Another brick in the Wall
Protests against bail-outs for grubby hands are a symptom of a global economic malaise.india Updated: Oct 18, 2011 22:21 IST
A handful of sit-in demonstrators have managed to take their protest against Wall Street avarice to four continents. Occupy Wall Street, which started a month ago with a few tents pitched at a park in Lower Manhattan, is now stalking the financial districts of many US cities, and banking capitals across the globe. It can’t be ignored any more. Politicians are naturally wary: the excessive greed that led to the financial crisis of 2008 and government actions to bail out banks that were ‘too big to fail’ have devastated Western economies. The anger over wealth, and jobs lost, is waiting for a trigger. This protest could be one. Occupy Wall Street claims to represent the 99%, a reference to the 1% of Americans who control 40% of its wealth. A potent tagline when taxpayer money is being spent liberally to restore the global financial system.
The protest draws from a view held by some economists that if something is too big to fail, it is too big to exist. This has led to speculation that billionaire George Soros, who has argued against governments taking over the toxic assets of banks, may be funding Occupy Wall Street. Mr Soros has denied any such involvement despite his persistent advocacy of liberal causes. There is enough rage out there against high unemployment rates and devalued currencies to discredit the Trojan horse theory. But western governments will realise from long experience that Arab Springs do not emerge from sand unaided. As of now, there is no political capital to be made out of Occupy Wall Street simply because there is no way to control it. The protest will have to acquire more momentum before it becomes clear whether it will have a lasting political impact or get blown away as a temporary vent for middle class frustration.
Political brinkmanship in Washington and European capitals over how to ride out the recession would suggest that such protests will gain traction. The contentious issue is how much policy easing can be undertaken before serious damage occurs to government finances. Europe is more precariously placed because it cannot undertake coordinated fiscal expansion. Pump priming can’t be halted midway, in fact more money will have to be shoveled into the fragile global economy before it recovers.
The tough decisions on raising productivity and punishing deviant risk taking behaviour have been set aside for later as governments attempt to spend their way out of the hole. This is threatening to push global trade and investment into a deeper crisis as the costs of huge borrowing programmes pile up and faith evaporates from currencies the world is accustomed to doing business in.