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They absolutely do. Focusing on investment banks (I assume you have no problem justifying the existence of retail banks and insurers, the other two giant topics in financial services), what they do is effectively make the allocation of capital more efficient. Without efficient capital allocation, most enterprise becomes extremely difficult. Without banks, there would be no stock market. There would be no way for companies to raise large sums of money to grow faster. There would be no one keeping markets liquid, which would encourage people to stick their money under the mattress rather than invest it. There would be no way for startups to exit, and so there would be no VCs, and no angels either (or at least, much more limited ones, making maybe one or two investments to help out a friend). All of this would massively reduce the amount of capital available to work with, and decimate the business world. Now, you might take the view that "you don't need capital to do business", but that's just a very limited viewpoint that applies in very narrow circumstances, like some small percentage of internet startups. Almost all businesses need capital to get started. There's a good reason why microloans are so successful - they provide capital that helps enterprise. Think of the banking system as an equivalent of microloans for people who need more than $100 (for example, because they need to design and sell new products, build new factories, buy stock, make strategic acquisitions, etc). |