Report on Wall Street’s Role in Increasing Disparities and Its Impact on Sustainable Development Goals (SDGs)

Introduction

The 1987 movie Wall Street highlighted early signs of growing economic inequality within the financial sector. A notable quote from the film illustrates the vast income disparities even among Wall Street workers at that time, with $400,000 annual earnings in 1987 equating to approximately $1.1 million today. This report examines how financialization has contributed to rising inequality and its implications for the Sustainable Development Goals (SDGs).

Financialization and Economic Inequality

Financialization refers to two interconnected phenomena:

1. The increasing share of the U.S. economy dedicated to financial activities rather than the production of goods and services.
2. The influence of financial institutions, such as hedge funds and private equity, on the operation of nonfinancial businesses.

Both aspects have significantly contributed to growing income and wealth disparities.

Key Areas of Focus

• Growth of the Financial Sector: Understanding the expansion of finance within the economy and the factors driving this growth.
• Direct Impact on Inequality: Exploring how the rise of finance increases income and wealth gaps.
• Transformation of the Broader Economy: Analyzing how Wall Street’s influence reshapes business practices, often exacerbating inequality.

Connection to Sustainable Development Goals (SDGs)

The trends described have direct implications for several SDGs, including:

• SDG 1: No Poverty – Increasing inequality undermines efforts to eradicate poverty by concentrating wealth among a small elite.
• SDG 8: Decent Work and Economic Growth – Financialization shifts focus away from productive economic activities, potentially reducing quality job creation.
• SDG 10: Reduced Inequalities – The growing disparities driven by Wall Street’s financial sector challenge the goal of reducing inequality within and among countries.
• SDG 16: Peace, Justice and Strong Institutions – The political influence of wealthy financiers can affect governance and policy-making, impacting institutional integrity.

Conclusion

The financial sector’s expansion and its pervasive influence on the economy have played a significant role in increasing economic disparities. Addressing these challenges is essential for advancing the Sustainable Development Goals, particularly those targeting poverty reduction, economic growth, and inequality mitigation.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 10: Reduced Inequalities
   • The article discusses the rise in inequality driven by financialization and the concentration of wealth among a few individuals in finance and technology sectors.
2. SDG 8: Decent Work and Economic Growth
   • The article touches on economic growth patterns, especially the shift towards financial activities and its impact on the broader economy.
3. SDG 16: Peace, Justice and Strong Institutions
   • The article references tax loopholes and political influence by wealthy financiers, implying issues related to governance and institutional fairness.

2. Specific Targets Under Those SDGs

1. SDG 10: Reduced Inequalities
   • Target 10.1: Achieve and sustain income growth of the bottom 40% of the population at a rate higher than the national average.
   • Target 10.2: Empower and promote the social, economic and political inclusion of all.
2. SDG 8: Decent Work and Economic Growth
   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation.
   • Target 8.5: Achieve full and productive employment and decent work for all women and men.
3. SDG 16: Peace, Justice and Strong Institutions
   • Target 16.6: Develop effective, accountable and transparent institutions at all levels.
   • Target 16.4: By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime.

3. Indicators Mentioned or Implied to Measure Progress

1. Income and Wealth Inequality Indicators
   • Share of income or wealth held by the top 1% or top 10% (implied by discussion of fortunes and income disparities).
   • Growth rate of income among the bottom 40% compared to national average (related to Target 10.1).
2. Economic Structure Indicators
   • Proportion of GDP derived from financial activities versus production of goods and services (implied by the discussion on financialization).
   • Employment rates in finance versus other sectors.
3. Governance and Institutional Indicators
   • Effectiveness and transparency of tax systems (implied by mention of tax loopholes and political influence).
   • Measures of political influence by wealthy individuals or entities.

4. Table of SDGs, Targets, and Indicators

Source: paulkrugman.substack.com