Why 'Occupy Wall Street' spread
Updated: 2011-11-29 13:50
By John Ross (chinadaily.com.cn)
Logically, the two richest self-made Americans, former Microsoft head Bill Gates and investor Warren Buffett, have made it clear that they are against the idea of large scale inherited wealth. They are multi-billionaires but only a few million dollars, less than one percent of their wealth, will be transferred to their children. This is not only an individual moral position but a rational economic one as it ensures for society the more efficient use of wealth - only if their children show the individual talent to build fortunes will great wealth be in their hands.
The 2008 financial crash also revealed the existence of a strange 'socialism for Wall Street, capitalism for ordinary Americans'. The huge incomes, billions of dollars, of Wall Street’s bankers were supposedly justified by their taking risks with their capital and making the economy more efficient. The reality turned out to be that they were not 'risking' capital as it was guaranteed by the state. In the financial crisis of 2008, tens of millions of ordinary people lost jobs; however, after the collapse of Lehman Brothers all major US banks were bailed out by the government. Furthermore, these US banks, far from making the economy more efficient, had misallocated capital to the point where it had bankrupted the entire US financial system.
There is public admiration for self-made people who are seen as having contributed great products to society - as was seen in public reaction to the death of Steve Jobs. But there was no sympathy for bankers who were being paid tens of billions of dollars for taking less economic risk than ordinary Americans, and whose reckless speculation made the economy less efficient. If such people are not leading society forward they are entitled to no more income than anyone else.
A recent Wall Street Journal opinion showed 74 percent of Americans believed the county was going in the wrong direction. In Europe similar disquiet exists over the debt crisis.
If there is not a wide resonance for times when society is going forward and demanding equality, then when society is going in the wrong direction there is no rationale for inequality – why should people receive high rewards for leading society in a negative direction. This is the dynamic in the US and Europe. In China, polls show people believe society is generally going forward; therefore, while there naturally are protests over individual issues and policy mistakes, there is no echo for the general US and European 'Occupy' movement – simply interest in it.
This economic dynamic also determines the future of the US and European ‘Occupy’ movements. If the economy starts going forward again people will conclude there were merely temporary problems which were defeated and those problems leading society to greater prosperity are entitled to greater rewards. If the economy does not improve social protests and demands for equality will increase.
John Ross is Visiting Professor at Antai College of Economics and Management, Shanghai Jiao Tong University. From 2000 to 2008, he was then London Mayor Ken Livingstone's Policy Director of Economic and Business Policy. The views expressed here do not necessarily reflect those of the China Daily website.