The Financial-Industrial Complex
Simon Johnson has an article in the NYTimes today with another suggestion on reforming the finance industry. He compares the dangers we face from this industry to the dangers Eisenhower warned about with the defense industry in 1961. His conclusion is that we need to create something like a Lincoln Labs for finance. The idea appears to be based on this article about breakthrough ideas in the Harvard Business Review.
It’s kind of an interesting idea. One of the reasons we were given for deregulating the financial industry is that nobody in the government can really understand what the banks are doing. But the same is also true of the relationship between DOD and the companies who make the fighter planes and missiles, so perhaps there are some useful models there.
There are a bunch of other neat ideas in that HBR article, so you might want to read the whole thing.
On a related note, I just finished reading Elizabeth Warren’s book The Two-Income Trap. It also contains a number of interesting ideas about the recent debt crisis. She did a study which seems to show that the root cause of the American middle class’ increasing debt load wasn’t plasma TVs and SUVs. It was fixed costs resulting from a bidding war for access to quality education for our children. I recommend this book, but it’ll probably make you angry.
