 years at 7.5% gives a quarterly payment of $2,509.15.  According to theory the stream-of-payments of $2,509 per quarter has the exact same value as the $100,000 in the hand.  But the actual cash-out of the loan, to the borrower, is $100,366.  

Now let's look at a mortgage.

A $225,000 home at 6% over 30 years with a monthly payment of $1,342.28 means a cash total of $483,219.82 for the property, $258,219.82 of cash-out above the selling price.  That $258k is money already spent, as it were, unavailable for other purchases.  This means the $258k is legally bound to go into the Financial Sector, increasing the total capital available to that sector, privileging the Financial versus the Manufacturing Sector.  

Further, since the Financial Sector can monetarize the debt payments, and the Manufacturing cannot, the former can effectively deploy 30 years of Sales (Capital) to the latter's 1.  The Financial Sector also removes the potential of the $258k being spent 'in' the Manufacturing Sector.

After all a buck, a yen, a euro, or a pound held by a consumer can only be spent once.

The more consumer spending, the majority of economic activity in an economy, is captured by the Financial Sector it must follow the less flows into other areas thus a positive feedback loop is established.  This feedback loop implies, to shorten the analysis, a lowering of total economic activity in direct proportion to the Financial Sector's percentage of the economy.

[As always, criticisms requested and appreciated.]

 

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

Paragraph 1:  In the 1970s the Dutch economy was . . . (describe most striking symptoms of "Dutch disease"--in one sentence, if possible).  Today, by contrast, the financial sector in western economies is . . . (describe most deleterious effects of financial sector weakening other economic sectors, widening inequality, stagnating incomes--in one sentence, if possible).

Paragraph 2:  The Economist coined the phrase "Dutch disease" to describe . . . .  I propose [for the reasons you already give in paragraph 2] to call the current phenomenon "the Anglo disease."  

Then go on from paragraph 3, more or less "as is."  I think it's a splendid piece on the whole!

I also find the chart especially striking, not least in the fact that it's almost perfectly symmetrical--as if the financial sector actually battened on the manufacturing sector, like leeches or a vampire, gradually draining out its victim's life force.  Maybe I'm "over-interpreting" here, but it makes a very striking image, all the same!

The phrase "just like the Dutch disease was caused..." should read "just as the Dutch disease was caused..."

Excellent article. Just want to make the grammar perfect.

The reality, unfortunately, is that a massive inequality, declining or stagnant living standards for the majority, which spend more than they earn, and, as a consequence, a massive bill pushed out into the future.

is a grammar error. It could be rephrased as, for example, "the reality, unfortunately, is a massive inequality...". Losing the "that" seems to work.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi