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One of the biggest contributors to income inequality is a lack of economic mobility. Maybe that sounds like a tautology - the difference between rich and poor s

One of the biggest contributors to income inequality is a lack of economic mobility. Maybe that sounds like a tautology - the difference between rich and poor solidifies the more difficult that it becomes for poor people to turn into rich people. To oversimplify, easy access to capital can allow a poor person to turn a great idea that solves real problems and a strong work ethic into a sustainable business that pulls him out into the middle class or higher. Without access to capital, the poor man is beholden to whichever employers are in his area, and whatever is on offer from them - odds are, it won't be enough to allow the poor man to send his children to private school.

btown 8y ago
To elaborate, easy access to capital is what allows those employers in his area to actually hire him. That profitable restaurant down the road, owned not by a Wall Street mogul but by a passionate middle-class entrepreneur, needs capital to renovate a second dining room, and if it doesn't get it, it's not going to be able to hire servers for that new capacity. It's going to stagnate, maybe remain a profitable small restaurant, but never have a chance to become a multi-location or multi-state job-creation engine. And this is where the "middle class bank products" come in. Anything that artificially discourages banks from making the purely-economic decision to finance that owner to expand the business - and there's always the tantalizing option to just cater to silver-plattered large-business loans and wealthy clients instead - is going to slow growth and make general inequality in the area that much worse. There's a shrinking middle class of businesses just as there is of individuals. Now, sure, the economic decision to finance this person should not be based on the idea that you could make subprime loans and repackage them to unwitting buyers. But there are perhaps middle grounds from a regulatory perspective. And there are also opportunities to address non-regulatory aspects that discourage capital sources from lending/investing; my company Belstone builds software to allow lower-middle-market investment bankers, the advocates for medium-sized businesses in the capital markets (who have the same dynamics described above), to close deals on behalf of their clients more efficiently, to support more businesses and more job growth. None of these efforts on its own is a panacea, but we have to try everything we can to move the needle.

btown 8y ago

To elaborate, easy access to capital is what allows those employers in his area to actually hire him. That profitable restaurant down the road, owned not by a Wall Street mogul but by a passionate middle-class entrepreneur, needs capital to renovate a second dining room, and if it doesn't get it, it's not going to be able to hire servers for that new capacity. It's going to stagnate, maybe remain a profitable small restaurant, but never have a chance to become a multi-location or multi-state job-creation engine. And this is where the "middle class bank products" come in. Anything that artificially discourages banks from making the purely-economic decision to finance that owner to expand the business - and there's always the tantalizing option to just cater to silver-plattered large-business loans and wealthy clients instead - is going to slow growth and make general inequality in the area that much worse. There's a shrinking middle class of businesses just as there is of individuals. Now, sure, the economic decision to finance this person should not be based on the idea that you could make subprime loans and repackage them to unwitting buyers. But there are perhaps middle grounds from a regulatory perspective. And there are also opportunities to address non-regulatory aspects that discourage capital sources from lending/investing; my company Belstone builds software to allow lower-middle-market investment bankers, the advocates for medium-sized businesses in the capital markets (who have the same dynamics described above), to close deals on behalf of their clients more efficiently, to support more businesses and more job growth. None of these efforts on its own is a panacea, but we have to try everything we can to move the needle.