The Dangers of Demonology

A writer at The Economist notes that hatred of bankers is one of the world’s oldest and most dangerous prejudices:

Civilisations that have eased the ban on moneylending have grown rich. Those that have retained it have stagnated. Northern Italy boomed in the 15th century when the Medicis and other banking families found ways to bend the rules. Economic leadership passed to Protestant Europe when Luther and Calvin made moneylending acceptable. As Europe pulled ahead, the usury-banning Islamic world remained mired in poverty.


In medieval Europe Jews were persecuted not only because they were not Christians but also because killing them was a quick way to expunge debts. Karl Marx, who came from a Jewish family, regarded Jews as the embodiments of capitalism who could only be rescued from their ancestral curse through revolution. The forgers of the “Protocols of the Learned Elders of Zion” wanted people to believe that Jewish financiers were engaged in a fiendish global conspiracy. Louis McFadden, the chairman of the United States House Committee on Banking and Currency in the 1930s, claimed that “the Gentiles have the slips of paper while the Jews have the lawful money.” The same canards have been used against Chinese minorities across Asia.

It can be reasonably argued that the financial industry in the US, and probably also in Europe, is too large as a % of the overall economy and also far too influential in political affairs–see my post about sticky governors. But the unthinking demonization of finance as an activity, and of people involved in that activity, is counterproductive, and, as the Economist author argues, dangerous.

via Stuart Schneiderman

6 thoughts on “The Dangers of Demonology”

  1. Not just hatred of bankers but, now, especially, misunderstanding of financial instruments and finance in general. One of the weaknesses of our educational system is its failure to teach economics and economic history, including the critical role of financial markets in economic development. Without a robust, open financial sector that matches entrepreneurs and investors along the continuum of low-to-high risk/reward, our capital-intensive high-growth industries would not exist as we know them. Without capital markets, derivatives, investment banking, VCs, proprietary trading, securitization and so forth, startup businesses could only get capital from inheritances, personal savings, friends & family arrangements, bank loans and the government. This would dramatically reduce the growth of promising new businesses and economic growth overall.

    Our schools teach about explorers but often without explaining that the early explorers were usually out to make a lot of money and were typically financed by governments, wealthy patrons or sometimes by stock companies or what we would call limited partnerships. Finance was inextricable from early exploration and economic expansion, as modern finance is critical to today’s tech-driven economic development.

  2. @Johathan – the part about the explorers is very true – I just read Zewig’s book about Magellan and the first third of the book was dedicated to how Magellan had to get his finances in order for the trip. Very interesting stuff. I am overdue to do a book review on that book.

  3. It’s code for the all-powerful, evil, and degenerate you-know-whooooos.

    Let’s not pretend otherwise.

  4. Demonization of finance is inevitable after too long a season where finance received too much adulation. Consistent practice for most of this nation’s history was similar to that applied to explosives manufacturing: allow it because of its utility when properly applied but do all you can to minimize and contain the explosion when the inevitable industrial accident takes place.

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