Over the last 50 years, the share of manufacturing sector profits in total profits declined by more than two thirds from 49 per cent to 15 per cent while the share of profits of the financial sector more than doubled from 17 per cent to 35 per cent.
The large share of the financial sector in profits, when its share of activity was so much lower, tells a compelling story about the misalignment of the real and financial sectors. The world view before the crisis clearly was that the growth of the financial sector, in and of itself, was desirable, indeed that real growth can be got by sheer financial engineering.