Banks contribute to economic growth?

The shysters, liars, fraudsters and criminals running the banking industry are forever trying to persuade us that banks contribute to economic growth – and in particular that any constraints on bank activities would constrain economic growth. And of course politicians lap up this story. Or if they don’t, they paid to change their minds.

Now the bank industry has expanded no less than TEN FOLD relative to GDP in Britain over the last thirty years. So we should see a positive explosion in economic growth. So what do we actually see? We see this:

The black line was inserted by me. Feel free to draw alternative black lines, but the result will be similar.

What can I say but “hilarious”!!!

And is it unfair in describe top bankers as shysters, liars, fraudsters and criminals? Well the Financial Times had a front page article entitled “Bankers accused of dishonest lobbying” about a year ago: and that was BEFORE the stench of Libor rate fiddling wafted into the air.

Of course there are plenty of factors influencing economic growth other any contribution to growth that banks might make. Nevertheless, the above chart hardly supports the idea that a big banking industry promotes growth.

BTW, the “tenfold” figure comes from a Bank of England paper “Banking: From Bagehot to Basel, and Back Again”, p.3.