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OPINIONS

Editorial: Occupy protests should avoid misguided attacks on capitalism

The Occupy movement that began as a protest against Wall Street has been showing some worrying signs of devolving into a protest against capitalism. We have previously praised the attention drawn by these protests to critical issues of economic inequality and unrestrained financial sector risk-taking, among other things, but we believe this change of course threatens to detract from the group’s original purpose. By associating certain policies with extreme viewpoints and poorly conceived economics, the Occupy protesters risk doing serious damage to the causes they support.

 

A few recent cases typify this trend. Last Friday, Occupy protesters in San Francisco took to blockading Macy’s and other retail outlets, discouraging shoppers from patronizing major corporations or from shopping at all. These protests, in addition to causing traffic jams and other disruptions, made no sense. They ignore the obvious reality that consumer spending is necessary for the labor market to recover and the jobs everyone wants so badly to return. They also perpetuate a misguided notion that small businesses are inherently better than large businesses. In fact, increasing the size of businesses often enhances efficiency through economies of scale, lowering the costs of production and prices for consumers. The trillions of dollars on corporate balance sheets right now reflect not evil greed, but rather a slow economy that discourages businesses from reinvesting their funds in new productive opportunities. Moreover, Thanksgiving shoppers are exercising a very basic liberty that a free society guarantees.

 

Another episode at Harvard University saw students walk out of an introductory economics course taught by Professor Greg Mankiw, a former adviser to President George W. Bush. These students complained of the supposed biases propagated by the course while offering no real evidence to show that the material covered anything other than standard basic approaches to economics. Along the way, the protesters demonstrated their ignorance by grumbling nonsensically that Professor Mankiw did not teach Keynesian theory as an “alternative” to Adam Smith, even though the two are compatible and are used to explain completely different things, when all they had to do was wait until the macroeconomic portion of the course for this material. Such a fundamental misunderstanding of the “mainstream economics” they railed against only reinforced that the protests were rooted in ideological preconceptions rather than actual analysis.

 

Similar strains of confused rhetoric have begun making occasional appearances at Stanford. A recent, widely distributed message encouraging students to “Occupy the Future” emphasized “the link between unrestrained economic growth and the current economic crisis.” Since the word “crisis” itself is being used to describe a large contraction in GDP and the subsequent weak recovery marked precisely by a lack of growth, it seems difficult to imagine why economic growth would be considered the problem. Similarly, the message goes on to lament flat wages for much of the population when rising wages would, of course, result from the very growth they criticize. Like the Harvard students who appeared to oppose markets just for the sake of doing so, these advocates appear to use decrying growth as a convenient catchphrase without considering the implications of their words.

 

In this discussion, it is worth emphasizing just what it means to have a market-based economy. Free markets do not have to mean low taxes or favorable treatment for the rich. Indeed, high-tax Scandinavian economies with lavish welfare states consistently score near the top of the Heritage Foundation’s Economic Freedom Index. The decision to use markets to maximize wealth creation exists separately from policy choices regarding the proper levels of taxation and income redistribution. Similarly, free markets do not mean allowing an unregulated frenzy of risk-taking on Wall Street. The hated bank bailouts that resulted from failed financial sector policy were outside of the normal capitalist framework where businesses are allowed to fail and succeed on their merits. Efforts to prevent the next bailout, as the Dodd-Frank regulatory reform bill or Republican presidential candidate Jon Huntsman’s plan to curb large banks endeavor to do, would actually strengthen capitalism and allow it to function properly. So too, would environmental protection, reforming politics to reduce the power of special interests, and other worthy goals of the protesters.

 

This brings us to our central point: we point out the erroneousness and futility of these episodes in an attempt to strengthen the focus of the protests. We admittedly pick a few examples out of a much broader context. By doing so, we intend not to paint the protesters all with the same brush or to use a small number of statements to undercut a wider effort, but rather to point out where the movement has gone astray in hopes of pushing toward what we view as the right track. For the most part, we share the goals of Tuesday’s “Occupy the Future” op-ed published by six professors on this page as well as, we imagine, many of the policies they would support. But we aim to stress that a country with slightly higher taxes on the wealthy, a carbon tax, robust financial regulation and other reasonable aims the protesters should adopt to pursue their goals would still be a place with a free-market, capitalist economy. Opponents of such types of progressive policies often try to paint their supporters as communists or radicals that seek to undermine American prosperity. The last thing that would help push public policy in this direction would be to prove them right.

