Economic development · New York City · Personal Essays

How It All Went Down: Why We Have The 99 Percent

Labor union leaders speak to the crowd after the march on 10/5

I’ve been wandering around Zuccotti Park quite a bit these past few weeks, interviewing people, joining in marches, and of course, indulging in the abundant offerings of food available for free at the protests. And as I talked to more and more protesters, I got this funny feeling that most of them, though definitely not all, didn’t really have a clear idea of why Wall Street was such a Bad Guy.

That is to say, ideologically, they were pretty sure that capitalism was not a good thing and that it’s led to a highly unequal society. But I didn’t hear anyone talking about specific banks, or particular CEOs, that they wanted to see legally punished. I didn’t find people who were interested in discussing economic theory or, say, debating whether Keynesianism might be a potential solution to our current recession. (And yes, I know that the protest is not exclusively about demands, that it’s about creating a space for radical politics and sociality outside capitalism; I get that.)

Then I asked myself: do I know what I’m angry about? Do I fully understand how we got here?

I was twenty-four and in graduate school, studying sociocultural anthropology, when the financial world came toppling down like a Jenga game. Reading Marx was helpful to some extent, but it wasn’t concrete enough. I realized, as I continued to visit Zuccotti Park, that I needed to refresh my memory of the events that brought us to where we are today.

The book, Diary of a Very Bad Year: Confessions of a an Anonymous Hedge Fund Manager, practically fell into my lap this week. It’s a series of interviews between Keith Gessen, one of the founding editors of the literary magazine n+1, and a charismatic, gregarious manager of a hedge fund located in Manhattan, conducted between September 2007 and August 2009.

Besides being extremely informative, both in terms of facts and as a glimpse into the culture of the finance world, the book has a comical overtone, due to the fact that Gessen is a literary guy with very little knowledge of the banking world. As I read the many laughable moments where Gessen’s lack of understanding is simply wondrous, I realized that this is one of the problems that led us into the crisis in the first place: Americans, even the most educated ones (Gessen went to Harvard and runs a magazine, mind you), really don’t know what goes on in the financial world. And yet we trust it with our savings and we rely on it to keep our economy flush with liquidity.

And without understanding the mechanisms of finance, people were susceptible to the subprime mortgage loans that caused the housing bubble, led to the financial crisis, and ultimately steered us toward this economic recession.

As I read the interviews, I frantically took notes until I had all the details clear. They go something like this:

  • 2000: Dot-Com bubble bursts
  • 2001: terrorist attacks
  • mid-2003: Fed cuts interest rates to historic low of one percent; meanwhile economic boom in China leads that country to park their money in the U.S. in the form of American Treasury bills, bonds & stocks –> results are (1) cheap housing loans available; (2) liquidity creates “paper” on Wall Street
  • paper leads to trades (credit swaps) as housing market takes off with building frenzies in California and Florida
  • mid-2005: housing market is glutted and prices begin to drop; it becomes clear that subprime mortgage holders will default; hedge funds now own bundles of these mortgages in the form of Collateralized Debt Obligations (CDOs)
  • 2007: two Bear Stearns hedge funds begin to go down after they have invested heavily in mortgage-backed securities
  • early 2008: Merrill Lynch announces they will be “writing down” over $8 billion in subprime and other mortgage-related assets
  • BANKS BEGIN TO FAIL: JPMorgan Chase buys Bear Stearns
  • The Euro begins to weaken
  • September 2008: Fannie Mae and Freddie Mac go into conservatorship of the Fed
  • Lehman Brothers files for bankruptcy; BoA buys Merrill Lyncg; the Fed nationalizes AIG for $80 billion; the Reserve Primary Fund fails
  • THE STOCK MARKET BEGINS TO GO DOWN THE TUBES
  • Morgan Stanley and Goldman Sachs fold; JPMorgan Chase buys Washington Mutual; Iceland goes bankrupt; the Big Three automakers threaten bankruptcy
  • UNEMPLOYMENT RISES CONTINUALLY
  • December 2008: Bernie Madoff is busted for his Ponzi scheme
  • February 2009: Citi gets partly nationalized
  • Newspapers begin to fold due to lost advertising revenue
  • California budget crisis
  • FORECLOSURES GOING ON ALL THE WHILE
  • And meanwhile, the Troubled Asset Relief Program, TARP (commonly known as “the bailout”) was eventually passed by Congress, issuing almost $700 billion to the banks that were failing either directly because of the burst housing bubble or indirectly in its wake. And not long after, banks are reporting profits and CEOs at places like Goldman Sachs are taking home enormous bonuses.

