Occupy Wall Street-Posner



What is one to make of the “Occupy” movement? Is this the return of the turbulent 1960s? Is it the American version of the “Arab Spring”? Of of the French and English riots of recent years?

 

I think only three things are clear: first, human beings are imitative, and the success of the Arab riots that brought down several governments and have shaken others was bound to attract imitation in some form (a necessary qualification: the “Occupy” “occupations” have been minimally violent); second, the social media have reduced the cost of organizing collective activity by strangers; and third, a depression (which we have now been in for more than three years, since the financial crisis of September 2008) gives rise to street demonstrations. (Think of the “Bonus March” on Washington of 1932, broken up by U.S. soldiers under the direct command of General MacArthur, who at the time was the chief of staff ot the Army.)

 

The police I think made a tactical mistake in routing the “Occupiers” from Zuccotti Park near Wall Street. That is the lesson of the 1960s. Arrests, whacking demonstrators with billy clubs, dragging screaming women to paddy wagons, and other police just create anger, martyrdom complexes, and sympathy for the demonstrators. The Occupiers had made the mistake of—occupying urban spaces (in imitation of the Egyptians who occupied Tahrir Square in Cairo), rather than marching in them. The occupations attracted criminals, panhandlers, and lunatics, and created unattractive, unsanitary conditions. Self-destruction impended, which cold weather in most of the country would have accelerated, had not the arrests interrupted the natural process of decay. As a result there is an increased danger that the occupations will be replaced by a movement—how effective a one I do not know. (In January 1969, student radicals occupied the Administration building of the University of Chicago. The police were not summoned, and after two weeks the radicals abandoned the building; almost 100 were then expelled or suspended from the university. The university was largely spared the turmoil that continued for years at other major universities.)

 

The grievances of the “Occupiers” appear to be three: income inequality, lack of jobs, and the baleful influence of the banking industry (“Wall Street”), broadly defined to embrace pretty much the entire financial sector. The three grievances are related, and a skillful leader could make them coherent, as follows. Income inequality had been growing for many years, most rapidly at the top of the income distribution; between 1979 and 2007, the income of the top 1 percent had grown by 275 percent, and the average income by only 18 percent. The income of the top 1 percent has actually declined during the current depression, but the growth of unemployment and underemployment has highlighted the enormous disparity in wealth between top and bottom. Although unemployment is much lower among college graduates than among others, the unemployment rate of young college graduates has increased sharply during this depression, from 2 percent in 2007 to more than 7 percent today. This helps to explain the prominence of college students and young college graduates among the “occupiers” and their emphasis on unemployment and income inequality.

 

Income inequality at the top of the income distribution has been further highlighted by the enormous publicity concerning the extraordinary incomes that continue to be obtained by financial executives despite their role in the current economic distress. Their incomes do appear to be excessive, in the following senses. These incomes are generated to a significant extent by speculation, which has social value in increasing the amount of information about asset values and the speed with which that information is generated, but these social values are smaller than the profits of successful speculators, since those profits consist primarily of gains, often produced by sheer chance, at the expense of the people or firms with whom they are trading. Speculation is not a zero-sum game, because valuable information is generated, but the value is smaller than the gains of the successful speculators. In the case of nonfinancial products and services, the producer is typically unable to capture anywhere near the full value that he creates. Bill Gates is believed to be the wealthiest person in the world, but the business model that he invented, and its implementation by Microsoft under his leadership, have created far more value that he and the other leaders of Microsoft have appropriated.

 

And without government assistance, whereas the incomes of financial executives have been bolstered by the efforts of the government to keep banks from failing.

 

Banking moreover has never been popular. The main reason I think is that banking is one of the few industries that simply refuse to sell to many of their most willing, even desperately willing, customers. For what they are “selling” is loans, and mainline banks won’t lend to people who have poor credit, leaving them to deal with the payday lenders, the car title lenders, and the pawn shops.

 

Because many financial executives have very large incomes, and because banks have huge financial resources, the banking industry has enormous influence on legislation and regulation. In the regime of deregulation and lax regulation of the financial sector that began at the end of the Carter Administration and accelerated in subsequent Administrations (notably Clinton’s and the second Bush’s), bankers were enabled to engage in a variety of risky and sharp practices—and competition forced them to do so. Banks depend mainly on short-term capital, both financial and human, and firms that depend on short-term capital are constrained to compete to the fullests extent allowed by the law and regulatory authorites, or else they lose their capital to their bolder competitors. Competition in such an industry is Darwinian.

 

Railing against income inequality, job loss, and banking abuses is thus understandable, but it doesn’t do any good. The “Occupiers” are anarchic and disruptive, and the solid middle of American society, which rejects the Tea Party because of its goofy ideas, is likely to reject the Occupy movement because of its style, while broadly sympathetic to its antipathies. But if the movement attracts charismatic leaders amidst a stagnant or worsening economy, it may become a force in American politics. Already Kalle Lasn and Micah White, who appear to be the nearest thing the movement has to leaders, have published an articulate manifesto, “Why Occupy Wall Street Will Keep Up the Fight,” www.washingtonpost.com/opinions/why-occupy-wall-street-will-keep-up-the-fight/2011/11/17/gIQAn5RJZN_story.html?hpid=z2 (visited Nov. 20, 2011), which reminds me of Tom Hayden’s 1962 “Port Huron Statement of the Students for a Democratic Society,” www.h-net.org/~hst306/documents/huron.html (visited Nov. 20, 2011).

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01/24/2011My initial thhogut was why dignify the rants of a drug using reactionary extremist through blogs that focus more attention on those rants? I've never read or heard his radio program and the reading of this blog will not change this position. However, in the same way that it is possible to judge the culture and climate of a corporation by examining the humor directed toward the CEO it is likely possible to judge the culture and climate of some very scary people by considering the extremities of its Limbaugh Becks, Palins, etc. When thhogutful and liberal people take these comments so seriously they consider moving toward the center there is really a movement to the right. I don't think that Liberals are about to move toward the center and embrace this distorted suggestion for constitutional reform, amendment or judicial interpretation but I do know that what were once Republican right wing ideas are now considered centrist positions. So, oldmanonthe street, be my selective monitor and continue the very important function of keeping me from becoming complacent in this society,

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[Alana]

Much has recently been made of the simtlariiies (???) between the teapublicans and OWS. Your most recent blog is a sharp reminder that the two have no common ground and, perhaps more importantly, the comparison points to the superficiality of the analysts. Yes your thoughts and projections are dark and hopefully will not come about. Yet, I too feel a deep forboding and have largely been absent from political reading and discussion. There are people whose positions are such that I choose to decline any discourse. Well, no one ever said that fighting the good fight; win. lose or draw, would be easy. The feeling is akin to the third law of thermodynamics redefined. That is, you can't win, you can't break even, and you can't get out of the game. Perhaps that law is incorrect. Carry on old man. You've somewhat roused this old, but younger, man.

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