For all its social snootiness, Wall Street has suffered far more from the meddling of members of its own class than from intrusions by those outside it. It was Franklin D. Roosevelt, an aristocrat, who held the lords of finance responsible for the Great Depression—securing legislation to establish the Securities and Exchange Commission, asserting federal authority over the stock exchange, and appointing a wealthy stock trader, Joseph Kennedy Sr., to ride herd. Not much better, from Wall Street’s perspective, was FDR’s Cousin Teddy, who as President prosecuted trusts as illegal monopolies. Or Louis Brandeis, a Harvard-trained corporate attorney turned crusader against the concentration of wealth and power.
These men changed the system from within, as have the ablest regulators in recent times. Arthur Levitt Jr., a vigorous SEC chairman under President Bill Clinton, was first the president of Shearson Hayden Stone. (Levitt is a member of the board of Bloomberg L.P., owner of Bloomberg Businessweek.) Paul A. Volcker cut his teeth at Chase Manhattan before running the Federal Reserve and becoming the gruff animating voice behind the Volcker Rule, which bans commercial banks from engaging in proprietary trading. It’s hard to imagine any of these “opponents” of Wall Street mounting a barricade. They didn’t need to storm the castle to know where the secrets were hidden.
In its very amateurism, Occupy Wall Street represents something new. Although it’s attracted some celebrities and well-heeled supporters, participants come chiefly from outside Wall Street. Many are unemployed or poorly employed. These are not bankers or reform-minded professors; these are also-rans in the capitalist race, upset with the system itself. Their chief weapon is neither eloquence nor argument, but their physical presence.
As critics have noted, the protesters are not in complete agreement with each other, but the overall message is reasonably coherent. They want more and better jobs, more equal distribution of income, less profit (or no profit) for banks, lower compensation for bankers, and more strictures on banks with regard to negotiating consumer services such as mortgages and debit cards. They also want to reduce the influence that corporations—financial firms in particular—wield in politics, and they want a more populist set of government priorities: bailouts for student debtors and mortgage holders, not just for banks.
In its grassroots and leftist character, Occupy Wall Street bears a superficial resemblance to protests from the ’60s and early ’70s. But the Woodstock Era was different in ways that tell us important things about the current siege. Then, radical students preached an affinity with the “working class,” but it was rare that the students and any members of the working class actually joined arms.
Consider the morning of May 8, 1970, when 1,000 young people, mostly students, converged on the New York Stock Exchange (NYX) to demonstrate against the killing four days earlier of four antiwar protesters at Kent State University in Ohio. I’d been at many such affairs (though not this one) in which “capitalism” and “corporations” were casually excoriated. Socialism, to many of my peers, was appealing; making a profit was not.
On that morning, the protesters demanded an end to the war and a cessation of military research on university campuses. Several hours into the demonstration, about 200 construction workers—wearing their hard hats for emphasis—began a counter, pro-war demonstration organized by Peter J. Brennan, president of the Building and Construction Trades Council of Greater New York. Around noon, the hard hats broke through a thin line of police, charged the students, and beat up scores of long-hairs, 70 of whom were hospitalized. Several Wall Street bankers and lawyers, in an apparent gesture of solidarity—the kids, after all, could have been their kids—tried to shelter protesters and were themselves beaten. Only six people were arrested.
The Hard Hat Riot epitomized the battle lines of the era: protesters and workers on opposite sides. The former didn’t empathize with workers because the latter were judged to be pro-war, pro-Establishment, pro-U.S. government. And factory workers had little use for Janis Joplin or free love. The movement wasted little effort on corporate villains—and none on banks. The enemy was the government, the Defense Dept., and the select corporate contractors who did its bidding, such as Dow Chemical (DOW).
