Lessons From and For the Class Struggle on Wall Street

10/13/2011 @ 10:37PM
Lessons From and For the Class Struggle on Wall Street
Art Carden

A consensus has emerged that there really isn't a consensus view among the Occupy Wall Street crowd and its assorted offshoots. Occupy Wall Street represents a motley collection of the disaffected and disenchanted from across the political spectrum that is more than just a left-wing version of the Tea Party. From the coverage I've seen, the Occupiers make some important points about the apparently never-ending wars and distributive politics favoring the few at the expense of the many. They would do well to take a handful of lessons to heart so that they can channel their frustrations in a productive direction.

First, wealth is not prima facie evidence that wrong has been done. When it is allowed to work free from interference, commerce is a positive-sum game.  Look at some of the names on the Forbes 400. The Gateses and Waltons of the world didn't get rich by stealing. They got rich by finding newer and better ways to make other people's lives better­in short, by creating wealth. This isn't to lionize the wealthy: no doubt, you will find skeletons in every closet and dirt under every rug if you look hard enough. By and large, though, it has been access to the institutions of commercial society rather than access to the institutions of political society that explains some of the vast fortunes about which so many of the Occupiers are so upset.

This raises a second important point originally made by Nobel Laureate Robert Lucas: economic growth, not redistribution, is what raises people out of poverty. If we're serious about alleviating suffering, eating the rich is a spectacularly unwise course of action. As Lucas writes:

Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution. In this very minute, a child is being born to an American family and another child, equally valued by God, is being born to a family in India. The resources of all kinds that will be at the disposal of this new American will be on the order of 15 times the resources available to his Indian brother. This seems to us a terrible wrong, justifying direct corrective action, and perhaps some actions of this kind can and should be taken. But of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor. The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production.

Third, a little consistency is in order if we're going to talk about bailouts. So, for that matter, is a little frankness. Steven Horwitz points out the inconsistency in decrying bank bailouts for agitating for relief from the burden of student loans: "To complain about bank bailouts while also arguing, as some have, for student-loan debt forgiveness would suggest the problem is not that government shouldn't bail out failed investments, only that it shouldn't bail out failed investments by corporations."

A lot of people are learning that describing their spending on higher education as "failed investments" is probably to err on the side of charitable interpretation. It might be more reasonable to say that attending an expensive school to earn a boutique degree with limited employment possibilities is consumption, not investment.

As Horwitz also notes, this should also make us reflect a bit on what it means to give "power to the people." Suppose you have spent several years picking up a degree in a field where there are no jobs, and you find that the concatenation of the people's voluntary choices in the marketplace means that your most attractive opportunities involve waiting tables or making lattes.

Why should you be upset? I modify here something that I first read on Duke University economist and political scientist Michael Munger's blog. "Power to the people" is apparently all good and well until "the people" start making the wrong decisions. In that case, power will accrue to those who know what is really best for "the people." There might be dissenters, sure, but you can't make an omelet without breaking a few eggs.

Fourth, as Sheldon Richman explains, " Wall Street Couldn't Have Done It Alone." Malfeasance was enabled or encouraged by government. In his book The Housing Boom and Bust (which I review here) Thomas Sowell explains how today's cause for protest and outrage–banks making loans people didn't understand to help them buy houses they couldn't afford–was yesterday's policy objective.

While a lot of people envision a model of politics as a form of noble savagery that is corrupted by evil people who stubbornly refuse to play the game the "right" way, the kinds of intrigue that have the Occupiers (and the Tea Partiers) so exercised are (to borrow from Steven Horwitz again) features of political society, not bugs. As the economist Gordon Tullock has argued, what should puzzle us is not that politicians are for sale. What should puzzle us is that the supply side of the market for political favors is so competitive that favors can be had for such low prices.

In light of economic conditions, it isn't surprising that people are angry. It's important, though, that they be angry about the right things. Blaming "greed" is unhelpful; as economist Lawrence H. White has written, blaming "greed" for economic malaise is like blaming gravity for plane crashes. Reality is much more complex, and simple rage, no matter how well organized, isn't likely to do us much good.

http://www.forbes.com/sites/artcarden/2011/10/13/lessons-from-and-for-the-class-struggle-on-wall-street/