I thought the formulation of the OWS's protests was both succinct and accurate:
The Anglo-Saxon model claimed that free markets would create prosperity; many voters feel instead that they got a series of debt-fuelled asset bubbles and an economy that was rigged in favour of a financial elite, who took all the proceeds in the good times and then left everybody else with no alternative other than to bail them out.
But it's painful to see The Economist recasting the problem along the lines of state interference (especially at the end of the article: Western governments have failed their citizens once) whereas the issue here is the co-optation of the political sphere by the financial sphere (the repeal of the Glass-Steagall Act under Clinton in 1993 being only one example).
the repeal of the Glass-Steagall Act under Clinton in 1993 being only one example
The removal of a regulation is quite different from co-opting the government to do the industry's bidding. Certainly, there are plenty examples of business having undue influence in government. But likewise, there are examples of government having undue influence in business[1].
The one thing I've heard anyone in OWS suggest that I can get behind is a separation of business and state.
Too often, the regulatory machine helps business (see Regulatory Capture[2]) -- and this cuts in many directions, like the governmental support of labor unions, as in the recent Boeing case. But it would still be a mistake to go to the other extreme and have the behemoth of government driving business.
It seems to me that the Economist is right, and getting the government to just get the heck out is the best solution. They shouldn't do anything to help or hinder[3] business.
[1] How often have we heard various content industries (movies, music, video games, comic books) promise to "self-regulate" lest government pass some threatened laws.
The removal of a regulation is quite different from co-opting the government to do the industry's bidding.
In 1993, the Clinton administration repealed the Glass-Steagall Act under pressure from Wall Street because Clinton wanted to secure Wall Street's financial support for his coming reelection. Wall Street money effectively contributed to shape the financial system in Wall Street's favor, that is, towards less financial regulation.
With this perspective, I see the removal of the Glass-Steagall Act regulation as an example of co-optation.
Minor correction, Glass-Steagall was repealed in 1999 by the Graham-Leech-Bliley Act. (It was originally signed into law in 1933, which might be where your 3 is coming from...).
But otherwise, yes Clinton signed it ostensibly for the reasons you mention (needed Wall St. campaign funds for Dems), but it was led by Sen. Phil Graham, poster boy for the revolving-door between Wall St. & Washington (and now on the board of UBS).
"It is worth remembering that the epicentre of the 2008 disaster was American property, hardly a free market undistorted by government. "
This was the line of the piece for me.
CWuestefeld gets a +1 for mentioning regulatory capture, which, in our current system, is the actual status quo.
Government will be unable to fix the various financial and regulatory problems we're facing so long as corruption continues to run as deep. There is no major industry in the country that doesn't have the lobbying and campaign finance dollars to capture its own regulatory bodies. Until we can solve this problem, any government led effort to regulate our marketplace will fail.
Taxing the rich is also something that only appeals to the ignorant. You can raise the taxes on the rich all you want, but the rich aren't going to pay more taxes. Complicating the tax code actually empowers the rich because they have armies of lawyers and accountants at their disposal. Complicating tax codes just creates a glass ceiling for the middle class.
Given the level of corruption and the services that the wealthy have at their disposal, the best we can hope for now is a level playing field. Get government out of the way, weaken it, starve the beast, whatever. The idea is not so much to deregulate, but to make the return on investment for serving the American people ( or at least customers! ) greater than that of buying lobbyists and politicians.
OWS anger at corporate bailouts, lack of work, and wealth inequality. Economist's answer? Lower marginal tax for the rich and higher retirement age for workers.
They are defending the broken status quo. Early in the article: "benefits that societies can no longer afford". Society can afford a hell of a lot if managed correctly. Unfortunately, the foxes are managing the henhouse.
You are misquoting the article, which actually proposes to "boost the tax take from the wealthy by eliminating loopholes while simultaneously lowering marginal rates."
In other words, make the rich actually pay more by eliminating loopholes used to avoid taxes entirely. Compensate somewhat for the increase by lowering the actual tax rate.
"Compensate somewhat for the increase by lowering the actual tax rate."
Why should we be "compensating" anything? "The Rich" promised to hire vigorously if we kept Bush tax cuts. They didn't hire then and they aren't now and it's still the same rate.
