Makers and Takers

The non-fiction finance book Makers and Takers (2016) was written by Rana Foroohar, a veteran financial journalist who is the economics columnist at TIME Magazine, as well as an economics analyst who appears regularly on CNN and public radio. The book takes the position that the financial system of the United States promotes injustice and economic inequality, which if it continues, can only lead to greater instability in the country.

Foroohar identifies the finance industry as a disproportionately powerful influence in the United States. It creates about 4 percent of new jobs and represents 7 percent of the economy, but it has the power to shape the mindsets of politicians, CEOs, and other people with outsized power in the country. Many consumers also adopt the same mindset because it is a dominant part of the culture, even if it results in economic policies that are counter to the average person’s best interests. For example, in 2008, government decisions resulted in large financial gains for the finance industry, while many regular people lost their homes and small businesses.

The financial industry was originally organized to support the average person in maximizing his or her wealth, but, instead, it often only benefits itself. Since so many politicians and CEOs are indebted to the finance industry, it prevents them from making a fair system that benefits everyone.



In Makers and Takers, Foroohar identifies several other financial issues that face people in the United States. First, wage growth is stagnant, with the majority of the fastest growing industries in the United States only paying minimum wage. Second, the leading business in America is finance, which manages wealth rather than creating products and generating ideas that lead to the creation of wealth. Third, the finance market exists only to make itself wealthier rather than to share the wealth among everyone in the United States.

These widespread issues lead to inequality, where a few people, most of whom are associated with the finance industry, control a disproportionately large share of the wealth. While it’s clear that this is unfair, financial thinking has become such a major part of American business and politics that it is hard to break the bad habits that contribute to it. Large companies in America increasingly act like banks, maximizing their profits by moving money around, hedging, tax optimization, and trading rather than by innovating and selling products.

The financial crisis of 2008 is in recovery as of the writing of Makers and Takers, but Foroohar points out that it is a slow recovery because the economic needs of most people are not being served with fair wages, job growth, work benefits, and affordable goods and services. Individuals responsible for this inequality are dubbed “takers” by Foroohar. She identifies them as anyone who uses market systems to enrich themselves rather than society at large, including many financial institutions, CEOs, politicians, and financial regulators.



One reason this tends to happen among large businesses and financial institutions is the concept of shareholder value maximization, an approach in which everything is done to maximize company value on paper for the sake of shareholders in the company. This approach is often shortsighted because it prioritizes quick profits over long term investments, and it neglects the profits of people who are not shareholders, including employees at the company.

There are also tax reasons for maximizing profits from shares and stocks since these assets are taxed at a much lower rate. The high-ranking management of companies tends to draw the majority of their paychecks from stock options for this very reason. This leads to wealth getting stuck in a closed loop, with only those who have access to financial markets and the accumulated assets to trade at an elite level able to accumulate wealth in the form of stocks and shares. All the wealth that is tied up in the finance industry cannot be touched by the average person.

To illustrate this, Foroohar looks at Apple. This company has stashed most of its cash in tax havens overseas, operating almost exclusively on shares and dividends, which are taxed much more lightly in the United States. Investors in the company are also reluctant to spend money on R&D or new factories, so the company simply feeds off itself financially.



There are many other examples, as well, such as Coca Cola colluding with Goldman Sachs to create a shortage of aluminum so that Coke could increase production costs and thus the cost of its product. Foroohar also finds similar evidence of collaboration and collusion between big banks and politicians.

The system as it stands only benefits those who can afford to make big investments. In order to fix it, Foroohar suggests a massive overhaul of the tax code to ensure that shares and stocks are being taxed fairly. She also recommends more investments in real money, as well as the inclusion of labor representatives on companies’ boards to weigh in on financial decisions.