The economist Simon Johnson, who this year was one of the Nobel Prize winners in Economics, has considered for years that it is necessary to reform the banking sector, which accumulates too much power and threatens economic and social stability.
In 2011, Simon Johnson wrote with historian James Kwak a book called ’13 Bankers’ with an analysis of the banking sector in the United States of America. The authors criticize the disproportionate size of many banks (such as JP Morgan and Goldman Sachs) and consider that the excessive power they acquired led to the capture of governments (placing people in key positions in the North American Administration) and influenced the decisions of several American presidents, contributing decisively to the 2007-2009 crisis and the global recession.
The authors also mention that these banks (which they even call “oligarchy”) managed to avoid significant regulatory reforms after the financial crisis.
In the book they say that the 13 bankers who met at the White House with the president of the United States in March 2009 – in a meeting in which Barack Obama criticized the sector, the million-dollar salaries and the lack of financing for companies after several state bailouts and asked them for support for the reforms he wanted to carry out: they were completely saved (their bonuses, their pensions, their teams, everything remained the same).
The authors argue that megabanks are not only too big to fail but also too big for the common good, which is why they advocate reducing their size (for example, assets and liabilities represent a maximum of 3% of the country’s Gross Domestic Product ).
Over the years, Simon Johnson continued to criticize the financial system and speak of the need to strengthen it.
In 2016, an article in Project Syndicate claimed that a dozen banks dominated the global financial landscape and that after the crisis, bailouts and reforms in the United States and the European Union, the financial system was in both regions and globally “ similar to that of 2006.” .
In 2023, in a long interview with economist Tyler Cowen’s podcast, Simon Johnson said he remained “very concerned about the concentration of economic and political power in the hands of these very large banks,” but also maintains that this is not the only problem. . and that there are also problems and risks of contagion in other parts of the financial system.
Johnson also considered that “the banking sector is a difficult business and full of problems” and risks for the rest of society “however it is organized.”
Simon Johnson, 61, was chief economist of the International Monetary Fund (IMF) and is currently a professor at the North American university Massachusetts Institute of Technology (MIT).
Two weeks ago he won the 2024 Nobel Prize in Economics together with the Turkish-American Daron Acemoglu and the British-American James A. Robinson. The Royal Swedish Academy of Sciences awarded them for demonstrating the importance of social institutions in the prosperity of countries.
In 2023, together with Daron Acemoglu, Simon Johnson published the book ‘Power and Progress’ about how technological development and increasing wealth do not necessarily mean prosperity for everyone.
There, the authors analyze history to give several examples. They explain how great advances in agriculture in medieval times led to greater productivity and wealth for some, allowing the construction of great cathedrals in Europe, while peasants had terrible living conditions. They also recall the miserable conditions of the working class in the textile factories of Manchester, in the United Kingdom, in the 19th century.
In ‘Power and Progress’, they consider that there is a great risk in allowing a small group of people, an elite, to monopolize the benefits of innovation and consider that it is essential that strong social and political forces exist so that technological advances are distributed fairly and promote collective well-being.
In the interview with Cowen’s podcast, Johnson considered that there is a vision of ‘techno-optimism’ that considers that technology improves the productivity and lives of populations, benefiting everyone, and said that he does not agree with this idea, predicting that will not happen if technology is not modeled to focus on the common good.
Johnson cites the work of Daron Acemoglu and Pascual Restrepo on how automation is used to replace workers without improving productivity or wages, leading to disastrous consequences for society from the start in terms of employment. The favorite example is supermarket “self-service” machines, where work that belonged to employees is transferred to consumers without increased productivity or better wages.
For Johnson, what bothers him most is the “lack of good salaries”, and especially the low salary increase since 1970 for the least qualified people, and he says he fears that technology will replace many workers and make the situation worse. Lack of improvements in real wages.
Last week, in an interview with France Presse, Simon Johnson considered that one of the most serious problems facing democracies is their inability to produce results that populations feel beneficial and said that leaving the development and impacts of technology and artificial intelligence in the hands of the The ‘gurus’ of the large technology companies (the so-called ‘big tech’) make them serve their wealth.
In 2010, Simon Johnson considered that Portugal was “on the verge of bankruptcy”, which displeased the Government (PS). Then, the Minister of Finance, Teixeira dos Santos, described the statements as “nonsense” and “ignorance.”
Source: Observadora
