Occupy Wall Street: Protestors move the ash heap of history to Zuccotti Park
From ex post facto laws to price controls, a critical look at some of the ideas current among the Occupy Wall Street set. by B. S. Kalafut
(libertarian)
Friday, October 7, 2011
Sympatheticobservers are now equating the "Occupy Wall Street" protests with the Arab Spring demonstrations. That (shamefully) trivializes the recent struggle in the near east: oppressed people taking to the streets to be set free is not the same as college students and professional activists camping out to make noise for ideology. Mohamed Bouazizi set himself on fire and set the Arab Spring into motion in Tunisia in protest of confiscation of his business by a socialist apparatchik; the Wall Street demonstrators have socialist leanings. The Occupy Wall Street protestors camp out because they don't have to work in the morning; Arab Spring protestors either skipped work or could not find it thanks to government stifling of private enterprise. Arab Spring protestors dodged bullets and risked death at the hands of military forces and paramilitary auxiliaries; the worst Occupy Wall Street protestors get is a bit of pepper spray from a policeman conveniently named Tony Baloney, now under investigation by the local district attorney. But the comparison is valid in at least one way: the protestors in both cases are people who do not feel they are being listened to by neither those in power nor journalists and opinionmakers.
Message matters. It could be that the Wall Street occupiers have good ideas and legitimate complaints and are ignored due to generational or class distinctions, ignorance of the usual ways of getting one's message out, or even simple bad manners. Or it could be that they feel they're not being listened to because they 're a bunch of know-nothings, offering bad ideas that, for good reason, nobody more connected to power cares to join them in advocating.
This second reason seems to be the case. The protestors are a leaderless bunch without so much as a unifying declaration (David Harsanyi's manifesto aside) but a few common memes and popular proposals have emerged. The protestors are certainly leftist, but their proposals are a bit different than both the leftism of politicians and commentators and the soft-totalitarianism that goes under the euphemism "Progressivism". They're policies from the proverbial ash heap of history, that people suffered under for decades or even centuries and that were fought against, in decades past or even as far back as the American Revolution.
We the "1%" who know our history may in our elitist way smugly think these Bad Ideas truly discredited, but truth is, like, relative, man, and we obviously believe these things because the Koch brothers are paying us. "99%" of people think the following ideas deserve a second chance:
Ex Post Facto laws. Ex post facto laws aren't just the stuff of historical curiosity and junior-high U.S. Constitution exams anymore. (Will quartering of soldiers be next?) The most persistently popular statement heard from the Wall Street protestors--the desire that may have precipitated the demonstrations to begin with--is that the breakdown of the financial system was caused by somebody or a group of somebodies working in finance, on Wall Street, who "stole" from the Average Joe and who should be brought to account. The catch is--as President Obama noted--that it didn't involve illegal acts. Whether the collapse was, as the President would have it, the result of immoral and irresponsible acts, or as in the more mainstream view, the result of a systemic risk problem made worse by misregulation, it wasn't the result of criminal behavior. Some mortgage brokers certainly did enter false information to get people loans, and some people supplied false information to receive loans, but they're not who the protests are targeting. What the protestors are asking for is for Wall Street bankers to be prosectued despite the legality of their actions at the time they were performed. That would necessitate the passage of an ex post facto law. Ex post facto laws, as the "1%" may recall, were used historically to punish those who politically fell out of favor, are prohibited by the U.S. Constitution (in Article I, and not in an amendment, no less!) due to their unsavory history, and generally became a thing of the past (in practice if not in theory) when the world adopted rule of law.
Ending corporate personhood. Corporate personhood is what enables corporations to enter into and be bound by contracts, and for corporations to be sued. It makes it easier for corporations to be brought to account--corporate personhood means (to bring up a famous example) that if I wish to sue Dell Computers I need not name the employees at fault and sue them separately nor even serve papers to specific wrongdoers, but can simply bring them to a corporate kiosk at the local mall. Here we need not search history for a bad example, but only need to know that corporations came to be considered legal people for reasons other than accident.
Rent and price controls. Complaints about increases in prices are also common in remarks made by "occupiers" to the press. A significant portion of protest coverage on Thursday's NPR Talk of the Nation was devoted to this. Prices are going up, rent in New York City is high, but wages do not always go up. The government "helped" the banks (which they need to pay back), why can't it do something about prices that are higher than people would like? Forget that this is one thing that all economists--even far-left types like Joseph Stiglitz--can agree on: price controls lead to shortages, always. From sold-out gas stations and long lines at the pump in the USA three decades ago to California's late-'90s blackouts to empty shelves in Zimbabwe and Venezuela more recently, price controls do not do what their supporters intend. Unless their supporters intend to create shortages.
