Wednesday, October 12, 2011: Roundtable Discussion on Occupy Wall Street
-- Roger Berkowitz, Associate Professor of Political Studies and Human Rights; Academic Director, Hannah Arendt Center for Politics and the Humanities, Bard College.
-- Paul Mariental, Director of the Bard TLS Program.
-- Jennifer Derr, a former professor in the History and Middle Eastern Studies programs at Bard College.
-- Steven Maslow, a banker on Wall Street and an avid supporter of the Hannah Arendt Center.
-- Two Bard Students who have been involved in the OWS demonstrations.
On October 12th, 2011, the Arendt Center hosted a roundtable discussion on the Occupy Wall Street movement with Bard faculty, Bard students who participated in the protests, and representatives of Wall Street.
Asked in July if Occupy Wall Street has been successful, Todd Gitlin—renowned social historian, former President of Students for a Democratic Society, and author most recently of Occupy Nation: The Roots, The Spirit, and the Promise of Occupy Wall Street—responds:
"OWS has been successful because we are talking about it. You now see bumper stickers that say 99%. I was just in upstate NY and I saw a candidate running for office with a sign that says: The candidate of the 99%. It is now legitimate to talk about inequality and the domination of American by a plutocracy, by an oligarchy of the super wealthy. No it is not successful in the sense that it has not delivered concrete results."
As the election has heated up OWS has faded even further from consciousness. At a time when we are about to pick our next leader, the leaderless rhetoric of OWS is out of step.
That said, Gitlin is right that many of the pressing issues underlying the OWS movement have insinuated themselves into public discourse. It is unlikely that without OWS President Obama would be focusing so clearly on raising taxes on those he calls the wealthy (by which he means those who earn over $250,000 per year). Indeed, if there is one core issue that seems to demarcate President Obama and Governor Romney it is the question of their differing attitudes towards wealth and taxes.
Gitlin, who is speaking next week at the Hannah Arendt Center’s conference “Does The President Matter?", is clear-headed about the movement's failures but remains optimistic about its future. Gitlin’s optimism, his hope for a movement that many other see as dead, is heartening. There may also, surprisingly, be a grain of truth in his rosy scenario.
Gitlin understands that the future of OWS is not in what it has been, but in what it has not yet imagined. After a lull in the movement, OWS, he writes, may well birth “individual initiatives combined with community spirit, assisted by technical ingenuity and the ability to learn from experience,” to shift the values that caused the crisis in the first place. If OWS is to bring about change, it will be because against its own anti-leadership rhetoric, it has and continues to produce new leaders.
"Leadership," Gitlin writes in Occupy Nation,
"is not abolished when movements don't designate spokespersons and leaders refuse the label, any more than prisons are abolished when they are designated as correctional facilities. In all social groups, leaders emerge. They emerge in the course of action when acts of leadership take place. Leaders prove themselves. Some are labeled leaders, some are not. Some accept the label, others reject it. Those who get the reputation for leadership get treated as leaders. It is as simple (and as complicated) as this: Leaders are persons whom others follow—admire, heed, recognize."
In imagining the fecundity of Occupy Wall Street's birthing of new leaders, Gitlin focuses on that aspect of OWS that was most surprising, new, and wonderful: Its determination to open up a space for being together, thinking, and talking in public. He quotes one OWS member as saying: "Something has been opened up, a kind of space nobody knew existed." There was, in the encampments, "a public place to go to, where attention could readily be paid, and individuals had faces and stories." Above all, Gitlin writes, the Occupiers were "creating a space where leaders and ideas could emerge."
In 1970, Hannah Arendt reflected on the Student Protests of the 1960s and said:
"This situation need not lead to a revolution. For one thing, it can end in counterrevolution, the establishment of dictatorships, and, for another, it can end in total anticlimax: it need not lead to anything. No one alive today knows anything about a coming revolution: 'the principle of Hope' (Ernst Bloch) certainly gives no sort of guarantee. At the moment one prerequisite for a coming revolution is lacking: a group of real revolutionaries."
The reason that a revolutionary moment will succeed or fail to turn into a real transformation is the presence or lack of real revolutionaries; revolutionaries, Arendt writes, are people who face the reality of the present and think deeply about meaningful responses and alternatives.
What Gitlin's account of Occupy Nation makes palpable is that amidst all the excesses and competing narratives, there are still some people who aspire to be real revolutionaries. Whether that small group will produce leaders of revolutionary potential is, of course, something we cannot know. But at a time of political paralysis amidst the political, economic, and ecological crises of our time, any movement that might give birth to new leaders is something to be welcomed.
