October 19, 2011

[Occupation] Rethinking Grotesque Inequality

I went out on Saturday to support the Occupy Ottawa movement. Notwithstanding the slow decision-making process of the protesters (in order to ensure all ideas were heard and to make the most of fairness and democratic order), it was interesting and inspiring to be taking part in a movement which is essentially about social and economic justice. Despite all the ridiculous rhetoric from Canadian politicians regarding how great this country is because it 'weathered the economic storm' much moreso than other nations; and despite the fact that the situation (both the financial situation and the picture of inequality) is not quite as severe in this country as it is in some others - Canada has some serious problems that make the protesters' cause a worthy one north of the 49th.

Inequality has grown in Canada since the 1970s. The rich have gotten richer while the incomes of poor and middle class families have not seen any considerable growth. In fact, one study by the Conference Board of Canada found that those in the top income bracket saw an income increase of over 16% between 1980 and 2005, while those in the middle income bracket saw no growth and those in the lowest income bracket witnessed a decrease of 20.6%!
An economist at the CCPA found that one third of all income growth in Canada went to the richest 1%. The average family in Canada earned $63,800 in 2009 – after tax. The average individual earned $31,500 after tax. Meanwhile, the 100 richest CEOs in Canada earned $6.6 million on average in 2009! 
Finally, people are entertaining the idea that such absurd income inequalities just shouldn't be allowed!
Now, there are lots of great articles out there written about wall street. Below I've pasted two that I've found particularly insightful - one by Jeffrey Sachs and the other by Justin Podur focussing more on the Canadian context. Enjoy!

Message to Wall Street
by Jeffrey Sachs 10/17/11
The Wall Street elite seems completely befuddled by the Occupy Wall Street movement. The demonstrators are called "unsophisticated," or misguided, or much worse (mobs, communists, and more). Here's a short note to the titans of Wall Street to help them understand what's happening.
Let me start with the Wall Street Journal, which seems to be the most confused of all. In its Friday edition, the Journal editorial board couldn't understand why the protestors would want to protest JP Morgan and hedge fund manager John Paulson. The Journal also couldn't understand why the protesters were failing to champion something as wonderful as the Keystone Pipeline, which the Journal assures us would create many jobs.

The Journal can be forgiven for this basic confusion. It must be hard work to channel Rupert Murdoch's cynicism, greed, and ideology every day, so here are some answers so that the editorial board doesn't have to knock itself out with fresh research.
The protesters are annoyed with JP Morgan because it, like its fellow institutions on the street, helped to bring the world economy to its knees through unprincipled and illegal actions. The Journal editorial board apparently missed the news carried in the Journal's own business pages that JP Morgan recently paid $153.6 million in fines for violating securities laws in the lead-up to the 2008 financial collapse. JP Morgan, like other Wall Street institutions, connived with hedge funds to peddle toxic assets to unsuspecting investors, allowing the hedge funds to make a killing at the expense of their "mark," and the world economy.

The protestors are not enamored of Mr. Paulson either, since he played this role together with Goldman Sachs. Paulson made a fortune by teaming up with Goldman to bundle failed mortgages, which Goldman then peddled to its customers, in this case some unsuspecting German banks. Paulson shorted these assets and thereby profited as the bank's investments collapsed. For this little maneuver, Goldman paid $560 million to the SEC in fines. Of course this is a small amount compared to the profits that Goldman reaped for years playing in toxic assets. On Wall Street, misbehavior pays, at least up until now.

Mr. Paulson actually made some extraordinary statements in the New York Times on Friday (hard even to believe the nonsensical quotations are correct, but there they are, in the paper of record). He too expressed befuddlement about the protests against his business dealings. Didn't the protestors know that he had created 100 high-paying jobs in NYC? 100?

What the protestors do know is that Mr. Paulson's success in shorting toxic assets bundled for gullible investors has netted him billions. In 2007, he reportedly took home $3.7 billion by betting against the U.S. mortgage market. And the protestors can also do their arithmetic. Paulson's take home pay was enough to cover not just 100 jobs at $50,000 per year but rather approximately 70,000 jobs at $50,000 per year. Nice try, Mr. Paulson, but the people in Liberty Plaza don't think your hedge-fund play is really worth the compensation of 70,000 people. Nor do they understand why hedge fund managers pay a top tax rate of 15% on their hedge-fund earnings.
The Journal, Paulson, and others who accuse the protestors of being "unsophisticated," somehow have forgotten a basic point. It's not just Paulson, or Goldman, or JP Morgan that parlayed their unethical behavior into vast fortunes at the expense of hapless investors. Just name a big name on Wall Street in the past decade, scratch the surface, and uncover a financial scandal. Bank of America, Goldman, JP Morgan, AIG, Merrill Lynch, Countrywide Financial, Lehman Brothers are only the start of the list.
Maybe the Journal forgot to mention this because it itself is enmeshed in a series of scandals, ranging from hacking phones in the U.K. that has created a full-fledged crisis for its parent News Corporation, to last week's resignation of the European publisher. Murdoch is not just running an organization of corporate propaganda, but a criminal enterprise, at least in the U.K.
The protestors are not envious of wealth, but sick of corporate lies, cheating, and unethical behavior. They are sick of corporate lobbying that led to the reckless deregulation of financial markets; they are sick of Wall Street and the Wall Street Journal asking for trillions of dollars of near-zero-interest loans and bailout money for the banks, but then fighting against unemployment insurance and health coverage for those drowning in the wake of the financial crisis; they are sick of absurdly low tax rates for hedge-fund managers; they are sick of Rupert Murdoch and his henchman David Koch trying to peddle the Canada-to-Gulf Keystone oil pipeline as an honest and environmentally sound business deal, when in fact it would unleash one of the world's dirtiest and most destructive energy sources, Canada's oil sands, so that Koch can profit while the world suffers. And they are sick of learning how many Republican politicians - the most recent news is about Herman Cain - are doing the bidding of the Koch brothers.