Increased and more steeply progressive taxation. If there is a portion of the protestors that does not advocate increasing tax rates in all but the lowest brackets, it has received little coverage. Supposedly this will be beneficial, yet history shows the opposite. Putting aside the moral dimensions of this--of getting government in the (large) size one wants by making someone else pay for it--and focusing on the prudential: high taxation, even high taxation only of "the rich" does not work. The long-term benefits of the Kennedy and Reagan tax cuts stand as evidence to this. Moving beyond this vague claim and even beyond the usual "proportional to the square of the rate" theoretical estimates of the deadweight loss due to taxation: a careful study by Christina and David Romer (of which a non-pay-walled version is available) showed that high marginal tax rates reduce investment and that non-countercyclical "exogenous" tax cuts boost long-term GDP. The Romers showed that tax cuts are not a good means to end a depression (and also that "starve the beast" does not work), but that they nevertheless do lead to investment and growth. Some readers may still believe the myth that there is a special "Free Market Economics" and that some other kind would produce different results: note that Christina Romer was until recently the chairwoman of President Obama's Council of Economic Advisors. Perhaps the occupiers' call for higher taxation is in the hope that it will be redistributed to those they favor (at the expense of society as a whole) but for working people to prosper in an environment with less investment and a smaller GDP than the current state of affairs would be at least tricky.
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"The catch is--as President Obama noted--that it didn't involve illegal acts. Whether the collapse was, as the President would have it, the result of immoral and irresponsible acts, or as in the more mainstream view, the result of a systemic risk problem made worse by misregulation, it wasn't the result of criminal behavior."
That is the WHOLE point. the fraud and state enforced monopolies AREN'T illegal. What the occupiers and you don't get is that it is the state the enables the privileged wards of the state to do what they do and exploit the masses economically.
"Corporate personhood is what enables corporations to enter into and be bound by contracts, and for corporations to be sued. It makes it easier for corporations to be brought to account--corporate personhood means (to bring up a famous example) that if I wish to sue Dell Computers I need not name the employees at fault and sue them separately nor even serve papers to specific wrongdoers, but can simply bring them to a corporate kiosk at the local mall."
Corporate personhood is a big part of the legal fiction of corporations and intrusion of the state into the free market. If we need a state enforced "concept" of corporate personhood jammed down our throats in order to facilitate corporate contracts, then obviously we have something other than a free market. Stating that you believe that "personhood" protects individual wrongdoers from the consequences of their actions says it all. Eliminating state enforced corporate personhood is just a start. The corporate form itself must bear the cost of their declaration of limited liability for there to be any semblance of a free market.
You seem to have views far more socialistic than the occupiers.
Posted By: Bill Gee
Date: October 10, 2011 01:40:31 PM
In order to understand the "Occupy Movement", you need to look past the demands and complaints of the individual protestors and look more into why they're there in the first place, and why similar movements are springing up in every major city in America. If, as you say, this movement is simply a bunch of people with "no job to go to" in the morning, why is it moving into its second month and why is it still growing? Why are protestors sleeping in wet sleeping bags on the streets night after night, and why are people from all over the country donating food, supplies, and words of encouragement?
However, I shall break down your arguments one at a time just because they are so ridiculous.
Ex Post Facto Laws: You are correct that passing Ex Post Facto Laws would be unconstitutional. You are incorrect that the Occupy Movement wants to pass any such thing. What they want is an acknowledgement that what Wall Street Bankers did was morally wrong, and that new laws should be passed in order to prevent this type of abuse from ever happening again. They are also frustrated that the Dodd-Frank Law did nothing to address the worst Wall Street abuses as most of us are.
Corporate Personhood: I'll refer to gede's post above. Calling a corporate entity a "person" is an afront to living human beings everywhere. Its original intent may have been to protect shareholders and employees from wrongdoing, but it's gotten WAY out of hand. An employee's claim that they approved a thousand bad loans because they were "just doing their job" is as weak as the Nazi prison gaurd who shot and tortured Jews because he was "just following orders". Giving immoral employees a shield of a corporate law department to hide their immoral acts is just as bad. How "free" is that market?
Rent & Price Controls: That's rich... Protestors complain that the rapidly increasing cost of living is driving them out of their homes and automatically they're advocating for price controls? You can also make the argument that Wall Street advocated for price controls, just in the other direction, during the housing boom. By approving so many new sub-prime loans and financing allies in Congress who would let them do it, they were artificially raisng the price of housing until it was well out of reach for the average working person. This artificially inflated housing market has yet to bottom out because the Government decided that it was better to protect the collective butts of their corporate sponsors, which continues to keep housing prices artificially high, and continues to keep hard-working people from owning homes, forcing them into the rental market, which then artificially raises the rates for everyone! If the government had simply let the housing market fall to its normal levels and allowed the worst offenders of the crisis to fail more people would be on the path to home ownership in this country and the remaining banks would have been be the ones that played by the rules.