So this weekend as we prepare for next week's conference "Does the President Matter?" pick up Todd Gitlin's Occupy Nation. You can also here him speak at Bard College on Friday, Sept. 21. And you can have him sign your book then.
John Cassidy over at the New Yorker has an excellent article that clarifies some of the basics about the debate over inequality. In Inequality 101, Cassidy reproduces a chart "Who Killed the Middle Class?" an article he published in 1995. The chart is fairly clear. It shows how from 1947-1973, the wealthy, the middle class, and the poor in the United States all saw their incomes rise at about the same levels. From 1973-1993, however, this equality disappeared. While the poor saw incomes decrease, and the middle-class stayed the same, the wealthy saw incomes rise, although not as much as earlier.
This chart is similar to the one I described in my Friday Post, The Way Forward. As I wrote there:
We see that until 1982, the wages of workers and the income of non-wage earners (thus the higher-paid supervisory workers) was largely equal. Beginning in 1982, however, the earnings of non-wage earners began to rise significantly faster than the income of wage workers. This is at least one original source of the increasing inequality of the American populous and it is exacerbated by an increasingly less-progressive tax code and also by the increasingly profitability of capital investments in the global economy.
Since the 1990s, the rate of inequality in our society has skyrocketed, especially for the very highest earners in the 1% and even the .1%. Cassidy provides this chart as well to make this clear.
I will be speaking with John Cassidy on May 10 in New York City. The event is part of the Hannah Arendt Center NYC Lecture Series. You can learn more about the event and RSVP here, as seating is limited.
If inequality matters, is it rational? David Grusky writes that much of the economic inequality in our economy is irrational, the result of rules and practices that irrationally keep pay high for a small group of college graduates and CEOs.
While many argue that inequality needs to be addressed by higher taxes, Grusky argues that inequality has causes deeper than the system of taxation:
But the takeoff in inequality cannot be explained by tax policy alone. To the contrary, as economists Emmanuel Saez and Thomas Piketty have shown [see their response to Grusky], there has been a dramatic rise over the last 30 years in pre-tax income inequality. The share of pre-tax income flowing to the top 1 percent of households increased from less than 10 percent in 1975 to more than 20 percent now. This spectacular increase in market inequality is of course exacerbated by changes in after-market taxation. However, because the takeoff in inequality is mainly generated within the market, we should look to market institutions to understand its main causes.
Grusky shows that beyond tax raises, it might be better to focus on two other causes of inequality: unequal opportunities in education and unjustified CEO pay. Since there remains a premium paid for college education and especially for elite college educations, increasingly the educational opportunities and preparation of more people would be one way to address income inequality. And since CEO pay has skyrocketed beyond market justification through the use of toothless boards of directors and suspect compensation consultants, leading to economic rewards beyond market justification.
Is economic inequality becoming a problem for Americans? The common sense today is that OWS has put inequality on the agenda today in a way that is new in American politics. And today Eduardo Porter makes the argument that OWS is having some traction on the question of income inequality. While Americans traditionally are tolerant of inequality, that may be changing.
Our tolerance for a widening income gap may be ebbing, however. Since Occupy Wall Street and kindred movements highlighted the issue, the chasm between the rich and ordinary workers has become a crucial talking point in the Democratic Party’s arsenal. In a speech in Osawatomie, Kan., last December, President Obama underscored how “the rungs of the ladder of opportunity had grown farther and farther apart, and the middle class has shrunk.”
There are signs that the political strategy has traction. Inequality isn’t quite the top priority of voters: only 17 percent of Americans think it is extremely important for the government to try to reduce income and wealth inequality, according to a Gallup survey last November. That is about half the share that said reigniting economic growth was crucial.
Seventeen percent seem a low number of citizens concerned about inequality, but looking deeper, Porter argues that attitudes are changing.
A slightly different question indicates views have changed: 29 percent said it was extremely important for the government to increase equality of opportunity. More significant, 41 percent said that there was not much opportunity in America, up from 17 percent in 1998.
Statistics on income mobility are notoriously hard to measure and contested, but the surveys indicate that optimistic Americans are losing that sense of mobility and possibility. Even if people can and do often earn more than their parents, the vast rifts opening up between rich and middle class means that increasingly Americans live in different worlds. These vast divisions are now seen as a problem not only by liberals, but also by conservatives like Charles Murray, whose book Coming Apart bemoans the loss of a common sense of American values. There is a way in which the truly extraordinary gaps in income are unraveling the social contract that holds the country together.
