Occupy Wall Street and Globalization

Global protests show OWS to be more than a national event

There is immense confusion over the “Occupy Wall Street” movement.   The left embraces it, though they’re not sure where it came from or what it means.   The right ridicules it, though efforts to say it’s a bunch of “lazy losers” who “envy the rich” are laughable.  Those involved don’t make things easier because they tell multiple stories, ranging from professional anti-globalization demonstrators along for the ride and Ron Paul supporting libertarians who want to break the big money big government nexus.

37% have positive reactions to the movement in the US, only 18% actually oppose them.   People are frustrated and the taste of corporate bailouts and shady financial instruments leaves Wall Street one of the least popular set of institutions in the US.    The fragility of the global financial system which over leveraged itself and seemed oblivious to the danger it was creating for the entire system has shocked people from Frankfurt to Beijing.   There is a sense that something has gone wrong and leaders are clueless on how to respond.

Given the surprising rise of this movement and its capacity for quick expansion, I believe that we are not seeing a moment of rage that will pass when the weather gets cold in winter, but the start of a global movement to critique the power of big money and the lack of voice so many people have in an era of globalization.   It will not be a movement of socialism, but of democracy.   It will not have a clear ideological focus but an evolving agenda.  It will persist even after Zuccotti park empties and Manhattan returns to normal.

Globalization is the name that was given to “complex interdepedence” in the late eighties as it became clear that the growing links between economies noted by scholars of international relations in the seventies (most notably Keohane and Nye in their 1976 work Power and Interdependence) were expanding beyond what anyone had anticipated.    The two most important aspects of this was: a) the technology/information revolution; and b) the internationalization of capital.

Up until the 80s most investors were national.   To invest outside ones’ own borders was risky and difficult, and often faced legal obstacles at home.   Between 1980 and 1990 that changed completely.   In 1980 foreign direct investment in the developed world totaled $390 billion, while $302 billion went to the third world.  By 2008 developed world FDI was over $10 trillion, while in the developing world it topped $4 trillion.  Portfolio investment also grew rapidly.

Investors no longer had any reason to be loyal to their home state, corporations expanded to use whatever advantage they could to minimize cost and maximize profit.    In many ways these are good developments, naturally reflecting the way in which the instantaneous exchange of information can allow greater flexibility.   Toyotas now can be made in the US rather than having to be shipped from Japan, consumers can enjoy the fruits of inexpensive goods from countries with low labor costs, and with linkages between states growing, the chance for major war declines.

Yet there is a clear loser: the state.   States no longer have as much control over their economies, have less capacity to create strong social welfare systems and find it harder to create regulations they believe necessary to protect their publics or the environment.   Whether or not one agrees with those policies, the fact of the matter is the state is not as powerful as it used to be.   And, as political leaders become both dependent on financial and business institutions and vulnerable, they listen very closely to what Wall Street or Frankfurt or Tokyo insiders say.   Whether in the World Trade Organization, IMF or US Congress, the influence of big business and big finance has never been greater.

This also means that democracy is weaker in states with democratic traditions.    Law makers no longer have the power to give people what they want if what they want flies in the face of economic realities of the new globalized political economy.    We can’t save the paper mills in rural Maine if foreign competition leads those investors elsewhere; to try we have to make wages low and avoid even almost all regulations.    That’s economic reality.

Beyond that, if politicians listen more to big money in a world where political campaigns are often just marketing campaigns with slogans and focus group tested themes, elections become almost meaningless.   No matter what the candidate says, once in Washington (or Berlin, Paris, etc.) the candidate is limited to a rather constrained set of options.   Thus emotional rhetoric painting the other side as horrid and ignorant hides the real problem.   There isn’t a lot the politicians can do.

As long as the economy was growing, people didn’t care.   They had jobs and their retirement accounts were healthy. Even those middle class who had to have two incomes rather than one and whose high paying factory job was replaced by low wage work at a call center at least had cheaper than ever goods from Walmart.   As wealth inequity grew rapidly to its peak since the 1800s, the rush of new technology and economic bubbles hid the reality:  both the public and even the politicians were not really in control of where this ride was heading.

Meanwhile the financial sector, over leveraged and under regulated, set up the perfect storm that hit in 2008, turning what should have been a normal recession into near economic collapse and a long term slow down as de-leveraging spread.    This crisis came from the same folk who brought us cheap clothes and global connection – the global financial and business elite.

It’s not that they are bad people.   They are doing what they are supposed to do, trying to maximize profit, innovate, and make money.   It’s just that markets are not magic, and without regulation from the state, insiders are able to rig the game and hide the risks, altering what capitalist theory says markets should do.    Moreover, public values that may be different from raw market outcomes become irrelevant – democracy becomes weak and impotent.

That’s the motivation for OWS.   It’s a public effort to stand up and say there has to be a counter balance to big money and its ability to shape the system.    Except for a few on the fringe it’s not an attempt to demonize or destroy big money; for all the faults of the system, globalization is both a good and an inevitable thing.   Rather, it’s a demand that democracy not be sacrificed, since if it is, the only voice that matters will be those with the resources to shape the market.   And while there are market romantics who believe that somehow markets magically gives us what is best, such faith does not stand up to historical scrutiny.

Don’t expect OWS or the core demand for more transparency and democracy to go away.   Now that we’ve seen the damage big finance can do to the economy and the need for regulation, as well as concern for human rights and a sense of justice, these efforts will persist and grow as part of the global civil society.   They may push governments to reach agreements allowing for more political control, they may create local responses to the standardizing influence of globalization.   We don’t yet know where this will lead, or how the emerging global order will function.   We’re living at the dawn of a new era, and OWS reflects a logical response to the weakening of traditional state-centric democracy.

One can’t understand OWS or the changing global order through the lens of twentieth Century perspectives.