Occupy • 30 October 2011 • The SnowBlog


I hope you don't mind me putting these thoughts here. I don't have a good alternative outlet for them. I want to say what I think is going on with the Occupy protests on Wall Street, outside St Paul's and elsewhere. Hopefully you've seen the protests in the news. Depending on where you get your information you might think they're scroungers or treehuggers or extremists or perhaps you think they're standing up for our rights. Of course they're not a single movement; they're lots of people annoyed about lots of different things who don't see a better way to make their point. And I think they might be right about that. I'm sure the Occupy 'movement' includes lots of people who think capitalism is just plain wrong. But I suspect for everyone who feels that, there are a dozen who want capitalism to get rid of its double-standards (e.g. bailouts predominantly for the rich) and to lean a little towards socialism and not so much towards the hardline free-market where providing any sort of social safety is seen as an 'imperfect market'. I think a lot of this starts with the idea of 'special interests'. That's a term that used to get bandied around in the States a great deal and it revealed an important point. If a few people were passionate about doing something and a lot of people were apathetic about stopping it, the few could get their way, even in a democracy where supposedly the majority always has their say. A special interest group couldn't necessarily raise enough votes for their cause, but they could make use of other political pressure points. In other words, there are ways to punch above your weight - to achieve more leverage than the one-man-one-vote rule might imply. And if everyone else is asleep then special interests often prevail. I think originally when people decried 'special interest' groups they were thinking of pet projects or slightly wacko zealots wanting to spend public money on freeway tunnels for woodland creatures to cross the road or religious groups wanting to ban the word 'Xmas'. You see a form of it in the NIMBYism of wind farms. As a whole, the country wants wind farms. But they want them in a vague, leave-it-to-others kind of way. Whereas individual communities often don't want them. And they don't want them in a passionate, handing out leaflets, holding meetings, heckling officials kind of way. The masses don't have a particular site in mind, they just want the job done. So wind farms will almost certainly end up wherever local organisation is weakest not necessarily where they suit the UK's energy demands best. (Disclaimer: I like wind farms and would actually like one near me.) So special interests can get their way by being organised and passionate even though the majority oppose them. Because the majority are disorganised and not paying attention and don't have an easy way to express their preferences. Voting one way or the other in elections is a very blunt instrument indeed when it comes to influencing the hundreds of policy and regulatory and budgetary decisions that go on around us - especially when most of us have no time or motivation to stay informed about this stuff. Now imagine what happens if you add money to the combination of organisation and passion. Some part of the democratic process always costs money and if you can find it, and spend your money wisely, then you can apply leverage out of proportion to the number of votes you command. Again, it's about punching above your weight in a democracy. In America there's a very easy way to buy your influence. Somehow America has ended up with a televised approach to elections, particularly at state, congressional and presidential level. You get your message out on TV spots and your opponents hit back using the same medium. The whole things costs a fortune. I've seen lots of different estimates but it seems to cost more than a million dollars to get into the House of Representatives, over five million to become a senator and several hundred million to become president (I suspect all those figures are very much on the low side because I took them from older sources). Given that successful candidates will be ones who, among other things, raised enough money to get elected it stands to reason that there'd a natural tendency for those with rich friends to have a headstart over those with poor friends. You need a loooot of poor friends to raise a million bucks, but one rich friend might do the trick. Or you could be rich yourself, then you don't need so many friends - or 'supporters' if you prefer that term. Take a look at this fun chart that's doing the rounds: PercentageMillionairesCongress.jpg That's got to have an effect on how legislators see the world compared with the views of 'ordinary people'. Taxing millionaires at a high rate is bound to be more popular outside congress than within it. Take into account that a very large fraction of politician's re-election funds are also going to be from millionaires, who most likely don't want to be taxed more heavily, and it's easy to see how Bush era tax cuts for the wealthy could come about during a war (an almost unprecedented occurrence - the American War of Independence being the only other example I could find). Now ideally, there'd be just as many pressure groups