Here, then, Wall Street and Big Oil, is what it comes down to. The protesters are no longer giving you a free ride, in which you can set the regulations, set your mega-pay, hide your money in tax havens, enjoy sweet tax rates at the hands of ever-willing politicians, and await your bailouts as needed. The days of lawlessness and greed are coming to an end. Just as the Gilded Age turned into the Progressive Era, just as the Roaring Twenties and its excesses turned into the New Deal, be sure that the era of mega-greed is going to turn into an era of renewed accountability, lawfulness, modest compensation, honest taxation, and government by the people rather than by the banks.
That, in short, is why Wall Street is filled with protesters and why you should wake up, respect the law rather than try to write it, and pay your taxes to a government that is ruled by people rather than by corporate power.

Jeffrey Sachs is Director, the Earth Institute, Columbia University; Author, 'The Price of Civilization'

The Logic of Occupy Wall Street
for Canada

Justin Podur

The Occupy Wall Street Movement and the Occupy Together movements that are inspired by it actually have a simple premise: society shouldn't be run for the unrestricted benefit of the wealthiest. The immediate grievance is the 2008 banking crisis, in which the U.S. banks engaged in fraudulent and criminal activity and were subsequently rewarded for doing so with trillions in government funds, while their victims reaped evictions and foreclosures.

“Step Down Lisa Raitt. Ur Killing Basic Human Rights” at the OccupyTO event in St. James Park, October 15, 2011. More pictures.
Canada did not have a crisis of the same severity, for a few reasons. Canada has a different banking system with a differently-regulated mortgage authority (although there are important similarities in the way the government takes risks and the private banks profit, and the Canadian system is far from invulnerable to crisis). The government is in the mortgage-backed securities business, but not in the totally unregulated way that the business ran in the United States. Social democratic politics are a little bit stronger in Canada than in the USA. Because the Conservatives were in a minority government at the time, the other parties were able to wring a stimulus out of the federal government that blunted the recession (the Bank of Canada also provided emergency funds and lowered interest rates to help the banks). But the overall problem, and direction of society, is the same, and the Occupy Together movement should find fertile ground in Canada.

Who Are the 1 Per Cent?

The slogan of Occupy Wall Street is “We are the 99%.” So, who are the 1 per cent in Canada? A 2010 report by the Canadian Centre for Policy Alternatives (CCPA) by Armine Yalnizyan documents “The Rise of Canada's Richest 1%.” There are 246,000 of them and their average income is $403,000. They hold 13.8 per cent of incomes, and pay some of the lowest taxes that the top 1 per cent have ever paid, historically.
To look within this 1 per cent (at a tiny fraction of it, 0.0002 per cent) economist Jim Stanford pulled some figures about Canadian billionaires from Canadian Business magazine for theProgressive Economics Forum. There are 61 Canadian billionaires, with a combined wealth of $162-billion (5 times the size of the federal government's budget deficit). This is 6 per cent of all personal net worth in Canada – they own twice as much wealth as the bottom 17 million Canadians. Their wealth increased by 8.4 per cent last year (while average hourly earnings in Canada grew by 2.5 per cent). On average, they added $100-million per household, while the average household added $524.
Through a few historical accidents, Canada has been spared the most spectacular aspects of the U.S. financial crisis, but it is hard to dispute that Canadian society is organized to benefit private corporations, and especially finance. The economics of this favouritism has been documented extremely well over the years by the CCPA. A 2010 report by the CCPA's Toby Sanger, for example, shows how the financial sector has had a 23 per cent profit margin during the past decade, compared to 7 per cent for non-financial industries. Sanger quotes “a leading bank analyst” who estimates that Canada's top banks will have $40-billion in excess cash by the end of 2012, the sum of all federal and provincial deficits projected for 2012-13. Corporate income rates have been cut from an average of 42.6 per cent in 2000 to 28 per cent by 2011, with more tax cuts coming. The tax cuts in this sector, and the tax havens for the fraction of the 1 per cent, have helped bring about the revenue shortages that are then called “deficit crises,” which governments then use as pretexts for austerity budgets.

Extremes of Inequality

In a society based on layers of inequality, the 99 per cent is itself differentiated. Another 2010 CCPA report by Daniel Wilson and David McDonald reveals one of these inequalities. The median income for Canadians in 2006 was $27,097; for aboriginal peoples, $18,962, or 30 per cent lower. Scholar Grace-Edward Galabuzi has documented social exclusion based on race and gender.[1] And a recent report by the Conference Board of Canada shows that income inequality in Canada is growing faster even than in the United States.[2] All of these inequalities are within the 99 per cent, which highlights the need for a more equal society in general. The extremes of inequality are glaring, but these grinding inequalities are no picnic either.
One comparison, made frequently in the media, that seems to drive progressives crazy is the one between Occupy Wall Street and the Tea Party movement, which is based on the magical idea that society should be able to afford things (from roads to wars) without paying taxes. When Tea Party politics got to Canada they helped elect Toronto's current mayor and helped give the Conservatives a boost to a majority government.[3] The Occupy Wall Street movement's arrival in Canada could help discredit the austerity that the Conservative government will be putting forward in their next budget, and could help in resisting their plans to deepen inequalities and destroy what economic, social, and environmental fabric is left. •
Justin Podur is a Toronto-based writer. He teaches at York University and blogs at killingtrain.com.

1 comment:

  1. hey ryan
    has some goods on it too.