# Why we can’t grow our way out of this (Part 1 of 2) Date: 2025-08-16 Next Part: https://disrael.github.io/blogs/raw/why-we-can-t-grow-our-way-out-of-this.part2.md --- --- ### Why we can’t grow our way out of this Paul Krugman has a new series on “[Understanding Inequality](https://stonecenter.gc.cuny.edu/wealth-and-power-paul-krugman-understanding-inequality-part-vi/)” that’s very good at explaining the what of inequality but so far (there will be one more installment in the seven part series) not the why. In fairness to Krugman he does go as far as he can explaining why without making himself look bad and that’s not nothing. Krugman explains that [Predatory Financialization](https://stonecenter.gc.cuny.edu/predatory-financialization-paul-krugman-understanding-inequality-part-v) took over much of the United States economy and made fortunes for some without much benefit for the many. But why did the financialization happen? There is a glimmer of the reason in this paragraph: > Finally, although this is hard to document, it has been obvious to me over the years that the wealthy — and successful businesspeople in particular — have outsized influence on policy in part because people assume that they must know what they’re talking about, even in areas that have nothing to do with their business. My friend [Barry Ritholtz](https://paulkrugman.substack.com/p/a-conversation-with-barry-ritholtz) calls this the “halo effect.” I and other progressive economists lost some arguments, especially about taking a harder line with bailed-out banks, during the early Obama years. I would come back from these meetings saying, only partly in jest, that part of the problem was that the bankers had really good tailors, which made them seem more serious than disheveled academics, even if some of us had Nobel prizes. Predatory financialization is a fancy word for fraud. The bulk of the American economy has been, for almost fifty years, fraudulent. Whether it was the financial sector, the tech sector, the healthcare sector, or even the education sector, larger and larger sums of money have been collected for services which simply aren’t worth it and in some cases are actually harmful or at least worse than their pre-financialization equivalents. People are reluctant to point out this fraud because their jobs are fraudulent also. If everyone is naked then mentioning the emperor is naked becomes more difficult. This includes Krugman as well who in the paragraph above is forced to use his fraudulent “Nobel” prize to justify his authority. