Is Going Into Finance Good for Society? – The Atlantic
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Jeremy Bentham—he’s an Englishman from the 18th-century—wrote a long treatise called Defence of Usury. In that, he took a philosophical rational view of the attack on usury, and asked if we’re really better off if we capped interest rates and didn’t allow people to borrow and so forth.
Lam: What was it like going into the financial industry, say, 1,000 years ago, versus today?
Goetzmann: 1,000 years ago was the period in Europe when the economy was really lighting up after the turn of the millennium. Between 1,000 and 1,200 years ago, I would say it was the beginning of the “bourgeoisization”—where people of the merchant class that used financial tools garnered a lot more respect and actually began to take control of cities in the Italian city-states and southern France. That was a period that, in some ways, was quite admirable because rule wasn’t based on descent.
In China, if you go back 1,000 years ago, you get to the Song dynasty which was this amazing period in financial innovation that embodies a couple of contrasts. On the one hand, there were very clever financial innovations, such as paper money and the creation of long-distance money transfers through paper instruments. But also, the development of a financial bureaucracy. The government took over things like the tea and horse trade, and nationalized a lot of financial operations and sharply constrained the profit that merchants would make.
So just in the moment when merchants in Europe were getting the upper hand, and running the cities themselves, in China there was a constant, grabbing hand that saw the profits that merchant could make out of trade and said, “Why doesn’t the government get that? Why should the merchants get that profit?”
Lam: Were people working in finance always relatively well compensated throughout history?
Goetzmann: Not necessarily. There have always been a lot of people hopeful of making money through financial operations, but there are a lot of failures as well as successes. But maybe what you’re asking is this: What about at the very top?
Is Going Into Finance Good for Society? – The Atlantic}