Occupy what?
By Jim Surber
11/19/11 

All over the world there are protesters on the big city streets. Whether they call themselves “Occupy Wall Street” in this country or a lot of different names in others, the participants are irritated and dissatisfied about the state of the economy, and about the unfair way that the common folk are paying for the sins of rich bankers, and in some cases about capitalism itself.           

It used to be easy for Western politicians and the media to dismiss such exhibitions as rages of the misguided fringe. As in the past, the new protests have also included familiar things like random acts of violence, hedonism, incoherent ranting and plenty of inconsistency. While protestors have different goals in different countries, higher taxes for the wealthy and contempt for financiers are the closest things to common denominators. Additionally, polls have shown that in America, popular contempt for the government is greater than it is for Wall Street. 

But even if the protests are relatively small and incoherent, are they evidence of a broader rage that exists across the Western world? Many people recognize that there are many legitimate, deep-seated grievances. All young people, not just those that are demonstrating, now face higher taxes, less generous benefits, and longer working lives than their parents. Currently they must deal with houses that are expensive, credit that is harder to get, and jobs that are very scarce. 

The lack of employment opportunity is not just in manufacturing, but in the more glamorous services that attract the increasingly debt-ridden college graduates. In our country, 17% of those below the age of 25 are out of work. Across the European Union, youth unemployment averages 20%. The extremes are Spain with a staggering 46%, and three that are in single digits in Germany, the Netherlands and Austria. 

It is not only the young people who feel squeezed. Those that are middle-aged now face falling wages and diminished pensions. The elderly are watching inflation and low interest rates rapidly erode the value of their savings. In England, prices are rising by 5.2% but bank deposits yield less than 1%. While this occurs, the bankers are back to getting huge bonuses. Is discontent all that surprising? 

To the average person, all this may indicate systems that have failed. Neither of the main Western models has much political credit at the moment. European social democracy promised its voters benefits that societies can no longer afford. The American model claimed that free markets would create unbridled prosperity. Many now conclude that they got a string of asset bubbles, fueled by debt, and an economy that was rigged in favor of the financial elite. Those at the top took the proceeds in the good times and left everybody else with no alternative other than to increase public debt to bail them out. To use one of the protest’s better slogans, the 1% has gained at the expense of the 99%. To use one of mine, we privatized the profits but socialized the losses. 

If today’s grievances are broader and more legitimate than in previous protests, then the potential dangers are also greater. Populist anger, with no coherent agenda, can go anywhere in times of want. The 1930s provided the most familiar example. A more recent but less frightening example is the Tea Party. The justified fury of America’s vanishing middle class against an awkward, unmanageable government has translated into a form of obstructive nihilism. At present, Washington can pass nothing to do with taxes, and that includes tax reform. 

Everyone disagrees on what should be changed or done differently.  One partial solution may be the costs, both direct and indirect, of finance. It can be argued that finance hinders global productivity by taking far too much for the task it accomplishes. Should governments act to reduce the potential dangers of finance while simultaneously reducing its profitability? Would it be better if banking and finance became once again what it used to be-- boring? 

It is a popular cliché that governments need to do more to get their economies moving again. This may be possible by focusing on policies that boost economic growth by trading less austerity now for effective, medium term adjustments such as increasing the retirement age. The rich should pay their share, but in ways that make good economic sense such as eliminating loopholes while holding marginal rates. Presently, partisan political gridlock and an impending election have stymied any progress in the near future. 

Governments also need to tell the truth about what went wrong. The nucleus of the 2008 financial disaster was American residential property, which is hardly a free market, undistorted by government. Recognizing the financiers’ excesses like derivatives and hedge funds, the huge holes in government balance sheets are not totally from bailouts. They are from politicians’ excessive spending in the boom-times, while making promises for pensions and health care that could never be kept. The promises did keep them getting re-elected, which again proves that a simple mirror is the best device to determine who is to blame. 

To me, the modern protests are more likely about living standards. They are about average wages and their purchasing power, which are both falling. People in the middle simply do not know how to make ends meet, and it is especially tough on the young who are forced to assume big debts for their education, only to enter an uncertain work environment. 

We were all brought up to believe that life was always going to get better. We were never warned that jobs might disappear the moment an owner could increase profits by sourcing work cheaper from anywhere else on the planet, and that creating replacement jobs would be a seemingly impossible task. We still live in a country where we have the rights to protest and to air grievances. 

Many of us are probably too old to join a protest, even if we wanted to. I can only say that if the substance of a grievance is, or can be focused upon, financiers’ and corporations’ use of government power to win unjust power and profits for themselves; that is a grievance for which I could at least sit in a drum circle.