White suburban protesters were free to indulge their indignation because they were largely unperturbed by financial issues. Most were affluent, or at least middle-class, and upward mobility was a birthright. People feared the cops, the draft, authority figures in general—we didn’t fear unemployment. At 16 my peers and I discussed politics always; the stock market never. Young people expressed solidarity with nonunion minority workers such as migrant farm workers because theirs was a political struggle as much as an economic one. There was no solidarity with the teamsters.
Although neither side would have believed it then, it’s the hard hats who were the forefathers of today’s protesters. They were the vulnerable ones, and the next few decades would prove just how endangered their livelihoods would become.
Economically, the U.S. is a different country than it was in 1970—and it will remain so regardless of how long the Occupy Wall Street protests endure. In the America of the early postwar decades, economic progress and a plenitude of jobs were axiomatic. Today they are not. Then, blue-collar jobs in steel, autos, machinery, and similar industries lifted families into the middle class; today, new workers at General Motors (GM) are hired at $29,000 a year, and even people with college degrees are hurting. Median household income, adjusted for inflation, is no higher today than it was in 1989. During the just-ended economic cycle (ending before the bust), median income actually fell. Capitalism may have triumphed in China—even in Vietnam—but in America it’s in a quagmire. This is what has brought the protesters to Wall Street.
Zuccotti Park sits in the shadow of One Liberty Plaza, a soaring black skyscraper that’s home to Nasdaq (NDAQ), Goldman Sachs (GS), and other financial tenants. In the ’80s, I used to play chess in the park with a dark-suited employee of Merrill Lynch who, when advancing one of the small pieces in the second row, would knowingly proclaim, “Pawns are people too.” Today, it’s the people who are pawns—or such is the rhetoric in Zuccotti Park. Merrill, then, was the people’s broker; today, as a result of its reckless speculation in mortgage securities, Merrill is a ward of Bank of America (BAC), which is staggering under the weight of its own mortgage miscues and is cited as a villain by many of those who are occupying Wall Street.
Although jammed with tarps, tents, a “mobile library” consisting of hundreds of books in plastic bins, the inevitable food station, and hundreds of people, Zuccotti Park has a similar feel to Speakers’ Corner, the open-air site for public orations in London’s Hyde Park. The run of opinions ranges from informed and specific—one morning a man in his 20s, recently laid off from teaching at a charter school, was holding forth against the tax break for “carried interest”—to rambling and unsophisticated. “It’s unfair how investment banks can print money and use it for what they want,” said Ryan Vener, before correcting himself and substituting the Fed for banks. Stan Rogouski, outfitted in a red and black lumber jacket, held a sign saying, “America Be No. 1 Again by Getting Rid of the 1%.” Rogouski said he hoped to put the corporate media, including me, out of a job.
Far from battling unions, Occupy Wall Street has their active support. David Martinez, a shop steward for Teamsters Local 814, has been shuttling between Zuccotti Park and Sotheby’s (BID), the Upper East Side auction house that’s in a labor dispute with its art handlers. Martinez, in a green Jets cap, says the workers have been locked out and replaced by temporary staff since their contract expired in July. According to the union, Sotheby’s has offered 1 percent annual increases on the hourly wage, increased health-care premiums (which will match rising benefit costs), and continued contributions to the 401(k) program, but wants to cut back on hours, tighten overtime, and gain flexibility to hire nonunion workers. “The most evil part is that they want future workers to be temporary, not union,” Martinez says. Sotheby’s spokesperson Diana Phillips says, “We offered a fair contract with wage increases in every year. We very much want our union colleagues to come back to work.”
Martinez, the son of a fireman, will turn 50 in November. He graduated from Pomona College, an elite school in Southern California, got a master’s in religious studies from Yale, and started work on a PhD. He dreamed of being an artist while teaching religious studies; the closest he came was handling art for Sotheby’s, and now even that job is on the ropes. Martinez was vague about why his career plan didn’t work out, but he’s still a serviceable metaphor for the downward path of the country’s economy: fireman’s son to Yale University to “locked out,” all in one generation.
