It is a new year, not only for Jews celebrating Rosh Hashanah but also for hundreds of thousands of college and university students around the world. As with all new things, there are surprises in store, some glorious and others traumatic. Over at Harvard, they invited Nannerl O. Keohane —past President of Wellesley College—to give the new students some advice on how to reflect upon and imagine the years of education that lay before them. Keohane refashioned some words she had given previously to students at Stanford and called them: “Self-Fashioning in Society and Solitude.”
Above all, Keohane urges students to take time to think about what they want from their education:
You now have this incredible opportunity to shape who you are as a person, what you are like, and what you seek for the future. You have both the time and the materials to do this. You may think you’ve never been busier in your life, and that’s probably true; but most of you have “time” in the sense of no other duties that require your attention and energy. Shaping your character is what you are supposed to do with your education; it’s not competing with something else. You won’t have many other periods in your life that will be this way until you retire when, if you are fortunate, you’ll have another chance; but then you will be more set in your ways, and may find it harder to change.
Keohane also turns to Hannah Arendt for advice. She writes:
In the fifth chapter of her powerful work of political philosophy, The Human Condition, Hannah Arendt discusses the connections between individuals and political communities. She notes that each human being is “distinguished from any other who is, was, and ever will be”—which is a vivid way of thinking about selfhood. Yet precisely because each of us is a distinct individual, we need speech and action to communicate; I cannot just sense instinctively what somewhat else is thinking. In speaking and acting, we “disclose ourselves” and thus expose ourselves to possible misunderstanding or exploitation by others, but also to the rich possibilities of communication.
Speech and action, in Arendt’s sense, cannot exist in isolation; they are meaningful only within human relationships. By the same token, “human nature”—as distinct from our more animal qualities—depends precisely on our capacity for speech and action: it is in fact through speech and action that each of us constitutes our self. This is Arendt’s distinctive contribution to our discussion of self-fashioning: the self is created not by each of us as individuals in isolation, but through the activities we share with other human beings—language, creativity, striving, politics. If your goal is to fashion a worthwhile self, you should be mindful of your surroundings and choose companions and activities that will give you opportunities to develop your language, creativity, striving, and politics in more depth.
Keohane is right that Arendt understands the fashioning of our public selves to take place through speech and action with others. The self that is created as a public self—the self that is spoken of in the public sphere—is created through the activities we share with other human beings.
At the same time, Arendt is clear that the emergence into public life of a unique self must be nurtured in the private realm. This is especially true for children, who must be protected against the public world. Children, she writes, “must be protected against the world,” which is why the child’s “traditional place is in the family, whose adult members daily return back from the outside world and withdraw into the security of private life within four walls.” Education, Arendt insists, is not an activity of the public sphere and the world, but requires a “secure place, without which no living being can thrive.” For Arendt, children must develop outside the “merciless glare of the public realm.” Only then can they develop individually and uniquely into plural and independent persons. In order that there be a public world of plurality, we need a private world of solitude and darkness. “Everything that lives,” Arendt writes, “emerges from darkness and, however strong its natural tendency to thrust itself into the light, it nevertheless needs the security of darkness to grow at all.”
Keohane too embraces the importance of solitude in education, arguing that a reflective education must have a double aspect, looking both inwards in solitude and outwards towards society. She enlists Thoreau and Montaigne in the defense of solitude, even as she insists that a liberal arts education has, in the end, “education for citizenship.”
At a time when democracy is passionately sought by people in countries around the world, and countries that have long enjoyed democracy are struggling to sustain it against multiple pressures, education for citizenship is one of the most powerful arguments for a liberal-arts education.
What Arendt argues, however, is that what makes education supportive of citizenship is precisely its inculcation of the virtues of solitude. Only the person who knows himself and thinks for himself and thus is inured to the sway of society and social pressures is, in Emerson’s words, qualified to enter the public forum.
Precisely this question of what does it mean to educate citizens today, and how we are to respond to the crisis of apathetic yet educated citizens, underlies the upcoming Arendt Center Conference: Failing Fast: The Educated Citizen in Crisis. The Conference takes place Oct. 3-4 at Bard College. And is open to the public. For now, take a look at Keohane’s speech. It is your weekend read.
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.