|"Only dull people are brilliant at breakfast"
|"The liberal soul shall be made fat, and he that watereth, shall be watered also himself."
-- Proverbs 11:25
The modern lords of finance look at the protesters and ask, Don’t they understand what we’ve done for the U.S. 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 Times reported what people in the financial industry are saying privately about the protests. My favorite quote came from an unnamed money manager who declared, “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, and could be even better if we made adequate investments in education and infrastructure. But to the extent that America has lagged in everything except financial services, shouldn’t the question be why, and whether it’s a trend we want to continue?
For the financialization of America wasn’t 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 polarization, because soaring incomes in finance accounted for a significant fraction of the rising share of the top 1 percent (and the top 0.1 percent, which accounts for most of the top 1 percent’s gains) in the nation’s income. More broadly, the same political forces that promoted financial deregulation fostered overall inequality in a variety of ways, undermining organized labor, doing away with the “outrage constraint” that used to limit executive paychecks, and more.
Oh, and taxes on the wealthy were, of course, sharply reduced.
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, if anything, financiers are doing to earn that money.
Why, then, does Wall Street expect anyone to take its whining seriously? That money manager claiming that finance is the only thing America does well also complained that New York’s two Democratic senators aren’t on his side, declaring that “They need to understand who their constituency is.” Actually, they surely know very well who their constituency is — and even in New York, 16 out of 17 workers are employed by nonfinancial industries.
But 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, despite its total loss of credibility: 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 criticize that industry’s behavior, no matter how gently — as evidenced by the way Wall Street money has now abandoned President Obama in favor of Mitt Romney. And this explains the industry’s shock over recent events.