Risk capital in all forms(from joint stock companies to venture capital) have made it possible for people to undertake much bigger enterprises. (Though whether it is all good certainly can be questioned). Surely a lot of innovation and productivity improvement has been fueled by financial instruments. Surely money is a lubricant for the economic activities. No question.
The debate is about what money instruments are applied for. Money employed for productivity improvements versus money employed to fuel (support) consumption. One creates wealth the other creates poverty.
Now one can argue that there are secondary benefits to consumption leading to innovation and all that. But the question is, where is capital best deployed? Shouldn't it have been e.g. deployed into developing alternative energy, into developing cheaper and more sustainable homes, into improving agricultural productivity and so on? Wouldn't that be a better surer way to tackling poverty (and spreading prosperity)? Wouldn't that mean real creation of wealth?
Financial systems are a necessary but not sufficient condition for economic progress. In the absence of productivity improvement and innovation, financial innovation will end up in inflation and worse.
And unless there is a change in the physical reality through productivity improvement and innovation, money market innovations will ultimately prove ineffectual.
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