Progressive Taxation: We've been over this so many times that I'm getting tired of saying it again. The wealthiest people in this country pay the lowest tax rates. (Trust me, I've been working in the Accounting and insurance field for over eight years and I've seen it firsthand.) Also, contrary to the talking points of the Republican Party, the wealthiest people are not "job creators". Most new jobs are created by small businesses and entreprenours, and the wealthiest companies have systematically made it nearly impossible for those individuals to start businesses through a massive web of Patent Trolls, licencing fees, and other government roadblocks that they engineered themselves in order to protect their "intellectual property" and to limit legitimate competition. The very least we can do is tax the crap out of them because they if they refuse to contribute to the general welfare in a legitimate way, we may as well get them to give a crust of bread to the masses they've left unemployed and impoverished. A better plan would be to end the massive levels of corporate welfare and to dismantle the military industrial complex. That way, the government would be allowing the market to function more organically, which will eventually lead to lower taxes and more genuine prosperity.
People like you don't understand why the movement exists and you will be equally surprised as it continues to grow. The rest of us have had enough!
Posted By: Bennett Kalafut
Date: October 12, 2011 01:10:25 AM
Buried in the above posts among the usual ideological rubbish about there being One True Free Market, and the "I don't know what corporate personhood is, I ain't gonna read what you say about it in your article, but I know from the name that I don't like it" nonsequitur argument there are two things worth remarking on:
The petty one: if certain people aren't paying their fair share of taxes, the solution is not to make the tax code more "progressive" and soak the successful (inevitably including some who aren't going through the contortions needed to pay less than their fair share) but rather to get rid of the tax expenditures that cause some to pay less than their fair share. Remember that the deadweight loss of taxation goes as the square of the rate. That's Remedial Econ 99 material.
The weighty one:
Do the protesters want an ex post facto law?
They're using words like "impunity", which imply that somebody should be punished. And "criminal". And lamenting that nobody was prosecuted.
If I thought the protesters understood the causes of the collapse, it would be "Regulations are imperfect, which means the government screwed up, therefore somebody in the private sector should be punished." Sounds perfect for a banana republic. But they don't understand the causes, nor the role the money supply plays in the economy (hence the bailouts), so that's not their position. But their position is that somebody should be punished. Else they would not call for prosecution, nor use words like "impunity". It's a nasty, infantile, illiberal impulse.
You take the view that softens this and would have the demand be mere acknowledgement by...somebody...that the collapse was caused by moral wrongdoing. Ritual sacrifice of somebody's reputation, instead of ritual sacrifice by prosecution, I guess. What was done that was morally wrong? Hedging against risk is not morally wrong. The thing about the systemic risk problem is that it is nobody's fault--and people who do not understand that (e.g. the protesters) have no business having an opinion. That government "regulations" (a mockery of the word) put forth in reaction to the last big instance of systemic failure forbade the most transparent way of doing this (banks holding medium-to-low-grade bond portfolios) does not change that systemic risk is nobody's fault. And systemic risk+ a (government-enhanced) speculative "bubble" was the cause of the recession.
One could take the position that giving somebody a loan imprudently is morally wrong. But to whom? "Bank shareholders" or "Bank shareholders and the lendee" are the two tenable positions. Corporate personhood does not relieve loan officers of their obligations to their employers.
We can discuss policies to put in place to prevent such failures from happening in the future. Economists are even tossing around clever ideas re: how to prevent speculative bubbles. But in order to have that discussion we need to move beyond infantile victim-villain narratives and the need to assign blame for something that "just happened" much as hurricanes "just happen".
Posted By: Bill Gee
Date: October 12, 2011 08:22:45 AM
Just like your fellow critics of the movement, you are pointing out specific sound bites from individual protestors and assuming that they speak for the movement in general, which is not true.
At the core of the financial collapse is the issue of Moral Hazard. I'm sure at some early stage somebody somewhere believed that granting loans to unworthy people just to fill a quota for the investor was wrong, but the lack of consequences and the presence of obsene rewards cancelled out any moral integrity among these individual employees. The fact that what they did was not specifically "criminal" is beside the point. Their actions and the actions of their managers and ultimately their CEO's set the stage for the biggest financial collapse since the Great Depression. If we cannot hold anyone accountable without passing Ex-Post-Facto laws, the least we can do is to limit the level of systemic risk through regulation. Unfortunately, that'll never happen because the very people who are supposed to be regulated are the ones who are writing the new rules. When the dust settles, the same level of moral hazard is in the system and the investing public is left with a false sense of security - that is until the next financial crisis comes, which will be bigger and more devistating than the first one.
All of this is just semantics as the true goals of the Occupy Movement start to solidify. I believe you'll see their hodgepodge of neo-liberal legislative proposals will be soundly ignored by the establishment, which will leave with the only alternative of seeking a change to the Constitution that will attempt to end corporate influence in the political process. I sincerely hope for the future that they succeed.
