Saturday, October 15, 2011

Occupy Wall Street: a missed opportunity

When the financial crisis first hit and the Bush administration started the first bailouts of American banks, there were two main organisations that supported the move.

1) The Republican Party
2) The Democratic Party

That is, the entire centre of US politics, the only two parties with any chance of getting into government. The first vote on the Emergency Economic Stabilization Act of 2008 had the majority of Democrats in the House of Representatives voting yes, and the majority of Republicans voting no. When it came to the Senate, both parties voted yes. It returned to the House of Representatives where the Democrats voted yes and the Republicans were split nearly 50-50, barely voting no. It was supported by Republican President George Bush, who signed it into law.

Among those opposed to the bill were the Libertarian Party, the Christian Liberty Party, the Constitution Party, the Green Party and Communist Party USA. The fringe groups on left and right found the bailouts repugnant while the centrists pushed it through.

After Obama took office the Tea Party movement emerged from the American right. Among other concerns, they were enraged by state support for the banks; Republican presidential candidate and Tea Party favourite Ron Paul denounced government bailouts to private concerns.
We only recently learned that the bankers at the Fed were able to use the latest financial crisis to bail out Wall Street cronies and foreign central banks with billions of dollars that were created and wasted instead of appropriated and voted on by representatives of the people.
Wall Street cronies? This sounds familiar. From the Occupy Wall Street's 'Declaration of the Occupation of New York City':
We come to you at a time when corporations, which place profit over people, self-interest over justice, and oppression over equality, run our governments.... They have taken bailouts from taxpayers with impunity, and continue to give Executives exorbitant bonuses.... They determine economic policy, despite the catastrophic failures their policies have produced and continue to produce. They have donated large sums of money to politicians, who are responsible for regulating them.
The Occupy Wall Street movement is a broadly left-wing protest movement against the crony capitalism of modern America, the deals between state and big business. So it looks like the Occupy Wall Street movement and the Tea Party movement are ideological allies, both determined to prevent the government from pouring tax-payer's money into rich corporations.

And that's where they both blow it.

The Occupy Wall Street declaration mentions the crony capitalist connections between state and business, but most of the document is a simple rant against corporations in general. As a result they are placing themselves in opposition to the capitalism-friendly Tea Party movement. The two protest movements who hold their opposition to crony capitalism in common, are turned against one another.

On the right, the Tea Party rhetoric is exclusionary and arrogant:
Conservatives understand the importance of planning, saving, and fiscal discipline.
And on the left the Occupy Wall Street declaration is strong on populist complaints but makes no suggestions for economic solutions. People on either side may feel a satisfied sense of political identification with their tribe of choice. But this is an opportunity missed for both left and right: I expect the centre to remain unthreatened.

Below, from the blog of economist Mark Perry:

8 comments:

  1. I disagree on many points.

    The Tea Party gets much financial backing from corporations and don't have a problem with Wall Street's influence on our elected officials -- precisely the sticking point with the Occupy Wall Street movement.

    OWS is emerging as a movement for campaign finance reform and an end to corporate personhood so that our elected officials, be they Republican or Democrat, are once again beholden to the people and not to Wall Street/Big Business/Corporations. OWS wants money out of of the election process. OWS feel very strongly that the economic debacle we have gotten ourselves into is a direct result of bad legislation and policies from our politicians' being the puppets of Wall Street and Big Business.

    The Tea Party basically doesn't have the balls to challenge Wall Street. To them, that would be sacreligious and unpatriotic. They're just pissed off they got bailed out ... while, strangely, not getting upset that banking and business reform legislation isn't on the agenda to prevent this from happening again.

    OWS is very much wrapped up in reform to prevent this from happening again. And they argue real reform won't happen until we change the rules of the game and stop corporations and banks from funding election campaigns. And they're not so much upset that the banks were bailed out as they are upset that none of those bankers were investigated and sent to prison.

    Yes, both groups are upset about the bail-outs, but for different reasons. The Tea Party is upset that it was at tax-payer expense. OWS is upset that things were allowed to get to that point in the first place and want reform so that it won't happen again.

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  2. Not trying to flog my blog, but I do give a pretty concise overview of how the OWS movement is shaping which the mainstream media refuses to acknowledge.

    http://yogchick.blogspot.com/2011/10/occupy-wall-street-overview.html

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  3. One last thing:

    For the Tea Party and Libertarians like Ron Paul, the problem is cronyism. OWS acknowledges this aspect of human nature but takes it a step further and claims the problem is far more sinister and systemically dysfunctional: Wall Street literally OWN our elected officials.

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  4. Well I see lots of common ground between the fringes of left and right. Foreign policy is another example: many on the right complain about the cost of stationing American troops in wealthy allied countries like Germany or Japan. Likewise many on the left call for a dismantling of the international American military presence. Imagine if libertarians, paleoconservatives and leftists united to pressurise the centre!

    But it seems that identity politics keeps them apart. The Democrats and Republicans can rest easy.