About Editorial Board

Editorials represent the views of The Stanford Daily, an independent newspaper serving Stanford and the surrounding community. The Daily's Editorial Board is chaired by President and Editor in Chief George Chen, who is joined by Executive Editor Marshall Watkins, Managing Editor of News Catherine Zaw, Managing Editor of Sports Do-Hyoung Park and Managing Editor of Opinions Winston Shi. To contact the Editorial Board chair, submit an op-ed (limited to 700 words) or submit a letter to the editor (limited to 500 words) at eic@stanforddaily.com.
  • an occupier

    Another reason to support small businesses over large: how many large corporations are the culprits behind vicious human rights abuses, particularly overseas? Not that small businesses are angelic and never take advantage of employees, indigenous populations etc., however just do a basic google search of “sweatshops” and “large corporations” to see how American wealth is built on the suffering of others.

  • A Protester

    “The Occupy movement that began as a protest against Wall Street has been showing some worrying signs of devolving into a protest against capitalism.”

    Um, it was a movement started by anarchists. Of course it’s about protesting against capitalism. Perhaps you missed the biggest banner at the Oakland port shutdown — “Death To Capitalism”? The protests are not “devolving” into that — taking issue with the economic system is their essence.

    By the way, would anyone in OWS seriously take the advise of the Daily Editorial Board, a group that has been staunchly against the protests in any event?

    “Thanksgiving shoppers are exercising a very basic liberty that a free society guarantees.”

    Being able to shop for a Tickle Me Elmo is not the hallmark of a free society.

    “Similarly, the message goes on to lament flat wages for much of the population when rising wages would, of course, result from the very growth they criticize.”

    It seems the Editorial Board has not heard of something called “inequality.” When GDP goes up, the wages for the entire population do not necessarily go up. Some might remain stagnant or go down. In fact, that has been what has transpired over the past few decades.

    “This brings us to our central point: we point out the erroneousness and futility of these episodes in an attempt to strengthen the focus of the protests.”

    So futile that we… are going to devote all of our recent editorial space to strenuously insist that you do not continue to protest! And not print any rebuttal in our pages that is submitted to us!

    Corporate Media is to America as Stanford Daily is to Stanford. Time to drop the “free market” fantasy and wake up to the dilemmas of real people that find their expression in popular outrage against the capitalist system.

  • Carl

    The banks did the same thing to Muni bonds that they did to Mortgage bonds.

    They lent the money for them, sold the bonds off, bought “””insurance”” betting against the bonds raising the cost of borrowing and increasing the likelihood of default, then conspired to destroy the credit ratings of the Municpalities so they could cash in on the bond insurance.

    So when a city gets their rating downgraded, Wall Street cashes in.

    When a utility goes bankrupt Wall Street not only cashes in, but swoops in to take over the utility and jack up rates.

    When a city goes bankrupt, Wall Street not only cashes in on their “insurance policy”, but now you’ve got Goldman Sachs running your parking enforcement and fee collections.

    When a state goes bankrupt, you get Wall Street running your toll booths for highways and bridges that won’t be built for at least 10 years.

    All the while Wall Street lobbies on behalf of the rich man to keep their taxes infinitesimal so they can tighten the chains and heighten the load on the working and underclass.

  • Carl

    Excerpted from NYT (http://www.nytimes.com/2011/12/01/opinion/kristof-a-banker-speaks-with-regret.html):

    “All this came into sharper focus this week as Bloomberg Markets magazine published a terrific exposé based on lending records it pried out of the Federal Reserve in a lawsuit. It turns out that the Fed provided an astonishing sum to keep banks afloat — $7.8 trillion, equivalent to more than $25,000 per American.

    The article estimated that banks earned up to $13 billion in profits by relending that money to businesses and consumers at higher rates.”

  • Joshua Loftus

    Somebody on the editorial board took intro econ and thought that it taught them the “correct” way of thinking about broad issues of human affairs. This is akin to someone taking intro physics (learning about force diagrams with 2 objects and 2 forces), and then believing that they both (a) understand complex systems and (b) have the “correct” answer for how such a system should operate in the most ethical or desirable way.

    There are three enormous problems with this. The first and least important is that an introductory level understanding of a deep and difficult subject is not a good qualification for offering advice to others about complex issues in that subject.

