The Value of Everything: Making and Taking in the Global Economy

by Mariana Mazzucato

By licensing only a few investment banks, governments granted them the monopoly power needed to co-ordinate expansion of related industries, and to achieve the profit required to absorb high risks.6 The banks’ unique role in development was recognized by some mid-twentieth-century economists, notably Joseph Schumpeter (1934) and Alexander Gerschenkron (1962).7 The ‘banking problem’ arose because, as the twentieth century progressed, banks’ role in fuelling economic development steadily diminished in theory and practice–while their success in generating revenue and profit, through operations paid for by households, firms and governments, steadily increased. A fast-expanding part of the economy in the middle of the twentieth century was not being accounted for in the national accounts. The economists (like Schumpeter and Gerschenkron) who had ascribed banks a key role in development were nevertheless clear that they achieved this through exercising a degree of monopoly power, collecting rent as well as profit.