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Via Paul Krugman, this comes from a recent paper by Thomas Philippon and Ariell Reshef.  Basically, they created a metric of financial regulation and graphed it against the relative pay of people in the finance industry.  Guess what?  When the market is lightly regulated, pay skyrockets!

Now, sure, a lot of other stuff was going on during this period too, so take this with a grain of salt.  But still: the amount of money being shoveled into the FIRE sector over the past 30 years has been pretty phenomenal, and it’s hardly a stretch to think that that’s pretty tightly correlated with loose regulation, massive leverage, and opaque rocket science derivatives.

What’s more, as Krugman points out, the amount of money going into finance has been so stratospheric lately that it actually has a significant impact on overall income inequality.  It’s only a part of the story, but it’s still a part.  One of the reasons there’s been less money for the middle class, thus spurring ever greater indebtedness in order to keep living standards on the rise, is because our financial titans kept so much of it for themselves.  It’s time for that to stop.  Finance should be the servant of industry, not its master.

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Fact:

In-depth journalism that investigates the powerful takes real money and is so damn important right now.But it doesn’t take a Mother Jones investigation to know that billionaires and corporations will never fund the type of reporting (like they do politicians) we do that exists to help bring about change. Instead, our mission-driven journalism is made possible by people power, and has been for 46 years now since our founding as a non-profit.

In “TITLE TK” Monica Bauerlein writes about the perilous moment we’re in, and why it’s so important that we raise $325,000 by the time November’s midterms are decided so we can be ready to throw everything we have at the big issues facing the nation no matter what happens. Please help MoJo’s people-powered journalism with a donation today.

$400,000 to go!

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