pushing in the other direction. In some ways it will be an unequal battle, because poor people can't compete with rich on a contribution-per-capita basis. But if what the rich are pushing for is unpopular enough, the poor should have the advantage in numbers. If you're around a hundred years old you might remember unions as heroic alliances of working people who forced businesses to pay disability to injured workers and pensions to those too old to work. If you're around fifty years old, you might think of unions as workshy Marxists intent on bringing industry to a halt with their knee-jerk strikes. If you're twenty years old, you might not really have had any experience of unions. Before the second-world-war, workers' movements and unions were powerful enough to have their own newspapers. These days, national news outlets belong to massive, global media conglomerates like News International or Clear Channel or ViaCom or ComCast. These are huge businesses which could not have existed fifty years ago because of laws about media 'concentration'. Media companies didn't used to be permitted to get too big and too broad for fear that they could slant the news. Those restrictions have been weakened over the years and now we get most of our news from giant corporations. It's hardly surprising if sometimes those giant corporations show some pro-corporate bias. They're not about to campaign for their own destruction - and so by extension they're unlikely to start mud-slinging competitions with any other giant corporations. In the last fifty years or so, news media has become more pro-corporate because most news media is generated by corporations. Newspapers and news TV have also come to rely ever more heavily on advertising. And advertising is very rarely about poor people sending messages to big corporations: it's nearly always the other way round. So the rare news corporation that agitates for corporate restraint is unlikely to impress its advertising clients. And finally there is something called 'access journalism'. If you call a top politician a crook you may never get another interview from anyone in government. If you try to blow the whistle on a corrupt corporation you may attract the mother of all lawsuits. If you 'go along to get along' you may find that you can get quotes and interviews from the rich and influential, that you get the best tip-offs of what's about to happen, and you have access to the inside story. Make powerful enemies and you may quickly become useless to your editors: persona non grata in all the places that count. Not to mention that really dogged investigative journalism costs a lot of money as well as making powerful enemies - and it's not even that popular with readers. No wonder celebrity news is forever on the rise while 'hard news' dwindles. You can sometimes get away with going after a 'rotten apple' or a 'black sheep' but going after the system itself is rarely a good idea for a journalist - even supposing his bosses wanted to run the story. The BBC got into a lot of trouble for their 'sexing up' the case for war reporting - even though they were right. Dan Rather lost his job for a story which was accurate. And no one even expects Murdoch's papers to try when it comes to policing those at the top (assuming they're toeing the News International line) And over those same fifty years of increasing media 'concentration' the traditional counter-balancing organisations on the labour side have dwindled and lost their status. I can't remember the last time I saw a positive portrayal of a union either in fiction or in the news. Perhaps unions themselves are to blame, but we have nothing to replace them with, so inevitably the scales have tipped towards corporations. Fortunately, innovations like the internet have opened the floodgates when it comes to 'ordinary people' figuring out what's happening in the world. Fox News might not cover the Murdoch phone-hacking scandal, but a two-second Google search can uncover plenty of information. Of course you need to get tipped off somehow in order to go searching - and you need to feel motivated to do so. The latter in particular - motivation - seems to have been in decline ever since the militant Sixties. For decades, corporations have been gently (and not so gently) pushing for what they want and they've naturally used methods other than the ballot paper to get their way because those methods work best for them. America has recently - and I think ridiculously - taken the legal fiction that a corporation is, in some sense, an 'individual' and argued that it therefore enjoys free speech protection [1]. Which in turn means that it should not be subject to limits over its political donations. Corporations in America can now donate huge sums to politicians who they believe will represent their interests. Another factor that's worth considering when looking for corporate bias is what happens to politicians once they are out of office. The Bush Administration particularly did a roaring trade in recruiting 'regulators' from within the industries they were supposed to regulate and then allowing them to take highly paid consultant positions back within those industries when their public offices came to an end. Some of these consultant positions are offered while the official still