In other words, even for those who are accepting of inequality and who believe in a meritocracy, excessive inequality cannot be justified. As Porter writes:
One doesn’t have to believe in equality to be concerned about these trends. Once inequality becomes very acute, it breeds resentment and political instability, eroding the legitimacy of democratic institutions. It can produce political polarization and gridlock, splitting the political system between haves and have-nots, making it more difficult for governments to address imbalances and respond to brewing crises. That too can undermine economic growth, let alone democracy.
Read more here.
A few hundred people gathered at the capitol today as part of Occupy Congress. Why so few?
Last Fall Occupy Wall Street movement sprouted 2,779 chapters around the nation and captured the attention of the 1% as well as much of the 99%. In some ways, the movement has had an impact. A number of young people and even some older people tasted the sweet nectar of political action, and there are individuals and groups still energized to take on the debilitating as well as embarrassing income inequality and political corruption that is endangering our system of government.
These issues are now on the agenda. Just today the New York Times ran a front-page story on Mitt Romney being one of the 1%. Romney, tone-deaf as usual, characterized his $374,327 income from speaking fees as "not very much" money; this was his way of justifying paying only 15% of his income in taxes because his earnings are primarily from investments.
And yet, it is undeniable that the movement has fizzled. One hears almost nothing about Occupy Wall Street these days. A long-planned day of action Occupying Congress drew barely a few hundred souls.
Democratic politicians—not to mention Republicans— around the country are resisting increasing taxes on the highest earners. Accountability on Wall Street and in Washington for the crisis is a fantasy. And serious talk of reforming our campaign finance system is barely audible. What happened? Why did a movement that enraptured the nation just a few months ago fade so quickly? What is the fate of the promise to rejuvenate politics and bring real change?
It cannot simply be the weather (unseasonably warm anyway) that has frustrated the protests. Could it be the glimmer of economic recovery that has changed the focus from protest to profits? Possibly. But still, the alacrity with which the energy and spiritedness of the protests fled from public consciousness is shocking.
I can't but think the real reason for the disappearance is disillusionment and failure. A movement that swept the nation, changed the discourse, and empowered thousands has, in the end, accomplished almost nothing concrete. No laws changed. No new candidates or leaders emerged. And the major issues that galvanized the country—income inequality and political corruption—have seemingly faded from view. With few successes to point to, many of the protesters appear ready to move on. How could this be?
The Occupy Wall Street website still promises, "The Revolution Continues." But the worry about the future is palpable on the forum page titled:
Forum Post: What the fu** has happened to occupy wall st.
There, you can find the following post by Thrasymaque that has generated enormous response.
OWS was based on an idea that was/is needed in many Arab countries: a revolution. Because of this, OWS categorically refused to make demands. They wanted to topple the government, not work with it. Because US doesn't need a revolution and most people don't want one, the energy faded away with the coming of winter. Anarchism and communism have never been very strong in America. Their protest was never expected to last very long. Anarchists always destroy there (sic) own selves.
Thrasymaque gets much of this right. Too many in the movement insisted on rejecting all goals or ends. Some of those had the fantastic goal of overthrowing the government. Others did not know what they wanted. And some really were swept up in the process of trying to figure out what they wanted. There was joy in public action and the thrill of debate and engagement. Much was beautiful and spontaneous. But the fact is that without a concrete goal and without leaders to mold and guide the passions of the people, the movement fizzled.
For those of us who hoped that Occupy Wall Street might rise to the moment and produce a leader or leaders to fill the dangerous vacuum in leadership in this country, the insistence on a leaderless revolution was a huge mistake; so too was the rejection of all issues or goals. The result is that we have seemingly squandered a movement of incredible power and promise.
The real problems we face as a country—the corruption of our political process, the decimation of the middle class, and the malaise of decline—persist. The establishment in Washington and Wall Street breathe a sigh of relief and seem more set in their ways then ever. Congress is paralyzed. Meanwhile, the wheels of finance are turning again. The failure of a popular movement that might have challenged the status quo has left those in power more secure in their privileges. From the winds of change, it seems we have settled into a desert of despair.
In my first post on Occupy Wall Street back on Oct. 5th, I quoted Hannah Arendt's reflection on the Student Protests of the 1960s:
This situation need not lead to a revolution. For one thing, it can end in counterrevolution, the establishment of dictatorships, and, for another, it can end in total anticlimax: it need not lead to anything. No one alive today knows anything about a coming revolution: 'the principle of Hope' (Ernst Bloch) certainly gives no sort of guarantee. At the moment one prerequisite for a coming revolution is lacking: a group of real revolutionaries.
