This article is a contribution to ‘Liberalism and Occupy Wall Street,’ a TNR symposium. Click here to read other contributions to the series.
Many pundits are asking whether the Democratic Party and the White House should “embrace” the Occupy Wall Street movement. The question is poorly posed. The real issue is the nature of the problems that now confront us and the most effective response to them. The party and the administration should make common cause with OWS to the extent that doing so is consistent with an agenda and message that Democrats can take to the country next year with a reasonable hope of rallying majority support.
Some basic facts are clear. The emergency measures the administration implemented in 2009 averted all-out catastrophe but did not restore the economy to health. The patient is still in the ICU, and the blood transfusions are coming to an end. The economy is growing far too slowly to make a dent in unemployment and is likely to do so for quite some time. While the top 1 or 2 percent are doing very well, the middle class is suffering. The Wall Street Journal reported on October 14 that median household income in the United States declined 7 percent from 2000 to 2010, the worst ten-year performance in more than forty years. Projected increases over the next decade will not be enough to regain the lost income, which means a full two decades of stagnation.
While there are many reasons for this gloomy picture, the most important is household debt, which remains much too high relative to disposable income. The administration’s program has done little to address the epicenter of the debt crisis—burdensome mortgages—a gaping hole that conservatives such as Glenn Hubbard and Martin Feldstein have urged the administration to fill. And young unemployed or underemployed college graduates are struggling with their own debt crisis—large students loans that they can’t repay. While saving the financial system imperfectly was preferable to letting it collapse, the failure to act with equal urgency to save the middle class will go down as a strategic error that ensured a populist reaction, which duly transpired—first on the right, now on the left.
A deeper issue underlies this outburst of discontent. Every community of any appreciable size has an elite—often more than one. Elites are tolerated, even respected, if the rest of the population sees them as using their wealth, power, prestige, and talents on behalf of the community’s interests, as well as their own. Elites are not expected to be saintly altruists, but they are expected to care about the rest of society, not just themselves.
And that is the nub of today’s populist revolt. It is very difficult to find anyone outside a couple of Manhattan zip codes who believes that the financial sector has added value to America’s economy and society over the past two decades. Financial “innovations” ended up expanding risk, not opportunity; the Masters of the Universe redivided the pie without noticeably expanding it. While wages stagnated, financial elites became untethered from the real economy and sailed off into the stratosphere of nine and ten-figure wealth. A capitalist economy loses credibility when its results diverge too far from public sentiments about decency and fairness.
That’s where we are today. The most recent Time Magazine survey found that 86 percent of Americans think that Wall Street and its lobbyists have too much influence in Washington, while 79 percent think that the gap between rich and poor has grown too large. Of those with at least some awareness of the OWS movement (about three quarters of those surveyed), 68 percent believe that the rich should pay higher taxes, and 71 percent that financial executives responsible for the financial meltdown should be prosecuted.
The task of political leadership is not to mirror or pander to these sentiments, but rather to articulate the important truths that underlie them. History shows that when elites fail to discharge the responsibilities their privileges entail, they sow the wind. America’s elites ignored this time-honored truth, and they are now reaping the whirlwind of their heedlessness.
In 2009, at a time when one might have expected maximum feasible humility from financial leaders, Lloyd Blankfein opined that Goldman Sachs was doing “God’s work.” While he was limning a previously unnoticed theological equivalence between himself and Mother Theresa, Brian Griffiths, vice chairman of Goldman Sachs International and also chairman of the Archbishop of Canterbury’s Lambeth Fund, was invoking John Rawls’s Difference Principle. In a 2009 discussion at St. Paul’s Cathedral, he had this to say about compensation in the financial sector: “We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.” And so we would, if it did. But where is the evidence that it does? I’m not even sure that Griffiths’ proposition was intended as a statement of fact. It seems, rather, like a ritual incantation designed to ward off evil spirits. If so, it has lost its protective powers.
It is time for a new American discussion about the responsibility of elites. Their role in helping to rebuild a sustainable fiscal course for our country would be a good place to start. Someone on Wall Street should circulate a petition endorsing the Senate Democrats’ call for a 5.6 percent surtax on the earnings of millionaires. It would be interesting to see how many banking and financial executives would sign it.
William Galston is a senior fellow at The Brookings Institution and a contributing editor for The New Republic.