Misallocation of capital
Tuesday, 23 February 2010
Joe Stiglitz on Worldview just now: “financial sector innovation” sucked up capital; that had an opportunity cost, in that “boring industries” with lower returns were starved of capital. (Echoes of Tom Geoghegan writing about unlimited interest in Harper’s last year. Somehow, I didn’t trust him then, but it makes more sense now.)
If our banks had been boring, like the Canadian banks, maybe we’d actually be in a better place right now. And what did all of this capital thunder towards? A huge volume of it poured into fundamentally unproductive (even counter-productive) suburban sprawl. Way to go.
As Kunstler said, “our suburbs… represent the greatest misallocation of resources in the history of the world.”
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Or, as Ken Layne puts it, “Stucco housing tracts, evil investment banks, ugly big-box retail strips, dumb show-off high-rises, land-raping golf resorts, Hummers — the nation’s financial collapse has taken down so many awful trophies of American Culture, we should probably send it a Thank You note, maybe with a Linens ‘n Things gift card.”