Preoccupied with Wall Street

The “Occupy Wall Street” (OWS) protests occurring in the United States have become a major preoccupation for a whole range of interest groups.

The protests are a cry of pain from people who are suffering as a result of the current global economic situation. Many of them are unemployed, see future prospects of employment as bleak and simply do not know what hit them or how it should be fixed. They are voicing their legitimate right to protest and demand a solution. Their problem is genuine and their approach is honest.

Using that as a backdrop, many people with vested interests are seeking to push through their own ideological agendas and pretend to understand what the protesters are really asking for – which would require incredible powers of divination because the protesters themselves don’t know what they are asking for.

It is particularly intriguing that those who are most vociferous in advocating the OWS cause are also the ones who were just as vociferous in opposing the “War on Terror” on the grounds that it was ridiculous to have a war on an abstract quantity such as “terror”. I am curious to know how exactly these individuals interpret the equally abstract term “Wall Street”. Against whom do the mind-reading pundits think the protests are targeted? ALL investment banks? All investment AND commercial banks? Only the CEOs? Or only those who have actually done something crooked or wrong?

In this post, I will express my opinion on some of the common arguments made against the financial sector. These are real arguments one often gets to hear and not imaginary “straw men” that I have concocted for my own convenience.

One frequently heard grouse is about the magnitude of CEO salaries. There are those who think there are “fair” levels of compensation. But how much money an individual makes is purely a function of demand and supply. I might think that Himesh Reshammiya does not deserve even a penny for the “entertainment” he churns out but I cannot decide how much he earns. The market determines that. There is no point in my trying to point out how “unfair” that is.

The argument against CEO packages is often sought to be bolstered by the claim that the tax payers bailed out several financial institutions. But the main reason the government stepped in was to protect the common man whose savings would have evaporated had the institutions been allowed to fail. So the taxpayers were actually helping themselves and not evil old “Wall Street”. Also, (correct me if I am wrong) many if not most institutions that were given such financial assistance have repaid the Treasury, with a handsome return on the people’s investment. To that extent, the profits are also public, contrary to the claim that gains are privatized and losses are socialized. Even if that claim were true, the responsibility for such a policy lies with the government and not with “Wall Street”.

There are those who demand higher tax rates for the rich. As always, this is a proposal that is acclaimed as a “fair” method of generating funds for the state. Scott Adams correctly points out that “fairness” is a mythical concept and people invariably pursue their own interests, conveniently choosing to ignore the benefits they get. There is no such thing as a “fair” tax rate. Assuming we are operating in a democracy, there is always a conflict between “majoritarianism” and private interests. The majority has the votes. The private interests have the funds. The law makers need both. Usually, some sort of a compromise solution is devised.

And, finally, there are those who opine that “fairness” is all about creating a level playing field where no one gets an unfair advantage. That is a noble ambition. I too would like to live in a world where the most talented actress gets the part and not the one who performs her audition on the casting couch and the most qualified candidate gets the job and not the one who was the nephew of the hiring manager. But, again, the responsibility for setting the rules lies with the government and the regulators. So why vent on “Wall Street”? Why not “Occupy Capitol Hill”? Or “Occupy the White House”? Or the Fed or the SEC?

If there is credible reason to believe that any individuals or organizations broke any laws, there is always a process of investigation that can be initiated. And, indeed, as the cases of Bernie Madoff, Raj Rajaratnam and Rajat Gupta indicate, action has been taken where warranted. But complaints based on gut feel just because someone seems to have made a lot of money are meaningless. It does not make any sense to force fit one’s favorite ideological bugbear into the contours of a knee-jerk reaction by the “have nots” against those who are perceived to be the “haves”.

I am sure there are some individuals on Wall Street who have committed irregularities and they should definitely be brought to book. But that is just one problem faced by the United States. It is not by any means the biggest problem. Portraying it as such is nothing but an attempt to divert attention from the real issues. I could talk about the ever-increasing American dependence on oil, the gargantuan expenditure on needless wars, the changing global landscape that is constantly taking low-end jobs away from the US and the burgeoning fiscal deficit that is a consequence, inter alia, of populism overtaking pragmatism. But those are just symptoms.

The most serious problem facing that country is an electorate that evaluates political candidates, not on their administrative capability or economic policies, but on their views on abortion, homosexuality, guns and religion. Such a society will get the government it deserves and should not be surprised to find itself trapped in an economic mire. The only real tragedy is the impact it has on the rest of the world.