Since the acute phase of the Great Financial Crisis erupted in September 2008, the response by policymakers has been to save the banks.  The response shows how finance is currently the master of not just the economy, but also politicians.

In the US, this is not surprising.  In the 1990s, Newt Gingrich put Congress up for sale while Bill Clinton put the White House up for sale.  Naturally, the wealthy and the bankers were only to happy to buy both Congress and the White House.

This leads to the obvious question: can society make finance servant, not master of the economy again?

Yes.

We know how to make finance the servant and not master of the economy.  This is done through transparency.  As Justice Brandeis wrote in Other People’s Money,

Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.

From transparency’s adoption in the 1930s until the 1990s when Wall Street managed to capture the process by which disclosure requirements were set, finance was the servant of the real economy.

It is only in the last 30 years finance has become the master.

What is lacking is the will to make finance the servant again.  There are two ways this will could be expressed.  The first is to take back the political institutions from the wealthy and the bankers.  In the US, this currently looks unlikely.  The second way is for investors to demand transparency.  By simply supporting the Transparency Label Initiative, investors can make finance the servant of the real economy again.  The Initiative once again makes it difficult for Wall Street to profit behind a veil of opacity.