OWS and the Downfall of the Smartest Guys in the Room

The problem with Occupy Wall Street, an investment banker wrote to me, is that financial mechanisms are very complicated, and the protesters don’t understand them. On the day that the New York occupation of Zuccotti Park spread to Washington Square, another visitor from finance looked out over the milling malcontents: “Things definitely went wrong, but you have to understand how the system works. Looking at these signs doesn’t give me a lot of confidence.”

And it was certainly true that, by themselves, the signs bobbing through the crowd urged a panoply of measures: Abolish the Fed! Tax the rich! Bail out the people! Lloyd Blankfein’s head on a pike! Now! All this hectic sloganeering lent a sort of poignant sweetness to a placard that pointed out, reasonably enough, that “the economy could be more fair.” But the mood got more rancorous the closer one got to the center of the action at Zuccotti Park, with anarchists, union folks, frustrated reformers, and hard-line anti-capitalists making up the bulk of the crowd. This was a far cry from a sensible policy luncheon at the liberal Center for American Progress.

And for some liberal critics of the Occupy movement, that’s precisely the problem. The New Republic’s first article on the movement by Mark Schmitt cautioned glumly, “Our Tea Party has come. And so all the good work and focused protests are tossed aside as liberals gravitate to the thing that looks and feels most like the early days of the Tea Party.” The essay might have been called “Remember the Think Tanks!”

In a similar vein, consider the testimony of Peter Orszag, Obama’s former budget director, darling of both the Democratic establishment and a media consensus uncritically accepting of his youthful good looks as telltale evidence of a fresh and creative interior. Rather than scolding the unruly masses at Zuccotti Park, Orszag hailed the virtues of the revolving door between Washington and Wall Street as generative of those experts who would provide the real solutions to economic crisis. After Orszag had left the OMB for the far grander emoluments on offer at Citibank he announced a paradigm shift in the making. “I am getting exposed to lots of different issues and problems, and that will then better inform my thinking and public writing,” he informed New York magazine’s Gabriel Sherman. “Direct experience need not undermine one’s intellectual integrity; sometimes it can even bolster it.”

If anything, Orszag was understating how our professional-managerial caste views the organic union that binds pelf and knowledge. Across the ideological spectrum, responsible adults agree that one must work in finance to understand it well enough to regulate it. As a former Goldman Sachs partner told Sherman, “If you think that someone’s past work on Wall Street disqualifies them from playing a role in something as complex as government, you’ll essentially have people who have no understanding how financial markets operate . . . . That’s a dangerous and scary thing.” Lest anyone mistake where the tacit logic of such positions lead, Orszag himself graciously spelled it out in the New Republic, when he baldly announced that when it comes to the management of economic matters “certain aspects of representative government can end up posing serious problems. And so, we might be a healthier democracy if we were a slightly less democratic one.”

There are at least two obvious objections to raise here. First, of course, there’s the means-and-ends issue of abdicating the expansion of the democratic experiment to ensure that the finance sector can go about its business more smoothly, regulated by regulators who have spent their careers cultivating a deep understanding of its needs and wants. But more concretely, Orszag’s argument advocates the empowerment of a set of experts who have already compiled an atrociously bad track record on their own terms. Rendering our political economy less democratic for their sake would be akin to putting Herbert Hoover in charge of the Civil Works Administration because he knew so much about unemployment.

After all, the whole Occupy Wall Street movement wouldn’t exist in this time and place were it not for the handiwork of our financial betters (or bettors, if you prefer). The whole American economy is now reaping the whirlwind after fastidiously ensuring that policy makers, regulators and our representatives in Washington all lavished extra solicitude on the lords of Wall Street for being “smart.” The first thing that anyone in finance will tell you about their choice to enter the sector, is that it’s a way to be surrounded by the smartest people. Not the most famous or honorable, not even the richest; the smartest. Karen Ho, in her marvelous book Liquidated: An Ethnography of Wall Street (2009) depicts a recruitment process wherein finance representatives convince Ivy League students that finance is the only intellectually challenging, fast-paced atmosphere suited to their superior minds. Wall Street shares the same basic estimation of its stature that Princeton does: a place where nobody is stupid or slow. Later on in their careers, finance workers use this “smartness” to justify the inherent “rightness” of what Wall Street does. Take a merger that results in cashiering of a hundred or so low-level employees who now can’t feed their families, as well as the gradual selling off of a once functional business enterprise into sub-securitized assets designed principally to hoover up broker fees. This sounds bad all around, right? Wrong! It is, don’t forget, a creation of our smartest people, who are able to discern what the market demands.

The litany of demolition wrought by the “smartest” people could go on and on. It includes, of course, the mammoth volumes of recklessly securitized debt that triggered the 2008 meltdown in the first place. But it also encompasses more ingenious variations on the themes, such as the toxic credit default swaps peddled as actual insurance to hedge investors against the very same that Wall Street conjured out of common household mortgages—or the fathomlessly cynical Abacus Fund marketed by the savviest minds at Goldman Sachs, which actually permitted investors to bet against the sound performance of the very mortgage products that Goldman was marketing with a straight face to its own clients.

