Why ‘Occupy Wall Street’ Makes Sense: Lessons Economists Could Learn from the 99%

Courtesy of Steve Keen’s Debtwatch

(guest blog) by Joe Mcivor

Moral Majority?

Back in May of this year, Austin Mackell wrote in The Guardian that the Arab Spring revolutions represented “a rebellion not just against local dictators, but against the global neoliberal programme they were implementing with such gusto in their countries”. He cited Egypt in particular as an example of a nation which had taken IMF loans and then promptly implemented their recommendations of substantial privatisation and cutting of services, with the usual disastrous results for the well-being of the population. He went on to write that people in the West had so far “failed to see the people of the region as natural allies in a common struggle”.

Some six weeks ago, thousands of people in New York began to try to correct this oversight. Drawing explicit inspiration from the Arab Spring, a Canadian activist group called Adbusters (self-described ‘culture jammers’ involved in exposing corporate wrongdoing and highlighting the problems of consumerism and advertising) called on people in New York to Occupy Wall Street, in an attempt to highlight what they see as the destructive excesses of a financial sector not only out of control but propped up by governments who frequently grant them disproportionate privileges. The ‘Occupation’ (which didn’t last long on actual Wall Street but remains in surrounding areas) drew thousands of protesters using the slogan ‘We Are the 99%’, highlighting the increasing proportion of wealth going to a small proportion of the population. The ‘Occupy’ brand has now spread throughout the world, with the now even more invigorated European austerity protests expressing solidarity with their American counterparts. Even in Australia, so far mostly unscathed by the ravages of the Global Financial Crisis (though this is likely to soon change), but nonetheless suffering from overpriced housing, unprecedented household debt levels and increasingly insecure employment prospects, protests using the Occupy brand are occurring (and Steve was naturally asked to speak at one such protest in Sydney). The ‘common struggle’, it would seem, has begun.

The purpose of this guest blog entry won’t be to detail the exploits of the protesters since this all began – for this you can check out democracynow.org for their excellent coverage. Nor will this blog be as rigorous in discussing theory as Steve’s blogs often have been: there won’t be a detailed discussion of endogenous money, or Minsky’s ‘financial instability hypothesis’ [1]. However, in considering the sentiments expressed by the protest movement, it occurred to me how often people uneducated in economic theory of any kind, when confronted with the reality of an economic problem, instinctively, intuitively understand the problem and its causes more or less correctly; while economists, who purport to specialize in the area of economic problems (and, it must be said, seem to go out of their way to be counterintuitive), get it fundamentally wrong. Below, I outline why, in a number of areas, economists could learn from the intuitive wisdom of the 99%.

Lesson #1. Unbridled Greed isn’t Good.

The ‘greed is good’ (ie ‘the invisible hand’) idea – that unregulated markets would maximise societal benefit by the heedless pursuit by individuals and corporations of their own self-interests, while government should restrict both its regulatory and fiscal role in the economy as much as possible – should have died out in the wake of the Great Depression. Unfortunately for most of us, Milton Friedman then came along with an explanation for the depression more palatable to the neoclassical mindset than what had come previously. Along with Anna Schwartz, he argued that the Great Depression wasn’t caused by unbridled greed and speculation: it was caused by the Federal Reserve (essentially) not printing enough money and giving it to Wall Street. Yes, really. If the Fed had printed more money and given it to Wall Street, they argued, this would have restored banking confidence and Wall Street would have resumed lending and prevented the worst of the depression – greed would have saved the day [2]. Unbridled greed was now off the hook for what was seen as the worst economic crisis in capitalism’s history.

Continue here: Why ‘Occupy Wall Street’ Makes Sense: Lessons Economists Could Learn from the 99% | Steve Keen’s Debtwatch.