A changed skyline
Not even Adam Smith saw much of a productive role for finance firms
Unless you visit about once a week, emerging from the Gautrain station in Sandton can be a disorientating experience. Nothing screams “out-oftowner” quite like standing on the corner of West Street and Rivonia Road and trying to work out where you are.
What happened to that building that was on the corner last time I was here? Can there really be enough lawyers in the country to fill that massive new structure? And that’s just one of four law offices in the area.
The Sandton skyline tells the story of how fundamentally the SA economy has changed over the past 20 years. It is dominated by the head offices of banks, insurance companies, law firms and auditors.
It even tells the story of the increasing pace of that change. The large head offices of service companies become redundant in a matter of years and are replaced by much bigger ones. Part of this built-in obsolescence has to do with rental contracts that speak to the same sort of determination that obliges us to upgrade our cellphones every few years, but it is also about the growing role these companies play in the corporate capitalist-based economy.
The buildings that house them are the 21st-century equivalents of the monumental cathedrals built in
Europe during the Middle Ages to reflect the glory of God.
There is an unspoken rule that they cannot be modest structures. Modesty might suggest a lack of commitment to capitalism. Even more dangerous, it might suggest you are not powerful and deserving of huge fees from enormously wealthy clients who are often other service providers.
The Sandton skyline is part of a decades-old global story, which has quickly become so entrenched that it’s difficult to imagine that until the 1970s the financial sector was not included in the calculation of GDP.
In The Value of Everything, economist Mariana Mazzucato recalls how, until then, finance was not widely considered a productive part of the economy. “It was viewed as important for transferring existing wealth, not creating new wealth,” writes Mazzucato, whose book is an attempt to determine whether the financial sector makes a net positive or negative contribution to economies. “Finance sneaked into their [economists’] measurements of gross domestic product only as an ‘intermediate input’ — a service contributing to the functioning of other industries that were the real value creators.”
For centuries, Mazzucato says, income earned by charging interest was viewed as a subtraction from productive enterprise rather than a symbol of it. Not even the father of modern economics, Adam Smith, saw much of a productive role for finance.
It all changed in the 1970s and 1980s. By the 2000s the financial sector dominated the “real” economy.
Ford and General Motors in the US make more money from selling loans for cars than by selling the cars themselves. As the Sandton skyline shows, the financial sector does not grow on its own.
In its wake grow the legal and audit firms that are increasingly needed to provide legitimacy to our new religions.
Back underground, the 15-minute ride to Park Station takes me back 40 years to the dishevelled remains of the 1980s economy, with not a cathedral in sight.
Until the 1970s, the financial sector was not included in the calculation of GDP