The Wall Street Protests

Oct 17, 2011 Editorial

The ‘Wall Street Protests’ have puzzled many Guyanese who, by and large, have their ‘papers’ clutched in their hand waiting for the visa to the US to arrive. What is the source of the anger that is driving the protests in ‘Wall Street’, which of course is simply a trope for financial America?
In a word, the source is ‘inequality’. It is recognition that the ‘American dream’ has become just that – a dream now beyond the reach of the vast majority of Americans.
And certainly out of the reach of newly-arrived immigrants because of the astounding inequality that has crept into the distribution of the American pie in the last few decades.
Let’s start with the obvious symptom: unemployment. Most Americans, not unsurprisingly obtain their income from their jobs. But three years after the financial crisis, the unemployment rate is still at the highest level since the Great Depression – over 9 percent from the 4.5 percent of 2007.
This means that 14 million Americans are ‘looking’ for work. If people working part-time who want to work full-time, plus some people who haven’t looked for a job in a while are included, unemployment jumps to 17 percent. If we include those that have given up looking for jobs or are in jail, we reach 20 percent and for minorities and youths, 30 percent. Main Street, then, is in serious trouble.
But what do we find when we cross over to Wall Street, in the midst of all this tribulation of the ordinary American? Corporate profits just hit another all-time high – $1.5 trillion, up from the $600 billion of the depression of 2008 but even higher than the $1.35 trillion of the boom year of 2007. Corporate profits as a percent of the economy are near a record all-time high -vastly higher than they’ve been for most of the previous half-century.
Then there is the matter of the ‘fat cat’ bosses. Chief Executive Officer (CEO) pay is now 350 times the average worker’s, up from 50 times during 1960-1985. More to the point, CEO pay has skyrocketed 300 percent since 1990 while corporate profits have doubled.
In the meantime, the pay of the average ‘production worker’– those that can find a job – has increased by a measly four percent, as the minimum wage, also adjusted for inflation, has dropped. Using this metric average, hourly earnings haven’t increased in 50 years. In short, while CEOs and shareholders have been cashing in, wages as a percent of the economy have dropped to an all-time low: 1970- 53 percent; 2011 – 44percent.
What this has translated into is the top 1 percent of Americans own 42 percent of the financial wealth in the country. The top 5 percent, meanwhile, own nearly 70 percent and 60 percent of the net worth.
Since wealth is the greatest predictor of upward mobility it is not surprising that the ordinary Americans now occupying Wall Street have woken up to the fact that studies have confirmed: the best most Americans can hope for is to keep their heads above water.
The main culprits have been the bankers of Wall Street. In 2009, President Barack Obama warned the bankers, “I’m the only one who’s standing between you and the pitchforks.” The bankers got massive bailouts; they were supposed to extend credit, extend mortgages. They did pretty much nothing, and they went back to the same actions as before: making money through trading and investing in T-Bills.
The latter manoeuvre has generated the most profits and the greatest ire. While manufacturing concerns, for instance, are starved for credit, the banks on one hand can borrow money from the Fed at almost zero percent rates and then simply snap up T-bills that the government pays them interest to sit on them.
On the other hand the Banks offer depositors almost zero interest and pocket the billions in interest collected from the government.
This has generated near-record financial sector profits of $1.3 trillion and average Wall Street salary of 6 times the average private sector salary. Any wonder why the protests?

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