The posts at WeAreThe99Percent are sobering, shocking.
They are some of people caught in the downward spiral of the US economy, but in reality it’s been happening for years as the split between the wealthy and the ‘middle class’ gets increasingly large.
The stories are of cripplingly high health care costs that destroy families, of foreclosures on mortgages and of the obvious result of years of banks pushing debt to customers.
There are also strong themes of ever-increasingly expensive education that is of diminishing value in the job market, and people are loaded up with tens of thousands in debt and low paid or no jobs.
These are signs of a society that is failing its people, and a strong articulation of exactly what the Occupy Wall Street movement is all about.
Is this the real Tea Party?
David Koch, second richest man in New York is apparently a cornerstone funder of the Tea Party, and he and his brother hold strong Libertarian views. Some of those views I regard as part of a fair society (legalisation of prostitution and drugs, gay marriage, removal of farm subsidies) but some are downright dangerous (removal of Social Security, the Federal Reserve Board and welfare).
The Tea Party movement was arguably taken over and certainly accelerated by Fox News into what seems to be a nutty right wing group, but the mass membership are driven by much of the same concerns as Occupy Wall St.
This newer Occupy Wall Street movement appears to be a genuine one, rising from a sea of frustration from people who are under-served and with little prospect. It started from a suggestion in a email from Adbusters to their readers, and seems to have no leaders.
Many of the participants made mistakes, perhaps taking on too much debt or studying the wrong degrees. But many more of them have done what society demanded of them, attending university, paying insurance, buying a car – and then got clobbered. The safety net in the USA has many holes, and doesn’t last for long.
The problems are not so simple
A lot of what the financial industry (Wall Street) does is good, even the slicing and dicing of mortgages up into CDOs was a good idea. What was not good was the pricing of those CDOs, the way they were sold and the way that mortgages were granted to people who realistically had no hope of ever paying them off. What is worse is the propensity to clip the ticket for increasing amounts. The short term dealmaking, get the money now nature of the street has its place as lubricant for helping businesses make tough decisions, but it encourages unacceptable banking practices in the long run. The US really does need to reinstitute the separation of retail banks and investment/trading banks, and bring in adult supervision.
The financial institutions do not stand alone in being recipients of fury. US corporations there are paying an increasingly small share of the overall tax burden, with some such as GE earning billions and paying little or no tax, or even receiving rebates. This is the result from years of corporate lobbying for tweaks in tax law, and the results are repugnant. The USA could learn from New Zealand should dramatically simplify their tax code, much like Roger Douglas did in 1984, and introduce a GST.
That’s not to say that that everyone on Wall Street is repugnant, or that even they see themselves doing wrong – far from it. It’s a game where the choices are laid out in front of you, and if you excel then the money will come. It’s a game where the amount of money flying around is so high that it’s relatively easy to ensure that a little sticks to those making the transaction.
Financiers however play within rules set for them by legislators in Washington DC. Those legislators are there thanks to a host of donations from thousands of people, but some of the larger amounts come from companies and individuals on Wall Street. That mixture of politics and money has lifted the concerns of corporations and diminished the relative concerns of individuals. It’s got to stop, but a recent Supreme Court decision actually went the other way – defending the right of corporations to get involved in elections.
A decent society is decent to everyone, regardless of whether they are old, young, sick, or healthy, or even whether they chose at times not to abide by our rules. I reject completely the idea of living in a society that accepts homelessness, that does not care for mentally and that locks up people for offenses that are relatively harmless. We humans are better than that.
Being part of the 1 percent
I was lucky enough to study and work at two elite USA institutions – Yale University and McKinsey & Co. The experiences at those two places were outstanding – the level of education at top schools and the scale of the work available in the USA at the top end far exceeds anything here. I helped, for example, 2 organisations with over $500 billion in assets at the highest level. I was taught by people that wrote the books we study from and met a group of ultra smart, globally savvy, fun and driven people. In short I was becoming part of the 1 percent, even though for four of my five years in the USA I was in debt, and even though my income paled in comparison with those on Wall street.
I deliberately chose not to apply for Wall Street jobs during my MBA, as despite the fun of playing with large sums of money there seemed to be little reward beyond chasing the money god. I was lucky (or unlucky) enough to temp for a few months in a bank that sold structured financial products in London, counting the amount of money that the bankers had made over and above the internally calculated value of those products. It was a calculation of a knowledge advantage, and the units were millions of dollar per day. Those bankers or traders were seen as the elite within the bank people, but in reality they were arseholes, and like everyone else there, including me, they were dedicated to making money and to little else. I was lucky because I managed to get kicked out relatively quickly.