The reason that a revolutionary moment will succeed or fail to turn into a real transformation is the lack of real revolutionaries; revolutionaries, Arendt writes, are people who face the reality of the present and think deeply about meaningful responses and alternatives.
I asked then: "Is there a serious and thoughtful confrontation with reality that underlies Occupy Wall Street?"
I asked from a position of hope. I fear that the answer, at least so far must be no. We are closer now to counterrevolution than revolution, but most plainly we face anticlimax. Most palpably, in the year of one of the most consequent elections in our nations history, we are missing a leader, a voice, that offers a meaningful and powerful agenda for change, let alone a revolution.
We must ask ourselves: Why is it that this crisis, and this movement, failed to produced revolutionaries?
Andrew Sullivan has an excellent essay in The Daily Beast about the undeniable allure of the Occupy Wall Street protests, in spite of what he calls "the hippie problem." As much as there are elements of the protests and the protesters that sound naïve and even coarse, as much as they at times seem out of touch, there is a core truth to the Occupy Wall Street movements that is so profound that it cannot be denied. In short, we must agree with the basic idea: that our democracy and our political system are broken. Here is Sullivan:
The theme that connects them all is disenfranchisement, the sense that the world is shifting deeply and inexorably beyond our ability to control it through our democratic institutions. You can call this many things, but a “democratic deficit” gets to the nub of it. Democracy means rule by the people—however rough-edged, however blunted by representative government, however imperfect. But everywhere, the people feel as if someone else is now ruling them—and see no way to regain control.
If you have any doubt that we have lost all trust in our democratic government (and who has such doubts), read this front-page article in today's NY Times.
A healthy democracy needs at least two things.
First, a strong middle class. As thinkers from Aristotle to Arendt have emphasized, political life requires that the people share a common world. Those who are too rich or too poor are excluded from what the people share; they exist often on the fringes of that consensus of common sense. It is the middle classes that determine a strong and meaningful sense of what the people are and give depth and sense to the public world. The best Constitution, Aristotle writes in his Politics, is one that encourages the largest middle class. The loss of our middle class has weakened that common sense and threatens our political system.
Second, a healthy democracy needs a shared factual world. As Hannah Arendt has argued, without a shared factual world, we cannot talk, argue, or disagree with others; we are left with nothing to do but talk to those with whom we already agree. In a world without facts, we risk undermining the venture of politics as Arendt understood it: to create together a common world, one as unruly, disorderly, and argumentative as such togetherness demands.
The Hannah Arendt Center for Politics and Humanities at Bard College convenes a conference exploring the loss of fact and the attack on common sense that have corroded our political world and fed our unprecedented distrust of politics. The conference—Truthtellng: Democracy in an Age Without Facts—is this weekend, Friday and Saturday, Oct. 28-29. You can watch the conference via live web simulcast by going to the Arendt Center website on Friday, beginning at 10:30 am.
To read more of Andrew Sullivan's article, click here.
Occupy Wall Street has been looking for issues to coalesce around. Now the Canadian group Adbusters—the group that issued the initial call that began the protests—has proposed that Occupy Wall Street adopt a Robin Hood Tax on financial transactions as its first issue. Here is their call to action.
The Financial Transaction Tax (FTT) is an idea that has lots of support amongst some economists. My friend David Callahan has been arguing for the FTT for a while now. By far the best and most balanced analysis of an FTT is by the IMF, here. On the positive side, the FTT has the advantage of being simple and intuitively attractive. But is a Financial Transaction Tax really a good issue for Occupy Wall Street to coalesce around?
The main problem is that the FTT employs a sawed off shot-gun approach to a real but specific problem and unintended consequences. Thus, the IMF study cited above concluded that a FTT would not clearly target financial excesses:
Where the goal is to curb financial market excesses, [FTT] offer a less specific remedy for the excessive leverage that is believed to cause them than other tax and/or regulatory solutions. Financial complexity does not derive solely or even primarily from trading activity. The buildup of hidden financial risks in the recent crisis resulted predominantly from excess leverage, risk concentration, and product innovation such as asset securitization, which would have been largely unaffected by a transactions tax. An [FTT] also does not directly address systemic risk.
The point is that the real problem in speculation is leverage and volatility. The FTT doesn't address leverage, and it doesn't target the high frequency traders who drive volatility. Instead, the FTT taxes ALL transactions.