Because the Economist's point is that so much of the potential tax revenue is getting excluded due to loopholes that eliminating those loopholes without reducing the marginal tax rate at the same time would amount to an enormous wallop. Maybe "the rich" can bear it, maybe not, but the point is effecting change of that sort would make them pay more, and that regardless of what actual tax rate we want to target, it would be better to start from a position where the actual tax paid by any individual is straightforward to calculate.
Only at that point does it become reasonable to figure out at exactly what number to set the tax rates, because until then you don't really know how much tax you're going to get from the person, since they may or may not have avenues of escape.
1) 50% reduction in both the mandatory and discretionary defense budgets (why there are two of them is an outrage in and of itself). Iraq/Afghanistan withdrawal included and needed badly.
2) If jobs are #1 in the current economy, entrepreneurship should be job #1 for Congress. Make the SBA the new WPA for the new century. Instead of putting people to work on solely "shovel-ready" government infrastructure projects (which they should also do, but I digress), the government should guarantee small business loans disbursed and managed by NCUA-backed credit unions (see what I did there?), who would know more than any large, NYC-based conglomerate the business needs of their community. Loan terms should be manageable and repayment should start at time of profitability according to financial projections as stated in mandatory business plan drawn up by founders/loan seeker. Repayment interest rate shall be 1% + Federal Discount Rate (so, currently 1.75%) and, again, guaranteed by the government.
3) Said small businesses above are far and away the largest drivers of employment growth in the US even without stimulus like #2 above, so get them even further growth by lowering both payroll taxes and offering credits to those who hire within the US (in either part- or full-time permanent positions, not contractors).
4) All businesses with <100 employees are eligible to buy-in to Medicare program and enroll employees regardless of age or health condition. Rates will be determined by current average monthly Medicare premium + 15%, to be paid by both employer and employee (negotiated privately between parties, of course).
5) Keep current Tax cuts but close all loopholes and subsidies, and institute a progressive Capital Gains tax (short and long-term) that mirrors income tax rates.
> In Seattle, for instance, the last big protests (against the World Trade Organisation, in 1999) looked mindless. If they had a goal, it was selfish—an attempt to impoverish the emerging world through protectionism.
Wow. While a case can be made that the anti-globalization movement would of had that effect, that was not its goal. I really should stop reading the Economist.
Protectionism has always been ONE OF the goals of the anti-globalization movement, especially insofar as that movement has had union support.
This is just one more aspect of the general rule that these protests do not have a unified agenda, because they're composed of diverse individuals with diverse goals. And in my ignorant opinion, a lot of those diverse individuals demonstrably have no clue what they're talking about, except of course in the domain of their personal misery and frustration. I recall, then as now, lots of anti-WTO (and anti-APEC 2 years earlier) protesters who had some pretty blurry ideas about what they were fighting for. There was lots of thinly-veiled "trade will steal our jobs" rhetoric in there - of course along with the environmental concerns, the third-world human rights concerns (Suharto was a big issue in the APEC '97 protests), the concerns about capital flight and race-to-the-bottom, etc.
That's crazy, isn't it. It makes you realize how important it is to diversify one's sources of information (as well as to be open to different points of view), in order to avoid unconscious brainwashing.
The Economist makes a great point in noting the over-simplification of macro-economic policies and the danger of populism, fears that seems justified when you read people saying that "society can afford a hell of a lot if managed correctly": what does exactly means "afford"? Must the society write a check to anyone who needs it? is the objective of the protest to create spaces where people can work and get themselves out of the whole or is to get the government to bail everyone out? Are western citizens entitled to more and more benefits that will definitively be paid by our sons or grandsons, or are we entitled to clean governments and smart politics?
The Anglo-Saxon model claimed that free markets would create prosperity; many voters feel instead that they got a series of debt-fuelled asset bubbles and an economy that was rigged in favour of a financial elite, who took all the proceeds in the good times and then left everybody else with no alternative other than to bail them out.
But it's painful to see The Economist recasting the problem along the lines of state interference (especially at the end of the article: Western governments have failed their citizens once) whereas the issue here is the co-optation of the political sphere by the financial sphere (the repeal of the Glass-Steagall Act under Clinton in 1993 being only one example).