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Home > Blogs > Ian Fraser > Democracy for sale: Occupy Wall Street is right, our politicians and banks have failed us.

Democracy for sale: Occupy Wall Street is right, our politicians and banks have failed us.

Banking reform | Democracy for sale: Occupy Wall Street is right, our politicians and banks have failed us. Ian Fraser

The Occupy Wall Street movement that started in Manhattan’s Zuccotti Park on September 17 has, since last weekend, spread like wildfire into more than 1,500 cities around the world. Given the dangerous and unsustainable forms of "crony" and "casino" capitalism that now predominate in the Western world, this is hardly surprising.

Investor and author Barry Ritholtz who blogs at The Big Picture put it well:

"[Occupy] was born in the late 1990s on an unholy trinity of accounting swindles, the dotcom collapse and analyst scandals. It grew on a housing boom-and-bust that created five million (and counting) foreclosures, leaving more than a quarter of bank-financed homes worth less than their mortgages. It matured on a growing wealth disparity that eviscerated the middle class and brought back the plutocracy of the 1920s. It reached its peak with the bailout of reckless bankers, who were rewarded for their irresponsibility with what may be the greatest wealth transfer in human history."

In an article headlined 'Wall Street’s long occupation of the middle class' Reuters columnist David Rohde explained it as follows:

"A variety of forces are slowly gutting the middle class – and a paucity of values on Wall Street is one of them. The problem is not every bank. It is a growing slice of the financial sector that has become a vast, computerized casino where staggering fortunes can be won or lost in minutes, with taxpayers left holding the bag."

If, when they rescued bankrupt institutions from the consequences of their own folly in 2007-09, governments had insisted on some sort of conditionality, (for example, they had insisted that “too big to fail” institutions were broken up, that bonuses be capped and that banks started behaving in vaguely responsible ways), this need not have happened.

But politicians like George Bush and Gordon Brown were either too stupid, or had too many friends in Wall Street and the City to even consider this sort of thing. So their governments handed the banks billions of dollars with no strings attached, and a critical opportunity for reform was lost.

As bankers were rewarded for failures and given license to return to mindless and destructive gambling and speculation -- not always with great success, it has to be said -- the citizens of developed countries have been been further impoverished. A mixture of high unemployment, flat wages, high inflation, austerity measures piled on austerity measures (including higher taxes and less generous services and benefits) have drastically reduced people's standard of living.

And as numerous commentators, including Pimco's Bill Gross, have pointed out, the evisceration of the middle class and working class at the expense of corporate profitability has been a long-term trend, but is one that cannot be allowed to continue. Meanwhile, the cack-handed way in which banker-led EU leaders have handled the European sovereign debt crisis (with the needs of gambling banks always being put above those of voters) has only increased Occupy's legitimacy.

Some banks that benefited from taxpayer-funded rescues have behaved appallingly. British banks including RBS and Lloyds Banking Group have inter alia continued to expropriate the assets of loyal corporate customers with alacrity, at the same time as cheating their retail customers out of billions through the swindle of payment protection insurance. All the while they have been hoarding cash and, even at loss-making institutions, directors and other high-flyers have continued to reward themselves with lavish bonuses, even as they turn the screw on loyal customers who have never missed a payment. And whenever a politician has the temerity to suggest even a minor reform, the banks issue bloodcurdling threats.

Yet if the government continue to feed these bloated cuckoos in the economic nest, we're doomed. As I’ve pointed out in earlier blog posts and as Andrew Smithers, founder and chairman of Smithers & Co, pointed out in his QFINANCE Viewpoint, all the government has to do to get us out of this mess is:

  1. Stop taking advice from bankers/stop allowing them positions of influence in Whitehall

  2. Remove the estimated £100bn a year in subsidies handed out to banks

  3. Introduce proper competition into the banking sector

But, either because they're corrupted or thick, the politicians don't seem willing to heed Smithers's advice. It is therefore hardly surprising that the Occupy movement, which uses the hashtag #ows on Twitter, has caught on to the extent it has. And if there is one sign that sums up the problems that Occupy -- whose commitment to non-violence is one of the secrets of its success -- believes must be overcome, it is this.

To conclude, the author Naomi Klein summarized why Occupy is so different from the anti-globalization movement of the late 1990s and, in her view, so much more likely to succeed. Writing on her blog on October 6, Klein said:

"Today everyone can see the system is deeply unjust and careening out of control. Unfettered greed has trashed the global economy. And it is trashing the natural world as well ... And the atmosphere cannot absorb the amount of carbon we are putting into it, creating dangerous warming. The new normal is serial disasters: economic and ecological. These are the facts on the ground. They are so blatant, so obvious, that it is a lot easier to connect with the public than it was in 1999, and to build the movement quickly."

Tags: #ows , Andrew Smithers , banking reform , Barry Ritholtz , Bill Gross , David Rohde , death of the middle class , dying middle class , european debt crisis , eurozone , George W Bush , Gordon Brown , Lloyds Banking Group , Naomi Klein , Naomi Klein blog , Occupy Wall Street , Payment Protection Insurance , Pimco , PPI , RBS , Reuters , Smithers & Co , The Big Picture , Wall Street , Zucotti Park
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