Wall Street's whining cannot be taken seriously
ANALYSIS:It is harder than ever to see what, if anything, financiers are doing to earn such lavish salaries
AS THE Occupy Wall Street movement continues to grow, the response from the movement’s targets has gradually changed: contemptuous dismissal has been replaced by whining.
The modern lords of finance look at the protesters and ask: Don’t they understand what we’ve done for the US economy?
The answer is: Yes, many of the protesters do understand what Wall Street, and more generally the nation’s economic elite, have done for us. And that’s why they’re protesting.
On Saturday, the New York Times reported what people in the financial industry were saying privately about the protests.
My favourite quote came from an unnamed money manager: “Financial services are one of the last things we do in this country and do it well. Let’s embrace it.”
This is deeply unfair to American workers, who are good at lots of things. But to the extent that the US has lagged in everything except financial services, shouldn’t the question be why, and whether it’s a trend we want to continue?
The financialisation of the US was not dictated by the invisible hand of the market. What caused the financial industry to grow much faster than the rest of the economy, starting around 1980, was a series of deliberate policy choices, in particular a process of deregulation that continued right up to the eve of the 2008 crisis.
Not coincidentally, the era of an ever-growing financial industry was also an era of ever-growing inequality of income and wealth.
Wall Street made a large direct contribution to economic polarisation, because soaring incomes in finance accounted for a significant fraction of the rising share of the top 1 per cent in the nation’s income. More broadly, the same political forces that promoted financial deregulation fostered overall inequality, undermining organised labour, doing away with the “outrage constraint” that used to limit executive pay cheques, and more. Oh, and taxes on the wealthy were sharply reduced.
All of this was supposed to be justified by results: the pay cheques of the wizards of Wall Street were appropriate, we were told, because of the wonderful things they did. Somehow, however, that wonderfulness failed to trickle down to the rest of the nation.
Median family income, adjusted for inflation, grew only about a fifth as much between 1980 and 2007 as it did in the generation after the second World War, even though the postwar economy was marked by strict financial regulation and by much higher tax rates on the wealthy than anything currently under political discussion. Then came the crisis, which proved that all those claims about how modern finance had reduced risk and made the system more stable were nonsense.
And what about the current situation? Wall Street pay has rebounded even as ordinary workers continue to suffer from high unemployment and falling real wages. Yet it’s harder than ever to see what financiers are doing to earn that money.
Why, then, does Wall Street expect anyone to take its whining seriously? That money manager claiming finance is the only thing the US does well also complained that New York’s two Democratic senators were not on his side, saying: “They need to understand who their constituency is.”
He wasn’t really talking about voters, of course. He was talking about the one thing Wall Street still has plenty of thanks to those bailouts: money.
Money talks in American politics, and what the financial industry’s money has been saying lately is that it will punish any politician who dares to criticise that industry’s behaviour – as evidenced by the way Wall Street money has abandoned US president Barack Obama in favour of Mitt Romney.
And this explains the industry’s shock over recent events.
You see, until a few weeks ago, it seemed as if Wall Street had effectively bribed and bullied our political system into forgetting about that whole drawing lavish pay cheques while destroying the world economy thing. Then, all of a sudden, some people insisted on bringing the subject up again.
And their outrage has found resonance with millions of Americans. No wonder Wall Street is whining.