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November 2011 Archive for Economic Sense

RSS By: Matt Bogard, AgWeb.com

Matt's primary interest is in the biotech industry and ag policy.

Why Occupy Wall Street Will Keep Up (the Wrong?) Fight

Nov 26, 2011


By Matt Bogard
Previously I had said "Time will tell if those occupying Wall Street calling for ending the Fed and crony capitalism are the true voice of the movement, or if they will ultimately find themselves tools for more interventionism through a progressive policy agenda." With a recent article in the Washington Post, I think I’m starting to piece together an answer, at least from one protester.
Take, for instance, the following quote:

"Only a soft regime change can end the pervasive corruption at the heart of our political system, in which corporate money wins elections, drafts laws and trumps citizen desires."
How is it that corporate money wins elections, drafts laws, and trumps citizen desires? I've discussed previously the issue of disproportionate political power and abuse as it relates to extreme wealth and corporate influence. In short, it's the nature of unrestrained democracy, not unrestrained capitalism. By granting government powers beyond those specifically enumerated in the Constitution, progressive policies have represented bounty to be won by whoever can exert the most political muscle, as put by Public Choice economist Dennis Mueller. If we are going to be concerned with the outlier that is the 1% of wealthiest Americans, our concern should be with those that achieved their wealth via progressive coercive political means as opposed to those that achieved it through socially cooperative means enriching the lives of multitudes. The ignorant, shortsighted, prejudiced view of the 1% as being a homogenous group of thieves and manipulators is not enlightening.
The writer goes on:
"Only the plural voices of everyday Americans, the 99 percent, have the capacity to wake up the 1 percent to their greedy, self-serving ways, and to dismantle the global casino in which $1.3 trillion worth of derivatives, credit default swaps and other financial instruments slosh around every day without a hint of concern or regard for the millions of lives that such speculation can destroy.…And we will see clearly articulated demands emerging, among them…a move toward a 'true cost' market regime in which the price of every product reflects the ecological cost of its production, distribution and use; and with a bit of luck, perhaps even the birth of a new, left-right hybrid political party that moves America beyond the Coke vs. Pepsi choices of the past."
While financial instruments may be difficult to understand, they are not bets made at the track or in a casino, they are tools for managing risk and directing capital to fill the most urgent needs of society based on the knowledge and preferences of multitudes of individuals, all giving their input via the price system. While not perfect, as the great economist Frederick Hayek put it, I would prefer imperfect prices over the pretense of knowledge. It was through the pretense of knowledge and the Federal Reserve’s actions in the social planning of money, interest and housing ("without a hint of concern or regard for the millions of lives that such speculation can destroy") that we got the financial crisis and the current recession.
The idea of a "'true cost' market regime" is an even more futile exercise in the pretense of knowledge. As I mentioned in a previous article, when we as a society fail to have the knowledge to determine the correct price and quantity of ice cream for our community or nation, how can we determine the correct price or quantity of carbon (or the ecological cost of any good, for that matter)? Aren’t those sorts of calculations what would be necessary to implement a "‘true cost’ market regime"? The command and control structure necessary to implement this ("without a hint of concern or regard for the millions of lives that such speculation can destroy") would be demeaning to the millions in the 99% and empowering to the wealthiest and politically connected in the 1%. We’ve seen the effects of economics of scale in compliance in agriculture before. We saw how empowering the Waxman-Markey attempt to ecologically price carbon was to the world's largest corporations.
I think through all of their rhetoric and their own model of direct democracy, many of the OWS crowd may confuse the virtues of the market with democracy. Unfortunately, people think that there is something mystical and blessed about the end result of tallying votes. They fail to see how arbitrary this can be, and how poorly voting can work as a means to express and represent individual preferences about very specific issues that deal with the minute details of everyday life and work. They confuse voting with the role and social function of the price system. What we need isn’t more democracy, or fascist price-fixing regimes. What we actually need is more of the Coke vs. Pepsi choices of the past. I know the author was probably analogizing the little difference between political parties, but Coke vs. Pepsi is a great example of how empowering the price system is compared to the democratic decision making by two barely indistinguishable parties. Anyone recall how empowering markets were to the 99% with regard to New Coke? How about more recently Netflix’s change in pricing structure? Agvocates are well aware of how empowering markets and social media were when it came to the corporate policies of Yellowtail and Pilot Travel Centers. Could you imagine having to implement these types of changes and  getting these responses through our political system or any number of political parties? Of course not. Voting  is too blunt an instrument to do this.When we try to democratize these types of choices, votes are not empowering tools of democracy for the masses, they are empowering instruments for the politically connected 1%.  The answer isn't more voting or additional choices in political parties. The answer is, as our founders put it, a republic if we can keep it, restrained from interfering with the minute details and choices of our everyday lives.
So I conclude by asking, is the OWS movement really about empowering the masses, or will they ultimately find themselves tools for more interventionism through a progressive policy agenda? If the movement is more concerned about wealth redistribution and things like "‘true cost’ market regimes," they are fighting the wrong fight.


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