holds public office - which certainly raises the possibility of implicit strings being attached. And some of these ex-public officials offer their services as experts in how to effectively (and legally, of course) manipulate the system. Needless to say, poor people are not paying these consultants' fees; it's all big business, especially big businesses who either wish to be laxly regulated or who do a lot of business with the government (such as defence contractors). This 'revolving door' makes sense to some: how could an outsider responsibly oversee an industry they were unfamiliar with? On the other hand, what about the stakeholders who are affected by that industry but not part of it? Does the logging industry have sufficient incentives to protect forests? Do pharmaceutical companies have sufficient incentives to offer affordable medicines? Are credit card companies in favour of cancelling debts for those bankrupted by medical bills? Do defence contractors ever lobby for less militarisation or smaller wars? I believe the answer to all those questions is 'no'. (This malaise even has a formal name in economics: Regulatory Capture: where an oversight agency turns from master to slave.) Corporations have become better and better at getting what they want, not because they're evil (though I sometimes think some of them are) but because that's their job. And there are very few effective institutions for pushing back. They have also got better and better at cutting wages over the years. Not the top wages, but the wages of everyone in the lower levels of the organisational pyramid. And they've got better at paying less corporate taxes - or being granted more tax 'credits' - or even getting the relevant tax rates lowered for the whole industry. Very rich people who mainly pay capital gains tax rather than income tax have had similar good fortune over the last fifty years. Even if 'ordinary people' do take an interest in a cause, there is relatively little they can do about it - or so it seems. Governments invite community feedback, but often ignore it. They do backroom deals. They rush bills into legislation. They appoint advisers and make use of massive consultancies all of whom are from big-business backgrounds (or are big businesses) and it's difficult to imagine how an ordinary citizen could get a seat at the table in any of those processes. Take a look at this graph (from the Washington Post) about U.S. effective rates of corporate tax. That's not the official rate (which is one of the highest in the world), but what corporations actually end up paying (which is one of the lowest rates in the world): taxratescorporate.jpg And look at Warren Buffett has to say (New York Times link) about the tax he pays on his income compared with the tax his secretary pays. His tax rate ends up being below 18% compared to an average of 36% for people in his office. Or look at this graph for what has happened to incomes in America in the last thirty years (source): inequality-p25_averagehouseholdincom.png What it all means is that each year the status quo gets nudged a little in favour of those who are organised, mobilised, canny and well-funded. The one remaining arena in which the ill-informed and unmotivated person in the street gets to have their say is elections. But even here they are choosing between political parties all of which have close big-business ties. You see this particularly clearly in America where the Republicans are ferociously pro-corporate in power and the Democrats are merely ineffectual. The Republicans get big-business donations for pushing a corporate agenda; the Democrats get big-business donations for not standing in their way. And then came the Iraq War. After which came the Banking Crisis. The war was an example of something very unpopular which went ahead despite massive opposition. People marched in their millions but saw very little of their opposition reflected back via the news media. Lots of people mistrusted the reasons for the war and their scepticism proved to be accurate. But those in power hinted all along that they were privy to secret information which vindicated their position. Later when that vindication was found to be illusory, politicians fell back on claiming that they did their best and merely trusted what they were told. This did not go over well with those outside of government who smelled a rat years before politicians came (partially) clean on the flimsiness of their secret proof. The Iraq occupation merely proved that 'ordinary people' are out of the loop when it comes to making these decisions. And the excuse of 'how could we have known in advance this was a bad idea' was trotted out again during the banking crisis. All those who had been warning of disaster had long since been labelled as cranks. So that the only people commenting on the crisis were those who thought it would never happen. Outside of the banking industry lots of people thought there was a problem. Inside the industry very few could see it. And because regulators, advisers and even professional pundits tended to be 'industry experts' and thus insiders, there has still been relatively little acceptance within the financial industry that the crisis was avoidable. Many outside experts see the sidelining of the Glass-Steagall Acts in 