How Finance Can Make History 2

Financial Power and the Making of History 2 explores how finance incubates new technologies, shapes the global balance of power and models of economic development, and further examines how we should view financial innovation.

After the Age of Discovery, capital rapidly developed Eastern resources through the East India Company. When Watt improved the steam engine, he relied mainly on funding from entrepreneurs. Edison, too, depended on capital markets to expand his business... Capital became the lifeblood of the economic system, while financial institutions took on the vital task of generating and distributing that lifeblood. From a global perspective, an advanced financial system and powerful capacity to export capital became key pillars of hegemony. The British Empire, on which the sun never set, and the United States, which sees itself as the world's policeman, are both examples.

When a force becomes too important, its negative effects are magnified. Since any turmoil in finance can ripple through the entire economic system, “regulation” has become a moral high ground in public discourse. Financial innovation entails risk, and so it is dismissed as a “wealth trick” that creates no value. Yet demonizing financial innovation stifles finance's vitality and undermines its ability to adapt to a new era, inevitably causing lasting harm to the economy of the future.