What is more, the FTT will penalize smaller and retail investors—precisely those in the 99%. As the chart below shows, most stock in the U.S. is held by middle-class investors—those between the 80th percentile and the 99th percentile. They are responsible for the vast majority of financial transactions (this is especially true since a large percentage of the equity holdings of the 1% in the chart are enormous trusts containing dividend paying stocks that have been held for generations and which never trade). Thus, the FTT falls most heavily on the people who own the most stock in the country and depend on that stock for our retirements and investments.
Another problem is that if the Financial Transaction Tax is not adopted globally, it may well drive trading off shore to even less well-regulated markets than our own. The U.S. tried a similar tax in the 1960s and repealed it when trading moved to London. Sweden tried a FTT tax in the 1980s and 1990s and repealed it later when trading fled to other countries.
Finally, the IMF concludes that the FTT would increase consumption and reduce savings by lowering the returns of investment and savings—a result directly opposite to at least some of the goals of Occupy Wall Street. In addition, the FTT discourages the rebalancing of portfolios, thus depressing total returns on mutual funds investments and 401ks.
So what might be some other ideas for Occupy Wall Street—and also our political leaders (such as they are)—to consider? Here are a few ideas that a number of professionals I spoke with mentioned:
1. Ban all High Frequency Trading. It has no purpose except to make some very big and wealthy firms money while increasing volatility for the rest of us. High frequency traders justify the practice as increasing market efficiency. But there is no economic justification to prefer a system that makes 1000 trades per second to one that makes 10 trades per second. Such trading is disruptive and very profitable. Ban it outright. Doing so would be much easier than getting the global cooperation needed to make a Financial Transaction Tax workable. And doing so would also make the U.S. markets more stable and thus give them a competitive advantage over other markets worldwide.
2. A Cancelled Order Tax. It turns out nearly 99% of the orders placed on Wall Street are never filled, but cancelled. A small percentage of these cancellations are just people changing their minds. But the vast majority of cancelled orders are used to manipulate prices by tricking other traders into thinking that a stock is moving in a particular direction. According to one study on an average trading day in 2010, only 1% of all the 89.7 billion orders were executed, which means that nearly 99% of all orders placed can be attributed to high frequency traders trying to manipulate stock prices. A tax on cancelled-orders has distinct advantages over a tax on all financial transactions. First, it will fall primarily on hedge funds and large high-frequency traders, and will not affect retail investors. Second, it will specifically target the casino-like aspect of Wall Street. A cancelled-order tax is not as simple or sexy as a financial transaction tax. Less has been written on it. But it actually seems like a better idea. Read more about the idea here and here.
3. Reinstate the Uptick Rule. Nearly every market professional I polled supports the re-instatement of the "Uptick Rule," a rule that was imposed in 1938 during the Depression and repealed in 2007—just before the market crash and the financial crisis. The Uptick Rule prevents hedge funds and traders from betting on falling stock prices when the markets are already falling, thus reducing volatility and reducing the ability of traders to make money by encouraging market panics. There is a debate about how effective the Uptick Rule is, but there seems to be little or no downside to reinstating it. The only people who oppose doing so are traders.
4. Taxing Corporate Debt and Leverage and Raising Margins. The IMF proposes taxing not financial transactions but corporate debt, thus discouraging corporations from using debt and leverage to finance their activities. As part of this approach, it would be wise to raise margin requirements, the amount of money that someone has to put up before buying a stock or financial instrument on credit.
While Hannah Arendt may not have been much interested in the minutiae of Wall Street regulation, she did care deeply about the importance of facts in thoughtful and reasoned argument. In just one week, on Friday Oct. 28, the Hannah Arendt Center will open our two-day conference on Truthtelling: Democracy in an Age Without Facts. When facts and opinions blur, reasoned argument falls prey to spin and deception. Politics is a realm of conflicting opinions, Arendt argued, but the opinions must necessarily be grounded on facts.
Whether or not the Financial Transaction Tax is a good idea, the debate around it should be based on solid knowledge of the financial system, the affects of such a tax, and also the alternatives. These are very complex issues and, in all honesty, much of the debate so far has traded in simplifications, soundbites, and falsehoods.
If Occupy Wall Street really wants to distinguish itself from the Tea Party and change our political culture, let's use this first foray into politics as an opportunity to model adult argument, something that has been absent from our public life for far too long. If they do want to model a future of fact-based decision making, they will do well to look deeply into the cons as well as the pros of a financial transaction tax. They would also do well to consult those people who work in financial markets daily. Many of these people—both those in the 99% and the 1%—want to eliminate market excesses and reign in the speculation and insanity that helped lead to the recent financial crisis. In the name of common sense and a way forward, let's have a real debate based in both fact and expertise.