In his latest book, Finance and the Good Society, Yale Professor Robert Shiller takes a view that runs contrary to the popular (and populist) wisdom these days: Wall Street is good for society.
"This time in history will be remembered as a time financial capitalism took over the world," Shiller says. "A time when emerging countries became developed. The plan we're on is going to yield a remarkable world in the future. It's really about finance."
According to Shiller, no nation can truly prosper without modern financial institutions. Furthermore, "we have to think the financial institutions we have today are part of a long historic progress to a better world, a better civilization."
Given all that's transpired since the crisis of 2008 — huge payouts for executives at faltering banks, taxpayer-funded bailouts and a slow recovery from deep recession — it's fair to say Shiller is in the minority on this, at least among those willing to speak publicly.
But Shiller is no apologist for Wall Street excess and understands the Occupy Wall Street movement arose, in part, because of a sense "people in the financial community lost [their] morality."
To combat this "race to the bottom," he is for a robust regulatory regime, both by the government and by the industry. "Ultimately you have to have morals and principles. You want it to be a good clean game," Shiller says. "Regulation is part of the picture."
Shiller's latest book provides some guidelines for this, as well as what he calls "a bunch of ideas" to democratize finance, by which he means "expanding it so this powerful technology accrues to the benefit of everyone, not just the minority."
Of course, many would argue financial capitalism — by definition — needs winners and losers and therefore breeds income inequality. Shiller doesn't deny this — "finance seems to breed inequality because it's such a powerful technology for wealth creation," he says — but believes the information technology revolution is more responsible for income inequality vs. the financial capitalism revolution.
"Our jobs situation is changing so fast because of IT, but that doesn't mean it's finance that's doing it," he says.
Again, this is unconventional wisdom. Today, most people see IT as improving their lives and don't begrudge Silicon Valley entrepreneurs for their untold wealth. Meanwhile, many see finance precisely as the "great vampire squid wrapped around the face of humanity," as Matt Taibbi famously described Goldman Sachs.
If Shiller is right, finance is doing more for us than we appreciate and IT isn't necessarily working toward the greater good. Still, 'Occupy Silicon Valley' just doesn't have the same ring.
- Robert Shiller