Date: 2024-10-19 Page is: DBtxt003.php txt00026255
FINANCIALIZATION
PRIVATE EQUITY
ABCs of PRIVATE EQUITY by the Americans for Financial Reform
PRIVATE EQUITY
ABCs of PRIVATE EQUITY by the Americans for Financial Reform
Open PDF: AFRE-ABCs-of-Private-Equity-V4.pdf
Peter Burgess COMMENTARY
AFRE ... AFR stands for Americans for Financial Reform and the E stands for Education Fund
This is a delightful collection of issues relating to the way modern Private Equity operates. While private equity has the appearance of creating real financial wealth, it does not. Rather it is moving wealth from one owner to another is a way that favors one over the other ... usually the one with the most wealth and power at the start, ends up with even more wealth and power as the 'game' progresses. For society as a whole, there is usually a degradation of value. For the investor there is an appearance of success.
I say 'appearance of success' because it has become apparent over time that the major economic metrics that have been in common use for a long time, are simply not good enough for the fast moving rapidly changing modern world. Frankly, it is madness to think of money as a measure of anything, yet that is what we do all the time in the modern world. A modern US dollar has about the same value ... buying power ... as a nickel had in 1900 and one UK£ (UK pound) could be exchanged for US$4 in the 1930s. Everything is priced in units of 'money' and while this is more 'efficient' than barter, the results being delivered by the modern money system are looking more and more grotesque.
Since the early 1980s there has been a massive increase in the level of 'financialization' in the modern economy. This has been an important enabler of creative financial schemes including the mergence of Private Equity which is all about 'gaming the system' and rather little about making the outputs of the system as good as they can be. This is very sad because the progress in engineering and technology during the last 100 ... or perhaps 200 ... years has been amazing. Young people today use many of these amazing products of modern technology, but have little understanding of what it has taken to get to this level of utility at such a low cost.
As I see it, the world has prgressed not because of the rich and powerful of the modern world, but in spite of them. A lot of people think that more and more profit is the ultimate goal, but I doule argue that the best outcome is going to be one where there is a reasonable balance between social progress, environmental sustainability and economic productivity. This not what we have had during the past 40 years, and it is becoming more and more clear that there is going to be an accounting very soon for the greed a relatively few over the past few decades!
I am glad to see this PDF ... but I am not very optimistic about its impact. While I love it ... how many people that will make a difference will get to see it, let alone understand and enjoy it.
Peter Burgess