Time Magazine Cover Story Cites Research by UC Davis Economists

magazine coverThe cover story of the May 23 issue of Time magazine, “American Capitalism’s Great Crisis,” cites research by economics faculty Oscar Jorda and Alan M. Taylor.

In the article, Time assistant managing editor and economics columnist Rana Foroohar focuses on the “financialization of America” — the growth of the finance industry and its shift away from investing in business enterprise.

“Academic research shows that only a fraction of all the money washing around the financial markets these days actually makes it to Main Street businesses,” Foroohar writes.

She quoted from a paper by Jorda, Taylor and colleague Moritz Schularick of the Bonn Graduate School of Economics: “The intermediation of household savings for productive investment in the business sector — the textbook description of the financial sector — constitutes only a minor share of the business of banking today.”

Foroohar added: “By their estimates and others, around 15 percent of capital coming from financial institutions today is used to fund business investments, whereas it would have been the majority of what banks did earlier in the 20th century.”

Kathleen Holder, content strategist in the UC Davis College of Letters and Science

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