In 2010 it was the Tea Party that made the news. Large numbers of mostly-employed, mostly-conservative voters, outraged at the bailouts and spending of the Bush and Obama administrations, were determined to drive a political change.
This year it is the Occupy Wall Street movement that is getting the headlines. It is a very different group than the Tea Party — less tidy, less employed and much more left-wing. The Occupy crowd has drawn predictable criticism from the political right, while Democrats seem unsure whether embracing the protestors is a winning political strategy. Certainly many of the protesters’ demands are unlikely to be met. At a time when the future cost of entitlements threatens to bankrupt the U.S., creating a new right to a “social wage” (getting paid just for being alive) is an obvious non-starter.
But if Occupy Wall Street has the prescription wrong, they certainly have much of the description right. The Occupy protestor holding the sign reading, We have privatized profits and socialized losses is making a point difficult to dispute. The protest movements that together bookend the political spectrum, Tea Party and Occupy Wall Street, agree on one thing – the nexus of power that unites Wall Street with Washington DC is dangerous to both the economy and to American democracy.
Being unpopular does not prevent Wall Street from being profitable. In 2010, just two years after the crash, Wall Street paid the highest bonuses in its history. The finance sector in the U.S.accounts for fully 40% of the profits of corporate America, a proportion without precedent in our history. (Or anyone else’s.) Over the last five years, Goldman Sachs employees have pocketed $80 billion in compensation, while the company’s shareholders have lost $25 billion in market capitalization. This is a peculiar kind of capitalism, in which the owners of the company (the shareholders) suffer losses while a small number of workers get very rich.
Meanwhile Main Street incomes stagnate, with median real wages in 2010 lower than in 1999.
Most of the Street’s profits these days come not from investment banking (raising money for new or established corporations), or from managing portfolios , but from proprietary trading that contributes nothing to the industrial and services economies that provide Main Street jobs. Wall Street has become simply a casino, one where the gamblers win if they bet right and the taxpayers lose if they bet wrong.
A healthy financial sector is absolutely essential to a modern post-industrial democracy. That does not mean that every activity in the financial sector is necessary or even benign. Much of what Wall Street did to get us into the 2008 financial crisis is still happening. We have not yet put in place a regulatory structure that subordinates Wall Street’s financial interests to those of Main Street.
Let’s hope our politics begins to reflect the reality of the Great Disconnect between our financial sector and the lives of ordinary Americans. Nobody has ever received more money from Wall Street than Barack Obama did in 2008, and Republican front-runner Mitt Romney is similarly well-connected. The wild card in the 2012 political race may be whether either party puts together a serious plan to rein in the power and income of Wall Street’s elites.