Economics from a people first point-of-view

Is Your Job Already Outsourced? (part 1 of 3)

Industry Concentration

In my previous blog series on “Banks and People,” I traced how the financial sector is in the process of becoming “concentrated” as a result of the financial crisis. “Concentration” simply means that the share of the market for each bank still standing has increased. In the past year we’ve lost over 140 banks in the US. We’ve lost 180 banks since the financial crisis began. Many more bank failures are expected this year.

Concentration within any industry brings dangers associated with monopoly or oligopoly power at the top. “Rent-seeking” is also found when economic power is concentrated. Rent-seeking is the act of legally appropriating wealth created by other people. Rent-seeking tends to promote economic inequality among individuals and/or among groups of individuals.

But while our attention has been focused on the financial crisis and bank failures, we’ve overlooked the huge foundational shifts taking place in many other sectors of the US economy.  Concentration isn’t just taking place in the banking industry, and concentration has been going not just for a couple years, but during the whole decade.

In this series of three posts, I’ll trace what’s happened in the publishing industry over the past decade as an example. The same pattern found in book publishing also applies to many other parts in our economy.
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Banks and People (part 3 of 3)

At the start of the crisis, the U.S. government said it wanted banks to switch from making investments back to making loans, loans that were sorely needed by businesses and consumers. Now, with TARP about to end, President Obama is still saying the same thing.
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Banks and People (part 2 of 3)

“I’ve been here for three years and never once heard the word ‘people’.” [handwritten note posted on bulletin board in graduate department of Economics at University of Wisconsin-Madison]

Last time we looked at two key pairs of opposites that played a role in the financial crisis.

Liquidity vs Leverage (or “Illiquidity)
Solvency vs. Debt (or “insolvency” )

This time we’ll look at how these pairs of “variables” apply to people and to banks.
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