[O]ver the past generation the U.S. government has decided more or less by accident--in the same way, that Britain decided by accident to conquer two-thirds of the world starting in 1750--that it wants to shift seven percent of GDP out of manufacturing and other sectors and into what the market was telling us were the sectors of the future.
So we shifted three percent of GDP into health care administration, and four percent of GDP into finance.
Now even at the time we noticed that shifting an extra three percent of GDP into health care administration was a huge mistake. What the extra three percent of people working in health care administration are doing was working for insurance companies trying to find ways not to pay for the treatment of sick people. They are not only not producing anything useful, they simply increase risk and fear--and make people scared that if they do go to the doctor they then will not understand the bill they get and will not be able to pay it...
As near as I can see, what the extra four percent of U.S. GDP devoted to finance is doing is taking money not so much from the bottom eighty percent but from the rest of the top ten percent that wants to know where to put their money--through price pressure, through arbitrage, through fees. It doesn't do anything productive in terms of spreading risk, improving corporate governance, or diminishing moral hazard in the credit channel--rather the reverse. But it does increase uncertainty. And it has brought us our current depression.
So we have moved seven percent of the U.S. economy into activities that are at best completely unproductive. Now we have to figure out how to move resources out of these sectors. At the moment we’re unable to do so because we’re still fighting the lesser depression and trying to keep it from turning into a greater depression. Link.