And Justice For All — 7 November 2011

In the midst of the inchoate discontent animating the Occupy Wall Street folks, one theme seems to emerge as well as any other: economic justice.  Exactly what is meant by that is not real clear.  It’s a bit hard to define, but it’s kind of like Potter Stewart’s definition of obscenity – “I know it when I see it.”  Certainly, when 1% of the population amasses 40% of the nation’s wealth, something appears to be wrong.

I don’t recall, however, much protesting about income distribution when times were flush and everybody felt like they had a chance at the brass ring.  Could it be that economic justice requires that all should be suffering together?  Who then will rally the economy back to strength?

When you dig a bit deeper, the “justice” piece gets a bit muddied.  Take Alex Rodriguez, for example.  The Yankees’ star third baseman makes $32,000,000 a year.  That means every time he suits up he makes four times the annual salary of your middle-class Joe.  And he is on vacation from October to February, a full quarter of the year.  How many of the “residents’ of Zuccotti Park have a problem with that?

Even in the stratosphere of baseball salaries, does it make any sense that A-Rod makes twice the money of Albert Pujols, World Series Champs St Louis’ star, who is widely recognized as the best all-round player in baseball today?  And while we’re talking about it, does it make any sense that the median salary among major league players (not the average, which can be distorted by the big-ticket guys) is around $1.5 million.  That means even the guys who spend their careers getting splinters in their keisters make ten times or more what Joe Sixpack takes home.

But if you ask the folks in Obamaville what they find unjust, they’ll be unlikely to point to professional sports, or Hollywood, or to many of the places where payscales are preposterous.  Their ire is reserved for the Wall Street types – they are the “1%” that seems to form the locus of their discontent.

And if you pressed them on the disconnect, they’ll probably tell you that Wall Street “took our money and paid themselves big bonuses with it.”  Indeed, the “bank bailouts” have become a flashpoint among populists of both left and right – the Tea Party as well as the OWS crowd.  But here’s a very important and very true fact: the taxpayer money that went to the big banks was paid back with interest as of this spring.  Instead of throwing hundreds of billions away, the TARP program actually will generate about $20 billion in profit for the federal government.  Not bad, for an investment that also saved the financial system from seizing up.

Okay, says the protester, maybe they didn’t pay themselves with our money, but regardless, those Wall Street types don’t really do anything useful for all that money.  According to one post on a OWS-related site, “Wall Street only gambles and bets and speculates.”  Well, it’s true they don’t manufacture any goods there.  But here’s what really happens: Suppose a corporate treasurer wants to issue $1 billion in bonds to finance a new factory, creating several thousand new jobs.  He doesn’t have a Rolodex of deep-pocketed bond buyers, but he knows someone who does: his investment banker.  Said banker says, “For a fee, I’ll buy the whole issue and see that it’s efficiently distributed into the market.”  This is called underwriting – the banker may or may not sell the bonds for a better price than he paid, so there is big risk there; but the fee is his cushion.  There are dozens if not hundreds of variations on this theme, but the basic transaction is the same.  Is this speculation?  Or is this helping the treasurer access the market in the pursuit of profitable growth, expansion, and jobs?

And guess who buys those bonds?  Pension plans, who need the interest payments to pay the retirees who depend on that money.  And insurance companies, who depend on the income to make up the large difference between premiums collected and claims paid out.

Wall Street is all about connecting people with money and people who need money.  The numbers are very large, so the fees and trading margins generate very big bucks for the participants.  The difference between a thriving, healthy, job-creating economy and one that struggles to keep up with population growth is a vigorous financial sector, aka Wall Street.  By contrast, what does a baseball player do for society that justifies $200k a day?

But they must be bad guys, those Wall Streeters.  Look at the mess we’re in.  The other night, Geraldo Rivera, who sympathizes with the Occupiers, was reduced to spluttering, “These guys sold all these sleazy mortgages and nobody has gone to jail.”  To which Bill O’Reilly accurately pointed out, “then their problem is with Eric Holder, not with Wall Street!”  If laws were broken – a big if – then the failure is with the Justice Department for failing to bring anyone to book for three years.

Still unhappy, the Obamaville protester may point out the the big guys on Wall Street have gamed the system so they always win.  And there they have a point that I would share enthusiastically.  It’s the corrupt symbiosis between big finance/big business and big government that is the greatest injustice in our economy.  But this is a position most strongly held by conservatives, as today’s WSJ lead editorial attests.  I would argue that the causation lies with government – if Washington didn’t stick its regulatory, tax, and procedural fingers into every corner of the economy, it wouldn’t be so important for American business to bend those rules to its favor.

Despite all this, the feeling in Zuccotti Park is one of grievance: the rich are responsible for bringing the economy down (the illogic of this notwithstanding), and economic justice requires that they be held accountable.  This is potentially very dangerous.  We have already seen violence at several of the protests around the country, and my fear is that they take on a darker cast as the weeks progress.

President Obama and his allies – both in Congress and out – have been subsidizing this grievance with their anti-business, anti-prosperity rhetoric.  They may regret voicing their sympathy with this crowd.

Besides, if it’s accountability you want, look at the fates of the CEO’s of the big banks that cratered – James Cayne of Bear Stearns, Richard Fuld of Lehman Brothers, Ken Lewis of Bank of America, Angelo Mozilo of Countrywide, the list goes on.  Their fortunes, mostly tied up in their firms, devastated; their jobs – summarily dispatched; their reputations, forever associated with the collapse of their firms under their watch.  Money, power, position – all the things that traditionally motivate high achievers, these guys have paid a heavy price.  Call it rough justice.

Economic justice does not mean equality, or even fairness.  Life isn’t fair.  If one gets a decent shot a doing well in return for industry, hard work, and integrity, that’s justice.  The “1%” doesn’t stand in the way of that.  If there is an impediment in today’s economy, it’s Obama’s antibusiness government.

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