    The second is that, unlike physics, even the most advanced economic theory is not even close to having a handle on how real world economies operate. As a predictive science, economics has pretty low credibility (especially when it really matters). This effect is even stronger for the orthodox economic theory that supports neoliberal capitalism (and is taught in almost all intro econ classes in the US). It is fundamentally based upon ideas from thermodynamics, when the actual economy is much more like a complex ecological system than an idealized gas. So it’s not very surprising when, e.g. over 90% of NABE economists polled in 2009 thought the recession would end in… 2009.

    The second problem is that even an accurate understanding of the way a system works would not automatically lead to “correct” decisions about the “best” or most ethical ways for that system to operate. Those are not scientific questions- they are philosophical ones, and (spoiler alert…) they have no definite answers! People with different value systems will come to different conclusions. You perceive “misguided attacks” because of your values and experiences. To others, these are absolutely necessary disruptions of the status quo with the goal of preventing imminent catastrophe.

    The third problem is compounded by the second, because making ethical decisions on bad predictions and faulty understanding is even harder than making ethical decisions based on good predictions and clear understanding.

    Finally, as critical thinkers in an academic institution, *of course* we should criticize and scrutinize capitalism! Just as we should always call into question every system, idea, and phenomenon. To suggest otherwise amounts to closed-mindedness and is antithetical to scholarship.

  • Ricardo Pinho

    we don’t have a free market.

    I basically agree with Josh. When i was reading this the first thing came to mind was not-written assumptions. This happens in any science, including physics and biology. But for what I’ve been reading, it’s even stronger in economic thinking. As a scientist, making my assumptions explicit and clear in any writing is a top priority. No discussion is sound without that process. And i must say this problem is not exclusive of the Daily. I frequently encounter it in places like the NYTimes. There are, clearly, schools of thought. And it seems any argument is good as long as it leads to the desired conclusion.

    I’m very passionate to discuss the financial crisis and current state of economic affairs. Feel free to try to find me in person. That can happen in the Occupy Meyer space, or any other Occupy event. After all, at least to me, that’s one of the main goals/strengths of the Occupy movement. It creates time and space for people of different background and views to briefly come together and have meaningful discussions.

  • Nathan Shields

    For someone to find the ‘communists’ more objectionable and alien than the criminals who run the Fed and other predatory corporations is frightening. A large group of people in the middle of the political spectrum find a lot of value in debating the finer points of economic theory, and the advantages a competitive market offers. What this editorial flat out ignores, by pretending a ‘free-market’ can exist in some sort of vacuum, is the human condition. To ignore the suffering and anger that is thinly veiled in American society today is a disservice to those in need of support, and a blatant effort to preserve what ideas academia has deemed safe enough. Which, while slightly admirable, does nothing to bring new solutions to the table, or invigorate the ongoing discussion about how we can use love, creativity and technology to rapidly alter our world for the needs of communities, rather than subsidizing corporations, watching them outsource jobs and technologies, and glorifying their almighty, ‘value-added commodity chains.’

    Our future can be in our hands, or the ‘markets.’ (which the USFG will gladly privatize profit from). Arguably it will be influenced by both. But which would you rather be a greater force for our future?

  • http://www.bostonreview.net/BR36.6/occupy_movement_forum.php Ralfa

    I’ll summarize my criticism by saying, we’ve heard the main points of this article over and over again, from the government, from interest-conflicted econ profs, etc etc. the problem is… the theories have not worked out. Case in point:

    “Similarly, the message goes on to lament flat wages for much of the population when rising wages would, of course, result from the very growth they criticize.”

    We’ve seen growth, and rising wages only for the top 1% of earners… surely you’ve seen the data? This is only the most vocalized criticism made by OWS.

    I tend to agree that we’re not going to eliminate capitalism. The problem is economists seem to think that the free market is this magic machine that will always work toward the benefit of society. We are now seeing that humans in charge of corporations are more interested in massive short-term gains for themselves than creating jobs, raising wages, etc. See this NYT piece on companies using cash to inflate their stock rather than fuel growth: http://nyti.ms/uFVXT0 . We can’t close our eyes and pray rosaries of Adam Smith waiting for economic growth to raise people up. The truth is, we’ve been listening to people like you for years, the result? stagnant wages, unemployment, and a bag in each hand from the criminal banking crisis.