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel is given by Sweden’s central bank and its recipients, like 1976 winner Milton Friedman, are all guilty of promoting financialization in one way or another (at a minimum accepting a fraudulent prize helps keep the fraud going). So fraud causes inequality and inequality causes more fraud, but how did the fraud start? Google AI has a nice summary which is itself fraudulent: > The 1980s were a transformative decade for technology, marked by the rise of personal computing, the proliferation of portable devices, and advancements in communication and entertainment. Key innovations included the [IBM PC](https://www.google.com/search?sca_esv=abfe88eb74890cc8&sxsrf=AE3TifNDY-42gry4enJ5ipkPpqobBZXHvg%3A1755317521562&q=IBM+PC&sa=X&sqi=2&ved=2ahUKEwjW2Nyqu46PAxVyv4kEHegzKk0QxccNegQIKBAB&mstk=AUtExfDeow1o7oXDJpeyGmufhpTEAZsU2EdtllP35ea9e7vhnqvyxR1EDAQbJ8eWIGmI6Ad84jJ0EKxMwRcmSVwLMB5pk4BNrkYPFeKKFGe83al_iwHIREzit0O4oHxv6_z5Jjb5oCw4XSoTN6Qvr2pYDi8TZi1la4gQNxEcxS9V-0KYpC9zTFPs-g2tAv4qUKPxlURumgkbtbFpej9RzAYJxTzjNQtO_J7XjbrLDenx8MSmiqSfVmIQ-knDf1fm_8pBvQhX47FDluoQ6BAa-uLSXJA20JHaVNPQ9omgmIDxyL2VZO5F_6c-JcZqnia02VElG7HjGjTsIZdGiMZwQKxreXI0gstbshH_1OU8Rq3o2OLfjO5TxMiCdEPicFo_hYQ8vSVSPyjDOa3xKofrEO7dTA&csui=3) and [Apple Macintosh](https://www.google.com/search?sca_esv=abfe88eb74890cc8&sxsrf=AE3TifNDY-42gry4enJ5ipkPpqobBZXHvg%3A1755317521562&q=Apple+Macintosh&sa=X&sqi=2&ved=2ahUKEwjW2Nyqu46PAxVyv4kEHegzKk0QxccNegQIKBAC&mstk=AUtExfDeow1o7oXDJpeyGmufhpTEAZsU2EdtllP35ea9e7vhnqvyxR1EDAQbJ8eWIGmI6Ad84jJ0EKxMwRcmSVwLMB5pk4BNrkYPFeKKFGe83al_iwHIREzit0O4oHxv6_z5Jjb5oCw4XSoTN6Qvr2pYDi8TZi1la4gQNxEcxS9V-0KYpC9zTFPs-g2tAv4qUKPxlURumgkbtbFpej9RzAYJxTzjNQtO_J7XjbrLDenx8MSmiqSfVmIQ-knDf1fm_8pBvQhX47FDluoQ6BAa-uLSXJA20JHaVNPQ9omgmIDxyL2VZO5F_6c-JcZqnia02VElG7HjGjTsIZdGiMZwQKxreXI0gstbshH_1OU8Rq3o2OLfjO5TxMiCdEPicFo_hYQ8vSVSPyjDOa3xKofrEO7dTA&csui=3), the [Sony Walkman](https://www.google.com/search?sca_esv=abfe88eb74890cc8&sxsrf=AE3TifNDY-42gry4enJ5ipkPpqobBZXHvg%3A1755317521562&q=Sony+Walkman&sa=X&sqi=2&ved=2ahUKEwjW2Nyqu46PAxVyv4kEHegzKk0QxccNegQIKBAD&mstk=AUtExfDeow1o7oXDJpeyGmufhpTEAZsU2EdtllP35ea9e7vhnqvyxR1EDAQbJ8eWIGmI6Ad84jJ0EKxMwRcmSVwLMB5pk4BNrkYPFeKKFGe83al_iwHIREzit0O4oHxv6_z5Jjb5oCw4XSoTN6Qvr2pYDi8TZi1la4gQNxEcxS9V-0KYpC9zTFPs-g2tAv4qUKPxlURumgkbtbFpej9RzAYJxTzjNQtO_J7XjbrLDenx8MSmiqSfVmIQ-knDf1fm_8pBvQhX47FDluoQ6BAa-uLSXJA20JHaVNPQ9omgmIDxyL2VZO5F_6c-JcZqnia02VElG7HjGjTsIZdGiMZwQKxreXI0gstbshH_1OU8Rq3o2OLfjO5TxMiCdEPicFo_hYQ8vSVSPyjDOa3xKofrEO7dTA&csui=3), and the widespread adoption of [microwave