Our recent crash course in brutal market outcomes should underline a crucial point: The patina of smartness that has so long shielded Wall Street from critical inquiry amounts to little more than the evasions undertaken by people with money who do not care to hear others questioning how they make that money. Despite the Randian lore now coursing through the Tea Party and the GOP presidential field, genius and common sense do not prompt financiers to invent increasingly unpredictable financial instruments to make more money (or maybe wreck the global economy); ideology does. Canada, for example, forbids certain types of investment for the simple reason that it could put too many Canadian citizens at real risk. We’ve made other choices. So when a former Fed employee tells me that you need people in finance regulating finance because it’s so darn complicated, it looks more like the ideology of high finance infecting the seats of regulation.

And that, in a broad sense, is the symbolic point of Occupy Wall Street. Demonstrators are seeking to call to account the bankers (or “banksters,” as many of the OWS placards would have it) for something that seems unthinkable on the trading floor of the Dow: They are alleging that our financial class has done something that, in the final analysis, is not so smart. You don’t need an MBA, it turns out, to know you’re getting screwed.

This is also, not incidentally, why the most common criticism of the Wall Street action—that the protesters lack concrete, economically informed proposals—misses the point. Everyone in Zuccotti Park recognizes that money is buying policy. They likewise know that sitting deferentially in their congressman’s office isn’t going to get them heard. Indeed, the struggle to be heard is very much what informs the persistent Occupy effort, at Zuccotti Park, and now throughout much of the rest of the country. The famous “people’s mic” is about horizontal communication—anyone can call a “mic check” and say their piece, everyone repeats after everyone else, and decisions are made by consensus. That may all sound quixotic—shades of the painstaking “participatory democracy” phase of sixties antiwar protests—and it is; many a leftist movement has foundered on the rocks of radical anti-hierarchy and endless “direct democracy” meetings. But at least during the first phase of OWS, these imperfect, egalitarian structures have generated the sense of inclusion that plutocracy has destroyed, so that people can begin to feel involved and heard and powerful. In a recent tour through Zuccotti Park, I confess that my heart skipped when I realized there are now people standing on the fringe of the protest all day, holding out their homemade cardboard signs with slogans like “Tax the Rich” and “Bring Back Glass-Steagall” and “Grandmothers for OWS”. This is both the depth to which plutocracy has sunk us, and the height to which OWS has raised us: Holding a lonely sign out to traffic, hoping, maybe expecting now, at last, to be heard.

In some ways, it’s working. Occupy Wall Street forced the question of inequality onto the talking head agenda, and it’s also changed the mood of the long-dormant American left. I have had more searching conversations about economics and activism with other left-leaning people than at any time I can remember. There’s hope, and where there’s hope, there’s action. Writers are organizing OWS newspapers—at least two so far, the Occupy Wall Street Journal, and Occupy!—to chronicle and analyze both the protests and the state of economy. The constellation of left activist organizations, from those affiliated with labor to freestanding liberal entities such as, are all sending the same blast emails, with the subject lines a unified brand for all Left incitements to action: Occupy Wall Street. Unions are working with students again, students are working with neighbors to block foreclosures. Just as the Tea Party made it cool to cut taxes, this surge may make it politically desirable to crack down on banks, and enact some serious regulation of the finance sector. Who knows—more political leaders could once again start talking openly about taxing the rich. It could happen.

Many liberals are fond of dredging up a New Deal-era quote from Franklin Roosevelt to bemoan the disorderly state of today’s social movements. After meeting with some activists who were pushing to enact the public retirement plan now known as Social Security, FDR told them “You’ve convinced me . . . Now go out and make me do it.” Well, a movement has appeared. Are critics impelled to question its legitimacy because it doesn’t look like organized labor? Is it too ragtag? We are living through an era of massive de-unionization—brought about, indeed, by the same targets of the OWS protests. There is more precarious labor than ever, students are plunged as deeply into debt as parents with mortgages, huge numbers of Americans are unemployed, and others are shunted from job to job. To expect these people to be organized is to expect them to have already overcome the forces they are protesting. To paraphrase another political truism, this time from the right: You go to war with the indebted precariat you have; and this is the precariat that is speaking.

Protests do not write policy. And something as loosely formed as the OWS action shouldn’t be drafting white papers. What protests can do most effectively is to alter the common sense understanding of what is right and wrong. In this case, the OWS action makes other sufferers of debt and disenfranchisement feel that their problems are political—not a symptom of personal shortcomings, and not just the unfortunate side effect of a passing miscalculation by the Peter Orszags of the world. The real “goal” of OWS is to rally together everyone who is willing to say to Washington, “American democracy cannot bear this inequality.” This movement may prove to be adept at waging ideological war against the disastrous free-marketeers, occupying the airwaves as well as the streets—but it will indeed fall to others to write legislation and to organize economic priorities in debt-wracked communities. The OWS protests should operate in concert with such efforts (OWSers have assisted foreclosure resistance in Queens, for instance), and should put up new forms of protests that keep the public’s eyes on the culprits. Bank occupations have already begun. Major campaigns are now successfully exhorting citizens to move their savings and checking accounts from big banks to local credit unions. The black box of high finance has finally been pried open and exposed for the unregulated machine of destruction that it is, and the alternatives being proposed in the tumult of Occupy Wall Street sound pretty smart to me.

An abridged version of this essay appears in the Dec/Jan issue of Bookforum.

Sarah Leonard is an editor at Dissent magazine and the New Inquiry, and co-edits Occupy! An OWS-Inspired Gazette.