I recently met a Dartmouth student on a New England-bound bus. She was on her way to her alma mater to attend her boyfriend’s graduation, while I was heading in the same direction to visit family. We got into conversation.
My travel companion was confident, polished, and impressive. Were she born decades earlier, she might’ve personified the “best and brightest,” the label historian David Halberstam ironically ascribed to Kennedy-era overeducated whiz kids. A future of infinite possibility lay on her charmed horizon.
There was something very familiar about her obvious precocity and professional aspirations, as my affluent hometown was brimming with bright young things with the same career ambitions. I’m not referencing going into public service, education, or science. Such endeavors are passé. I refer to that zeitgeist-defining objective: the pursuit of riches on Wall Street.
The lure of high finance isn’t new. Before the financial crisis, nearly half the graduates of prestigious universities like Dartmouth went into finance or finance-related consulting. That number plunged when Wall Street hubris sent the global economy into a tailspin and the once-mighty houses of finance teetered on the brink, but the government bailout saved the same firms and the stock market is soaring anew. Happy times are here again. As a result, high finance is again hanging out hiring shingles, and the well bred are answering the call. My travel companion was one. She was spending the summer between her junior and senior years in lower Manhattan, logging 16-hour days as a financial analyst trainee in hopes that her hard work would be rewarded with a job offer upon graduation.
Her aspirations contrasted with those championed by Dartmouth’s commencement speaker, the educator Geoffrey Canada. “I have always been deeply moved by the sacrifices that others have made to make our country the greatest nation on Earth,” he told the school’s graduates gathered on the university quad. “Our country was created, molded, and improved by men and women whose moral compass was not moved by the influence of wealth, prestige, or notoriety.” Canada’s examples of such persons: Rosa Parks, Bobby Kennedy, and Martin Luther King, Jr.—not a Wall Street tycoon among them.
Canada’s speech likely did not change the career aspirations of anyone in the audience, including my bus companion. Few if any of the future financiers in robes and tasseled mortarboards would turn down lucrative offers from Goldman Sachs or JP Morgan because of his impassioned words. His was likely an unanswered clarion call.
But should it matter that many of the country’s brightest college graduates gravitate to Wall Street? Quartz’s Zachery Seward and Roberto Ferdman call the trend a “bad omen.” They note, “Whenever the portion of Harvard College graduates choosing finance or consulting for their careers has increased, the stock market has declined the following year.” The reverse is also true: less Harvard graduates heading to Wall Street corresponds to market rebounds.
Seward and Ferdman aren’t making a serious case, however. Correlation, they remind, doesn’t necessarily imply causation. Still, they might be onto something.
Recent Commerce Department data indicates that the financial sector’s share of gross domestic product now exceeds eight percent, a larger percentage than before the recession. By contrast, in 1950 during an era of robust economic growth, the sector accounted for just 2.8 percent of GDP. Back then banking was famously boring. It was also less crisis-prone—hardly a coincidence.
While a well-regulated financial sector serves an important purpose by helping to efficiently allocate capital to productive ends, its current size and scope (and political heft) is alarming. Research by New York University economist Thomas Philippon bears this out. The sector has experienced an explosion of trading activity whose social value, he ambiguously declares, “is difficult to assess.” Philippon’s research suggests that finance’s share of GDP really ought to be about two percentage points lower than it is now.
Thus, the financial sector as currently configured is doubly worrying. It’s overinflated and under-regulated, rendering it a crisis-prone behemoth that presents a grave risk to the global economy, a lesson we failed to learn in 2008. Its outsized role in the economy also helps produce an outsized demand for the country’s best young talent that could otherwise go into professions that provide societal value. That is, instead of making careers in fields that actually help make the country great, as Canada urges, many Ivy Leaguers and others are sucked into Wall Street’s golden vortex.
Not that any of this was of concern to my travel companion. She was already greedily anticipating her Wall Street bonus.