ovens](https://www.google.com/search?sca_esv=abfe88eb74890cc8&sxsrf=AE3TifNDY-42gry4enJ5ipkPpqobBZXHvg%3A1755317521562&q=microwave+ovens&sa=X&sqi=2&ved=2ahUKEwjW2Nyqu46PAxVyv4kEHegzKk0QxccNegQIKBAE&mstk=AUtExfDeow1o7oXDJpeyGmufhpTEAZsU2EdtllP35ea9e7vhnqvyxR1EDAQbJ8eWIGmI6Ad84jJ0EKxMwRcmSVwLMB5pk4BNrkYPFeKKFGe83al_iwHIREzit0O4oHxv6_z5Jjb5oCw4XSoTN6Qvr2pYDi8TZi1la4gQNxEcxS9V-0KYpC9zTFPs-g2tAv4qUKPxlURumgkbtbFpej9RzAYJxTzjNQtO_J7XjbrLDenx8MSmiqSfVmIQ-knDf1fm_8pBvQhX47FDluoQ6BAa-uLSXJA20JHaVNPQ9omgmIDxyL2VZO5F_6c-JcZqnia02VElG7HjGjTsIZdGiMZwQKxreXI0gstbshH_1OU8Rq3o2OLfjO5TxMiCdEPicFo_hYQ8vSVSPyjDOa3xKofrEO7dTA&csui=3), [cordless phones](https://www.google.com/search?sca_esv=abfe88eb74890cc8&sxsrf=AE3TifNDY-42gry4enJ5ipkPpqobBZXHvg%3A1755317521562&q=cordless+phones&sa=X&sqi=2&ved=2ahUKEwjW2Nyqu46PAxVyv4kEHegzKk0QxccNegQIKBAF&mstk=AUtExfDeow1o7oXDJpeyGmufhpTEAZsU2EdtllP35ea9e7vhnqvyxR1EDAQbJ8eWIGmI6Ad84jJ0EKxMwRcmSVwLMB5pk4BNrkYPFeKKFGe83al_iwHIREzit0O4oHxv6_z5Jjb5oCw4XSoTN6Qvr2pYDi8TZi1la4gQNxEcxS9V-0KYpC9zTFPs-g2tAv4qUKPxlURumgkbtbFpej9RzAYJxTzjNQtO_J7XjbrLDenx8MSmiqSfVmIQ-knDf1fm_8pBvQhX47FDluoQ6BAa-uLSXJA20JHaVNPQ9omgmIDxyL2VZO5F_6c-JcZqnia02VElG7HjGjTsIZdGiMZwQKxreXI0gstbshH_1OU8Rq3o2OLfjO5TxMiCdEPicFo_hYQ8vSVSPyjDOa3xKofrEO7dTA&csui=3), and [cellular phones](https://www.google.com/search?sca_esv=abfe88eb74890cc8&sxsrf=AE3TifNDY-42gry4enJ5ipkPpqobBZXHvg%3A1755317521562&q=cellular+phones&sa=X&sqi=2&ved=2ahUKEwjW2Nyqu46PAxVyv4kEHegzKk0QxccNegQIKBAG&mstk=AUtExfDeow1o7oXDJpeyGmufhpTEAZsU2EdtllP35ea9e7vhnqvyxR1EDAQbJ8eWIGmI6Ad84jJ0EKxMwRcmSVwLMB5pk4BNrkYPFeKKFGe83al_iwHIREzit0O4oHxv6_z5Jjb5oCw4XSoTN6Qvr2pYDi8TZi1la4gQNxEcxS9V-0KYpC9zTFPs-g2tAv4qUKPxlURumgkbtbFpej9RzAYJxTzjNQtO_J7XjbrLDenx8MSmiqSfVmIQ-knDf1fm_8pBvQhX47FDluoQ6BAa-uLSXJA20JHaVNPQ9omgmIDxyL2VZO5F_6c-JcZqnia02VElG7HjGjTsIZdGiMZwQKxreXI0gstbshH_1OU8Rq3o2OLfjO5TxMiCdEPicFo_hYQ8vSVSPyjDOa3xKofrEO7dTA&csui=3). What happened is that the 1980s were not at all a transformative decade for technology but in fact a flop. In his book 23 Things They Don’t Tell You About Capitalism economist Ha-Joon Chang (who doesn’t have a “Nobel” prize) explains that the impact of recent technology has been greatly exaggerated compared to previous advances like steam engines, electricity, and washing machines. It’s not that similarly transformative technology is impossible. Just that it’s very difficult. First our economy isn’t and never was very good at the sort of very long range investment necessary for higher hanging fruit transformations. Green tech would be transformative but fraud is a lot easier than a worldwide clean up of pollution. --- **[Continue reading Part 2 of 2](https://disrael.github.io/blogs/raw/why-we-can-t-grow-our-way-out-of-this.part2.md)**