Being part of the 1 percent as a professional isn’t easy either. You are expected to work incredibly hard, maintain a certain sense of decorum and not rock the boat. It helps to have gone to the right school, for undergraduate and graduate studies, if not before. You don’t get much in the way of holidays, and are expected to be on call at all times.
I managed, courtesy of the last recession, to again break away from the USA corporate scene.
Meanwhile in New Zealand many are experiencing at some of the negative impact of the GFC, though I am unsure as to how bad it really is. Compound that with the hammering that Christchurch took, and while we are just getting on with it, we potentially have some real problems.
However we are blessed with a society and politics that, ACT party notwithstanding, generally and genuinely finds it unacceptable to treat people so harshly.
We are seeing increasing disparity between the wealthy and the rest in NZ, and we therefore need to doubly continue to ensure that the social welfare safety net is working. That means free or cheap education and health, as fundamental rights, it means a living income for everyone regardless of their circumstance and it means making sure we don’t have a situation where housing is unaffordable and can create catastrophic losses for families.
At the same time we need a society and economy where businesses can start, nurture, grow and prosper. We already have some good elements in our tax system, but there is a way to go before we get a fair tax system that rewards entrepreneurialism and has minimal loopholes. We don’t, for example, tax capital gains at all here. A simple across the board 20% tax on capital gains worked well in the USA for many years, and a tax I would welcome here, excluding only primary residences.
While there are problems, we have a good society here, and many live the life that many of the 1 percenters do not manage to live in the USA. We have the lifestyle many in the world dream of, while we have the ideal economy to start and grow businesses.
So what can we do about it here in NZ?
There is not a lot we can do about US policy, and it is senseless to get buried in US politics as it is something which we can and should not try to influence. Also it is, as far as I know, illegal for non-citizens to donate to campaigns.
But we can make sure that we don’t follow in the footsteps of the US by making sure we stay vigilant on the things that make our society great. We missed for example, decent regulation of finance companies, resulting in the loss of billions. We succeeded though in standing up to banks, and their current strength is partially a function of that.
Why can’t we make our 1% into 100%? Why not aim to make New Zealanders the envy of the world, combining a (minimum) decent living with a vibrant economy and the world’s best lifestyle.
It’s something worth pushing for, and here are some of the basic elements I believe we need to (continue to) push for*:
- A simple social welfare system that ensures everyone gets a living wage, regardless of the reason they need help
- Low or no income taxes for those earning under a minimum amount
- Free or near free high and consistent quality education for those who cannot afford otherwise
- Free or near free health care for those who cannot afford otherwise
- A flat capital gains tax (say 20%) on all capital gains except for sale of the primary residence
- Decriminalization of all and legalization of certain drugs, to drive safer drug taking though better messaging, less drug taking (Portugal example), higher income from tax on drug sales and removal of the largest cause of crime from the mandate of police.
- Constant effort to maintain our short election campaigns and campaign financing that cannot be influenced by wealth of individuals or corporations.
- Constant effort to increasingly simplify tax law, making it as easy for corporates to understand their income liability as it it is with GST.
- Firm and fair regulation from well educated and informed regulators of companies that take money from investors.
- Continued celebration of individuals who make it big by building great companies with strong values, and condemnation of those who create wealth through financial trickery and do not give back.
There is more. However for now my main question is just how bad is it in New Zealand? Are we seeing the desperation of the US, or are our limited resources being largely applied where it matters? We will always have perceived and actual individual injustices, and we should seek to clear them, but for now it is the systemic ones that we need to worry about.
*Note that I don’t believe, for now anyway, in a financial transaction tax as has been mooted by some. The call is for a, say, 50 cent tax on each financial transaction. The difficulty is in understanding exactly what a transaction is. Traders could simply gather up all trades for a day between themselves and other institutions and call them one transaction. Alternatively if the tax was based on the number of securities exchanging hands, then bankers would simply construct products with higher face value and lower numbers of securities. And so on. For every tax a financial product can be created off-market that avoids the tax, but only the largest banks will be able to do this. The smaller investors would pay the tax regardless.