Is it possible to have too much finance? Harmed by the aftermath of financial crises, enraged by bailouts of financial institutions, irritated by the generous remuneration, aghast at repeated malfeasance and infuriated by the impunity of those responsible, most ordinary people would find it all too easy to answer: yes.
They are not alone. Both scholars and staff of influential international institutions, such as the International Monetary Fund and the Bank for International Settlements, agree. It is possible to have too much finance. More importantly, significant economies are in this position, among them Japan and the US.
It is easy to question the role of financial activity. After all, between January 2012 and December 2014,financial institutions paid $139bn in fines to US enforcement agencies. More fundamental is the contrast between the 7 per cent average share of the financial sector in US gross domestic product between 1998 and 2014 and its 29 per cent average share in profits (see chart).