www.economist.com/node/21534759Schumpeter
What should Wall Street do?
The finance industry needs a better response to the protest movement attacking it
Oct 29th 2011 | from the print edition
“AS THOUSANDS have gathered in Lower Manhattan, passionately expressing their deep discontent with the status quo, we have taken note of these protests,” wrote Lloyd Blankfein, the boss of Goldman Sachs, in a recent letter to investors. “And we have asked ourselves this question: ‘How can we make money off them?’ The answer is the newly launched Goldman Sachs Global Rage Fund.” This will invest in firms likely to benefit from social unrest, such as window repairers and makers of police batons. As Mr Blankfein explained: “At Goldman, we recognise that the capitalist system as we know it is circling the drain—but there’s plenty of money to be made on the way down.”
The letter is a spoof, penned by Andy Borowitz, a comedian. Goldman Sachs and its peers would of course be failing in their duty to investors if they did not find opportunities in the current global turmoil. But they should also be thinking much harder about the risk posed to their business by the protests.
The protests against finance are popular and global. In America, they have attracted sympathy in high places: Barack Obama seems to view cosying up to the Occupy Wall Street protesters as a way to revive his flagging hopes of re-election. Even some Republicans think there may be votes in declaring kinship to them. A poll by CNN published on October 24th found that those who approve of Occupy Wall Street outnumber those who disapprove by 32% to 29%. Worse for Mr Blankfein and his pals, a hefty 54% of Americans say they don’t trust Wall Street to do what is right for the country, up from 30% in the 1990s. The financial industry already faces burdensome new regulations. If voters get any angrier, it could face even heavier ones.
Wall Street’s traditional approach to attacks on its reputation has been to disengage from the public and hide behind an army of lawyers and lobbyists. Since the financial meltdown of 2008, this tendency has grown stronger. Wall Street’s lawyers won an internal power struggle with its spin doctors, convincing the bosses that they would end up sued or in jail if their public statements were anything other than bloodless boilerplate.
So the big banks’ apologies for their role in messing up the world economy have been grudging and late, and Joe Taxpayer has yet to hear a heartfelt “thank you” for bailing them out. Summoned before Congress, Wall Street bosses have made lawyerised statements that make them sound arrogant, greedy and unrepentant. A grand gesture or two—such as slashing bonuses or giving away a tonne of money—might have gone some way towards restoring public faith in the industry. But we will never know because it didn’t happen.
On the contrary, Wall Street appears to have set its many brilliant minds the task of infuriating the public still further, by repossessing homes of serving soldiers, introducing fees for using debit cards and so on. Goldman Sachs showed a typical tin ear by withdrawing its sponsorship of a fund-raiser for a credit union (financial co-operative) on November 3rd because it planned to honour Occupy Wall Street.
To be fair, there have been some small steps in the right direction. Jamie Dimon of JPMorgan Chase has apologised for mishandling loans to military families. Vikram Pandit of Citigroup has committed his bank to “responsible finance”, whatever that may be. But none of this has done much to allay public anger. Schumpeter would not be surprised if the “bank transfer day” on November 5th, backed by Occupy Wall Street, sees a large number of savers switch from big banks to credit unions.
So perhaps it is time for a bold new strategy: engaging directly with the protesters. This would legitimise an unrepresentative movement of “people doing drugs and having sex in the park”, objects one Wall Street PR man. Another grumbles that the protesters are upset more by unemployment and inequality than by anything particular that Wall Street does. Maybe so, but bleating about it will not mend Wall Street’s battered brand.
The odd thing is, Wall Street does have a reasonable tale to tell. Banking is not tobacco. Its products do not usually kill its customers. The industry messed up horribly, but people still need loans and somewhere to park their savings. Companies—you know, the things that create jobs—need investment banking to help them manage their finances and grow. Misguided regulations, written in anger, could imperil this. Wall Street needs to articulate this case firmly and often.
Outrageous fortunes attract slings and arrows
Bank bosses might also consider exposing themselves directly to the public’s fury, by meeting the protesters face to face. What they say in the few seconds before the eggs start flying would matter less than the act of saying it. (Though their message should certainly include apologies for past cock-ups as well as explanations of the good Wall Street does.) The Masters of the Universe would not win the argument, but that is not the point of what has become known as the “Tony Blair masochism strategy”, after Britain’s then prime minister discussed the Iraq war with angry voters in the run-up to the election of 2005. Letting himself be verbally assaulted proved cathartic to voters. The encounter also gave Mr Blair a chance to make his case in plain English and highlight his critics’ inconsistencies. He won the election handily.
Granted, no Wall Street boss has Mr Blair’s political skills, and few have much experience of arguing with people wearing nose-rings. Mr Blankfein may be the son of a postal clerk, but it would be stretching it to say he has the common touch. As for Mr Dimon, would he be able to resist the urge to tell the protesters exactly what he thinks of them? But desperate times call for creative measures. A dose of masochism could not possibly harm the Wall Street brand, and it might actually help.
www.economist.com/node/21534759____________________________________________________________________________________________________
www.economist.com/blogs/democracyinamerica/2011/10/occupy-wall-street-3Occupy Wall Street
Leaderless, consensus-based participatory democracy and its discontents
Oct 19th 2011, 20:44 by W.W. | IOWA CITY
OCCUPY WALL STREET is not only a mass protest movement intended to draw attention to economic injustice and political corruption. It seeks to embody and thereby to demonstrate the feasibility of certain ideals of participatory democracy. This is, to my mind, what makes OWS so interesting, and so unlike a tea-party protest. OWS is not simply a group of like-minded people gathered together to make a point with a show of collective force, though it is that. The difference is that it has developed into an ongoing micro-society with a micro-government that directly exemplifies a principled alternative to the prevailing American order. The complaint that OWS has failed to produce a coherent list of demands seems to me to miss much of the point of the encampment in Zuccotti Park. The demand is a society more like the little one OWS protestors have mocked up in the park. The mode of governance is the message.