    I found the OWS declaration very unhelpful because everything it denounces about corporations could be true also of states, small businesses, farmers and the like. It talks of pollution, but agriculture is notorious for that. It complains about discrimination in the workplace but American companies have helped undermine gender discrimination in South Korea by employing the well qualified women that sexist Korean firms wouldn't.

    Your Chicago list is better, much more focused and clearly not against corporations as a concept, only calling for careful regulation.

    Here in Ireland the movement is focused on the austerity budgets pushed through by governments in recent years. But this 99% thing is not applicable - the latest government were voted in fairly recently and have fairly high popularity in polls. The outraged socialists are some tiny percentage, still claiming to stand for 'the people' who don't vote for them. Personally I support further austerity since it seems to reassure international markets and we've had two quarters this year with significant GDP growth. I don't want the progress to be jeapordised.

    I could be biased by a few personal observations. For starters, some of those organising in Ireland are extremely socialist - I see some talking about 'revolution'. No thanks! Also I've seen the way Greek people protested so vigorously, with riots breaking out and people even being killed. Yet Greece now has a sinking economy while Ireland and Estonia, who simply shouldered their austerity budgets and went back to work, seem to be recovering.

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  5. I'm not against austerity and I don't think OWS is either. In the U.S., though, the focus is starting to center around campaign finance reform and keeping corporations/big business/Wall Street out of our electoral and legislative process.

    Another major obstacles between these two groups getting together is that they have totally opposite reasoning about this debacle. The Tea Party, many of whom are Libertarian, don't want more regulation of business (somehow they don't seem to focus on prevention). OWS would say its these very capitalism-run-amok approaches that got us in this mess in the first place.

    But it would be nice to see the Libertarians of the Tea Party and liberals hold a giant rally in Washington protesting military presence in the Middle East. Unfortunately, Libertarians are only a part of the great Tea Party movement.

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  6. I've seen some centre-left folk argue that wealth redistribution through taxation and welfare is more important than regulation. Some claim that Sweden, for example, is actually very open to free trade, even while it retains quite high tax rates. The Heritage Foundation's Index of Economic Freedom describes Sweden has having very high government spending and taxation, and strong labour protections. However they also have:

    "...high levels of trade freedom, investment freedom, monetary freedom, and financial freedom. The overall regulatory and legal environment, transparent and efficient, encourages robust entrepreneurial activity. Banking regulations and lending practices are prudent and sensible. Monetary stability is well maintained, with inflationary pressures under control. The judicial system, independent and free of corruption, provides strong protection of property rights."
    http://www.heritage.org/index/Country/Sweden

    So there may be a compromise. Fairly relaxed regulation, open trade policies, matched with high government taxation and spending. I have no strong opinion either way. (Though it happens that I've just started reading this document which argues that Sweden's welfare state experiment has been destructive:
    http://www.libera.fi/wp-content/uploads/2011/10/Libera_The-Swedish-model.pdf )

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  7. Income inequality in sweden is not very different from the US. It's just that it gets compensated afterwards by wealth-distribution.

    I think wealth-distribution is an important point. One major complaint is the astronomic rise of wages of the top 1% (hence the 99% rhetoric). Those wages have risen 100-fold since the 1980(!) in the US whereas wages of 'the 99%' have only risen about 8% since the 1980s. This can hardly be justified by the great results of these people since the 1980s. Economic growth was much greater between 1950 and 1980. The 'if you pay peanuts, then you get monkeys'-argument seems to fail. When you include stock options and bonuses into the salary-equation, US CEOs earned about 20 times more then Japanese CEOs. Yet US companies have not been 20 times more successful. No wonder if you waste a large part of your revenue on top wages!

    So we get a group of very wealthy people running global business, who get extremely poor results but end up being bailed out with tax-money. On top of that it looks like these bail-outs haven't changed business at all. You'd think that when you get rescued by taxpayers you will keep the taxpayers interests in mind, but judging from the still exorbitant salaries that the (failing) top-managers are still getting, this does not appear to have happened. That's the narrative and I think it is a strong one.

    If a company is too big to fail, then it is not fit for the market.
    Then the CEOs should act more like government officials.

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  8. That's also the narrative of the right, however. I see plenty of libertarians who are enraged that taxes are going to protect rich corporations. They also think that an unhealthy corporation should be let die, and that no business is too big to fail.

    Here is free market libertarian economist Bryan Calpan:

    "I've been against bail-outs from the beginning. So should have all economists. It's reasonable to debate the merits of contracyclical monetary policy. It's not reasonable to debate the merits of rewarding failure on a grand scale."
    http://econlog.econlib.org/archives/2010/05/bailouts_when_w.html

    But the right don't necessary hate corporations on principle, while I find the OWS declaration disappointingly vague and simply anti-corporate. This is why I think it is a missed opportunity. For once the more extreme left and right had a principled position in common - against state bailouts and protection of big business - but they seem to have missed the opportunity to remain divided and fighting.

    (Incidentally, do you have any ideas why incomes soared for the super rich since 1980? Due to government policies, new technologies, globalisation?)

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