1999 as the moment the rot set in. After the Great Depression, America had created rules which prevented banks from acting too much like financial gambling institutions. By the closing years of the Clinton Administration, the buoyant economic climate and the passing of so many decades made it possible to relax those rules without causing too much panic. And so began a huge speculative bubble which is still in the process of bursting. And of course speculative bubbles are all about getting spectacularly rich. A lot of lobbying went in to creating a climate where that could happen. As Senator Dick Durbin said, despite having caused the financial crisis, those same firms "are still the most powerful lobby on Capitol Hill. And they, frankly, own the place." A New York Times article which mentions that quote also says that between 1990 and 2010, financial firms spent $2.3bn on federal campaign contributions. (source). Would they have kept spending after that first billion if they weren't getting some sort of acceptable return on their investment? All of which is enough to make any 'ordinary citizen' suspect that their government does what Wall Street tells them. So why isn't it Wall Street who pays the bills? 'Ordinary people' are being told they've got a stupendous amount of national debt to pay off. They could surely be forgiven for wondering why it's now their problem. Take a look at this chart from the New York Times showing where America's huge deficit has come from: NYTDeficitChart.jpg Look at the first column. The first chunk is for wars that were controversial to say the least and certainly do not seem to have achieved their publicly-stated aims. The second chunk is tax cuts for the wealthy. And the fourth is the bank bailouts. The fifth was largely about allowing pharmaceutical companies to charge Medicare more for drugs than they get paid in other countries. Add in the fact that a lot of 'stimulus spending' under the Obama government hasn't actually gone to helping out poor people in debt, it's gone to protecting corporations from the fall-out of their actions and you can see why austerity for all might not be popular. Austerity only for the middle and working classes is clearly even more unpopular given how much of a hand they had in spending all that money or how much benefit they reaped from it. The rich haven't had to give back their tax cuts. The bankers haven't had to give back their bonuses. The trillions spent on war haven't done a thing to help ordinary American people. And what's more, many of them opposed all three of those things. But now it's time for them to foot the bill. They know the news media won't help them. They know their elected officials will turn a deaf ear. They suspect that one-off marches won't even make the news. So a few of them have camped out not in front of the White House, but in front of Wall Street. Not at the end of Downing Street but in the City of London. Because that's where the real power is. It's where governments go to get their marching orders. (The City of London is not even subject to some of the laws which apply to the rest of Britain.) And, as this rather fine article points out, these people are holding signs rather than giving interviews because it's much more difficult to twist someone's words if they're written down. I think that the potential support for these Occupy protests is vast. There is a largely-invisible head of pressure that's built up over the last few decades of which the Occupy protests are just a hint: like wisps of steam from a volcano that might no longer be dormant. Ordinary people know that things aren't really going their way. They know that politicians are heavily swayed by what big business wants. And they suspect what that means: that people who have unexceptionable jobs and who make their money from salaries not investments will be slightly worse off each year in real terms. And those who fall through the gaps are increasingly likely to find no social safety net beneath them. Funding for safety nets is being eaten up in rescuing banks and bailing out corporations. Read this article from Rolling Stone magazine if you want to get really angry about how handouts in America are only for the wealthy. We might all be happier about staunch capitalists if they refused bailouts and went down with their ships - as their economic philosophies tell them they must. But somehow, they are never hoist by their own petards. Free market doctrine does not seem to preclude corporate safety nets only social ones. So I tend to believe that the Occupy protests are actually in nearly everyone's interests. And they effectively make the point that permitted forms of protest have been systematically nullified so that there's little point in writing to your MP or voting differently in an election as a way to make your voice heard. A whole infrastructure of leverage has been erected around the political process to make sure that the powerful have a means to exercise that power. I have no idea what the Occupy protests will achieve, whether they will peter out or even if there is a way forward which would address their grievances. But I certainly sympathise with their aims and applaud their sacrifice (perhaps this man's most of all).


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