And what is the message of the "General Assembly", the governing body of the original financial-district occupation? According its website:
www.nycga.net/about/ "New York City General Assemblies are an open, participatory and horizontally organized process through which we are building the capacity to constitute ourselves in public as autonomous collective forces within and against the constant crises of our times." Got that? If this sounds a bit academic, that's because it is. Whether you're having trouble parsing this or not,
this piece chronicle.com/article/Intellectual-Roots-of-Wall/129428 by Dan Berrett on the academic roots of OWS's governing ideology is incredibly helpful.
Mr Berrett focuses on the influence of David Graeber, "an ethnographer, anarchist, and reader in anthropology at the University of London's Goldsmiths campus." Mr Graeber was impressed by the people of Betafo, in Madagascar, who ruled themselves through a process of "consensus decision-making" demonstrating the left-anarchist ideal of "democracy without government". Mr Graeber applied what he learned in his ethnographic work in some of the left-wing anti-globalisation protests of the 1990s, and has now brought his experience to bear on Wall Street, laying the groundwork for OWS's experiment in participatory democracy. As Mr Berrett reports:
"Soon after the magazine Adbusters published an appeal to set up a "peaceful barricade" on Wall Street, Mr. Graeber spent six weeks in New York helping to plan the demonstrations before an initial march by protesters on September 17, which culminated in the occupation."
Spontaneous order can take a bit of planning. But it seems Mr Graeber's planning has born fruit:
"The defining aspect of Occupy Wall Street, its emphasis on direct action and leaderless, consensus-based decision-making, is most clearly embodied by its General Assembly, in which participants in the protest make group decisions both large and small, like adopting principles of solidarity and deciding how best to stay warm at night.This intensive and egalitarian process is important both procedurally and substantively, Mr. Graeber says. "One of the things that revolutionaries have learned over the course of the 20th century is that the idea of the ends justifying the means is deeply problematic," he says. "You can't create a just society through violence, or freedom through a tight revolutionary cadre. You can't establish a big state and hope it will go away. The means and ends have to be the same."When 2,000 people make a decision jointly, it is an example of direct action, or direct democracy, Mr. Graeber says. "It makes you feel different to go to a meeting where your opinions are really respected." Or, as an editorial in the protest's house publication, Occupied Wall Street Journal, put it, "This occupation is first about participation." "
It is hard to deny the romance of this, and part of me would like to camp out in Zuccotti Park and pitch in. But I wouldn't expect it to last. Not only is it hard to see how this worthwhile little experiment in leaderless, consensus-based decision-making is a realistic means to the end of a whole society governed by leaderless, consensus-based decision-making, it's hard see why this is a desirable end.
Because the participatory democracy of OWS is an ideological endeavour, it can avoid the hard problem of liberal society: the ineradicable diversity of moral belief and the impossibility of consensus. Consensus-based communes composed of individuals who opt in specifically because they already agree with the commune's founding values can work precisely because the people who would make consensus impossible—people with very different opinions and values—stay away. But not only does the OWS experiment skirt the problem of pluralism through self-selection, the ideological homogeneity of self-selection may make deliberation tend toward extremism, as
Cass Sunstein's important work www.yalelawjournal.org/pdf/110-1/NEW%20SUNSTEIN.pdf on deliberation and group polarisation shows. He writes: "When like-minded people are participating in 'iterated polarization games'—when they meet regularly, without sustained exposure to competing views—extreme movements are all the more likely."
Even given a climate of ideological similarity, this mode of communal egalitarian living doesn't tend to scale up well beyond a few hundred people, and requires intense and often invasive surveillance and monitoring to minimise free-riding, as well as heavy communal pressure to maintain the kind of conformity of belief necessary to maintain ongoing consensus. This is not, to my mind, a beautiful dream. Anyway, insofar as people are serious about it, egalitarian participatory democracy points in the direction of radical decentralisation and hyper-local control. The immense scope and diversity of the American territory and population, as well as the vast scale of the American state and the number and complexity of its activities, are fundamentally incompatible with the kind of society now being performed by the romantics in Zuccotti Park.
Moreover, direct deliberative democracy by its very nature puts effective power disproportionately in the hands of extroverted, energetic, and charismatic individuals with a knack for persuasion. The opinions of introverts and those of us who need a good deal of time to mull things over tend not to be fully included into the decision-making process. So these people (most of us, I think) must go along, their views systematically underrepresented until the rule of the pushy yammerers becomes too intolerable and they leave. Exit is more powerful than voice if voice is not your strong suit.
There is a great deal wrong with American governance, and not only within government. I think that the concentrated management and diffuse ownership of public corporations has left a relatively small numbers of corporate managers with insufficiently checked control over trillions of other people's property. And I think that the relatively unchecked power of government to make or break fortunes has made it more or less inevitable that corporations would in time end up writing their own regulations to their own advantage. Occupy Wall Street is a great boon to the extent that it helps draw attention and build effective opposition to the unjust mechanisms of upward redistribution and to the many flaws in our political economy responsible for the disproportionate influence of the wealthy and powerful over the rules that profoundly affect us all. However, insofar as OWS is meant to persuade Americans to adopt a wholly different and better way to live with one another, it is bound to fail. Even if consensus-based, leaderless participatory democracy could work on a grand scale, Americans aren't interested. And face it: sooner or later, Brookfield Properties is going to get it's park back. So for those deeply committed to realising a lasting community governed by the ideals of OWS, let me recommend a
seastead.
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