Martinez’s cohorts in the park speak a dialect (or dialectic) unrecognizable to the financiers who work in the neighborhood. Capitalism teaches that personal ambition is a social good; it does the work of the invisible hand, achieving gains for the one and growth for society. People in the park do not believe this. They have not seen the gains, and they do not think the top 1 percent should earn a fifth or so of the total income while others go without. They resent that corporations are organized for profit; indeed, they see “profits” not as the return on capital invested well, but as evidence that companies are overcharging their customers. At an emotional level they nostalgically yearn for a less “financialized” country—one in which markets are more regulated and with fewer opportunities for speculating on financial assets. Most bankers—probably even most people who regulate banks—think it’s good for the economy that banks have the ability to package mortgages into securities and trade them. The protesters do not.
To the extent that the movement offers remedies, most are unresponsive to the problems that inspired it. Wall Street suffers from two essential flaws. Most obvious is compensation: It’s simply too high. Not only does that create a sense of injustice, it incentivizes recklessness. (A related issue is that bankers are systemically unaccountable. Most firms are public, thus the risk-takers tend to lose neither compensation nor capital when risks go bad.) Secondly, the Street is increasingly indistinguishable from a casino. There’s far too much trading—a zero-sum game that rewards only traders and renders markets more volatile. And some trading, including in many derivative products, serves no economic purpose.
Those problems could be addressed by regulation—for instance, a Tobin-type tax on financial transactions, especially short-term trades. And to some extent, unnoticed on the barricades, they are being addressed. Dodd-Frank has raised the requirements for bank capital, thereby diminishing risk. The Volcker Rule will limit trading. Compensation hasn’t been fixed, nor has the perception that the government, if need be, will bail out banks. Still, bank trading is down, bank risk-taking is down, and profits are down. This is not a happy time for banks.
This should please the protesters, but reforming the 1 percent will do little to fix what ails the 99 percent. High bonuses aren’t the cause of poor job growth or of steadily flattening wages. What contributes most to income disparity in the bottom and the middle of the scale are technology and globalization. People in San Diego and New Delhi now compete in the same labor market, and the connectivity created by high tech means that more Americans—even educated Americans—work in jobs that can be shipped overseas. According to research conducted by Matthew Slaughter, an economist at the Tuck School of Business at Dartmouth, incomes are falling even for people with college degrees. David Martinez has one of the few jobs that cannot be outsourced (handling art), but he’s competing in a labor market in which millions of other people are vulnerable—and Sotheby’s knows it.
Globalization and technology do boost incomes at the upper end, since each allows economic winners to reach a wider market. But these gains are fairly earned. If Amazon.com (AMZN) is able to sell books in China—and the Chinese can sell computers in the U.S.—it’s unclear how, or why, the government should try to stop it. This is the great dilemma of the 99 percent.
The easy political responses—starting a trade war with China, or rounding up all the people who might be undocumented immigrants—won’t accomplish anything. Improving the educational system, investing in infrastructure, and incentivizing corporate investment would, but such steps will take decades, not weeks. If Occupy Wall Street plans on hanging in for real change, the protesters will need to start trading in their tents for drywall.
There are now protests flourishing around the country, including my hometown. Occupy Boston is at the foot of the financial district in Dewey Square, which is given over to scores of closely packed, brightly colored camping tents. On the same day I toured the site, Ben S. Bernanke visited the Federal Reserve Bank of Boston, right across the street, though no one on the square seemed to know it. Nor did Bernanke wander over.
The message in Boston is the same as in New York, but with a more desperate edge. Stan Malcolm told me he had been working in flooring—an industry hit hard by the real estate slump—until 18 months ago, when his employer shut down. “There ain’t no work anywhere,” he said. Since then he has been doing day labor and eating at soup kitchens. I asked what he will do when the cold weather comes. Wasting not a syllable, he replied: “Bundle up.”