Paul Krugman has a defense of the Occupy Wall Street people in his Times column. As usual, it's well-written and persuasive, but I don't think it gets at the whole of the issue. Krugman's central argument is that the movement is essentially right to vilify Wall Street and the wealthy, and that it's those positions that are dangerous and extreme rather than, as the Right would tell you, Occupy Wall Street's.
Now, I think Krugman's main mistake is that he projects onto Occupy Wall Street what he wants to see in it: essentially an army of center-left folks who believe that we need government to tame the excesses of the market and regulate industries that are habitually destabilizing when left to their own devices. And while Krugman's position is cogent, powerful, and essentially correct, I think much of Occupy Wall Street has a different agenda. There are segments that are essentially protesting for the sake of protesting (and flying a Marxist flag to feel important). Those folks can be dismissed out of hand. There's another chunk that is taking up traditional far-left positions that are either entirely economically indefensible (like rejecting free trade), or more nuanced than those people like to think they are (like minimum wage hikes).
But the segment that I think Krugman is correct in sympathizing with, and which is the portion with whom I am most sympathetic, are those who are protesting out of an unspecified frustration with the American economy. They know something is wrong. They know that the economy is in a hole, and ordinary people are struggling while Congresspeople are sitting around and worrying about government solvency at a time when investors are lending to the US government at incredibly low rates and 9% of the workforce is out of work. And they know that super-wealthy people are doing exceptionally well and paying very little in taxes to top it off while ordinary people struggle. But those people don't know exactly what to do about it, while people like Krugman do.
But where I think the movement goes off the rails (and Krugman with it) is in the tenor of the protests. To put it in simple terms, to me, this doesn't look like a "what about us" protest-- it looks like a "let's cut the rich down to size" protest. And the two are very different. Yes, rich people broadly and Wall Street in particular are doing better than the average American. The question, then, is what we can do about it. Cutting CEO pay isn't going to put millions of people back to work. Nor will abolishing Wall Street help the country move forward-- more likely it'll hurt.
The real changes have to come at the policy level, in ways that make the "99%" better off rather than the "1%" worse off (though there's at least some inevitable sacrifice that "1%" will have to make to get that result). Simply put, the economy's problem is massive private debt overhang that is keeping consumers from spending and stifling demand. Wall Street people are smart enough to support such provisions. Goldman, Morgan Stanley, Citigroup, and every other big bank have economists on staff who forecast the economic impact of government stimulus. And those economists, across the board, acknowledge that stimulus will improve the economy. So what's blocking policies that will resolve those issues? My feeling is it's two things. First, this is still a country whose people are widely suspicious of government. Tea Party folks might not like Wall Street any more than the "Occupy Wall Street" folks, but talk to them about stimulus, and they'll wave their pitchforks in the air and mutiny. They've convinced themselves that if government just gets out of the way, business will magically start hiring (for some reason neither they nor their leaders can articulate in any minimally coherent way) and the economy will start booming. These people might not like Wall Street, but they and their leaders refuse to acknowledge that the solution is more rather than less government investment. Second, and this point is more directly related to Wall Street, is the fact that relief for debtors (which is probably the single most significant step government could take to speed up the recovery) would force banks to take write-downs, which in turn would cut into their revenues and damage their balance sheets. And, at a time when Citigroup and Bank of America are especially vulnerable, forced write-downs may not be wise policy. And, at the end of the day, with much of the country still opposed to debt relief for ordinary people (remember, the Tea Party started with Rick Santelli's nonsensical rant about bailing out "losers"; and those "losers" weren't the illiquid banks-- they were homeowners who were underwater on their mortgages), there's no political will to override the creditors' position on that issue.
One solution might be targeted stimulus directed at household balance sheets-- in essence, paying off mortgages for those who are underwater, or combining forced write-downs on the principal of underwater mortgages with subsidies for the banks holding those mortgages. Would this be another bailout? Sure. But economics isn't a morality play. While debtors were certainly irresponsible for taking out loans they couldn't afford, creditors were equally irresponsible for making loans to creditors without doing their due diligence. And such a solution would provide equal relief for both guilty parties. Would this reward the "guilty" (dumb borrowers and lenders) at the expense of the "innocent" (those who borrowed and lent prudently)? Sure again. But it's not like it's only those who are underwater on their mortgages who are struggling. The overhang of debt is having a huge effect on aggregate demand, which in turn affects even the prudent. So a factory worker who is laid off because her company's sales dropped 30% because households started saving to pay down debts instead of spending may have done everything right, but that's no relief to her. And debt relief for underwater homeowners and banks, by shoring up household balance sheets and freeing up funds to spend, would indirectly help her as well.
But I think such nuanced solutions aren't what OWS is fundamentally about-- I kind of get the sense it's more about dragging down "the rich" and "Wall Street" than it is about promoting policies that will actually improve the lives of ordinary people. And I think that's my biggest problem with the nature of the protests.
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