So here we are. What do we do? Who do we blame? Are bankers bad people? Is capitalism a system driven by immorality and insatiable materialism?

Nothing is that black-and-white. But if you look carefully at the above scenario, and not at its details but at what it represents in a “big-picture” way, there is one conclusion that, for this writer, seems apparent.

Growth-based capitalism — the notion that a healthy economy is one in which consumerism drives the engine that creates an infrastructure that we need to live in — is simply not working. It has not created an equitable society where all enjoy the fruits of productivity. It has not proved itself sustainable. It has not made people happier or more appreciative of what life has to offer. It has made us work more and feel more pressure to represent our achievements with massive houses and big cars. It has made the middle-class insecure and brought uncounted numbers of students to enter a life of debt in the interest of having a potential career, only to find that such an American Dream really can only be had while sleeping. It has left our inner cities and small towns to rot. It. Has. Failed.

Is there a solution? Well, that depends on us. Can we live with less? Can we learn to use available resources — neighbors, vacant public spaces, social networks, community organizations —  to maintain or enhance our health? Can we accept that overconsumption never really was the route to happiness anyway?

This is where Occupy Wall Street really gets it right. For all their potential sites of criticism — they smell bad, they’re conspiracy theorists, they’re aimless, they’re using MacBooks and Twitter to instigate revolution — they have managed to create a space outside of the logic of capitalism. It’s a space where it’s up to each individual to decide what he or she wants to contribute and wants to take away, and everybody’s talents are taken seriously. Nobody is judged based on class or background or pedigree. The key is finding a way to socialize, to exist, without tying each action to the dollar that has proved so untrustworthy, so faulty, so isolating.

What’s happening on Occupy Wall Street isn’t socialism; it’s radical individualism at it’s best. And nothing is more truly American than that.

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6 thoughts on “How It All Went Down: Why We Have The 99 Percent

  1. Hi Rachel, excellent work! About 4 years ago, I wrote a research paper “Lost American Dreams” that exposed the capitalist scoundrels and I concluded we America was headed toward a continued spiral downward.

    Today, this is not just a national problem or our problem, it’s a international problem.

    You might be interested in reading more about the international perspective on the financial crisis at the following URL’s
    Pointing Fingers: Can Europe and the U.S. Work Together to Solve the Financial Crisis?
    http://knowledge.wharton.upenn.edu/article.cfm?articleid=2858

    Are you ready for the era of ‘big data’?
    https://www.mckinseyquarterly.com/Strategy/Innovation/Are_you_ready_for_the_era_of_big_data_2864

    Thanks for sharing your hard work, I for one, appreciate your work and stand amazed at how you get to the core of a problem and find solutions with the tenacity of a mama bear protecting her young. LOL

    Let me know what you think about the two articles.

    Michael

  2. Rachel,
    Radical individualism is an American VICE, not a virtue. You could as easily have characterized the spirit of Occupy Wall Street as communitarian. My impression is that the last adequately sophisticated defense of Liberalism (democracy & free markets) was in John Rawls’ A Theory of Justice and the intensely partisan split in American politics aligns with the Libertarian philosophies of Rawls’ student Robert Nozik (Anarchy, State and Utopia) vs the Communitarian philosophies of another of Rawls’ students, Michael Waltzer.
    One problem with Rawls’ work was that he used the economic principle of “Indifference curves” (a rising tide lifts all boats) to justify unlimited disparities of income & wealth. More appropriate at this stage in the economic history of the West would be the application of the economic concept of “Opportunity costs”. When Mukesh Ambani had his new family home built in Mumbai, one BILLION dollars was only its nominal cost. Its more relevant cost was the lost opportunity to replace the slums of Mumbai with decent housing. It has now become a simple fact and not an idealistic nugget of rhetoric, that WE ARE ALL IN THIS TOGETHER, and that we live in a GLOBAL community.

  3. Looking for commentary on Occupy Wall Street, I came across your above post.  While I found it informative and insightful, I was quite thrown by your characterizing what’s happening on Occupy Wall Street as “radical individualism”.
    I took issue with that in my above comment.  Re-reading this post and others by you here and in several other venues, it became quite clear that we have similar political sensibilities and even similar attitudes toward, for example, religion, and the Israel/Palestinian conflict.
    So why did it make you feel so good (I assume) to write that last paragraph while it made me feel so bad to read it?
    I imagine that even beyond the kind of radical tolerance of “individualism” inspired by Lady Gaga, you saw, in the protestors’ mutual acceptance of difference, a kind of solidarity. While I heard, in the phrase “radical individualism”, an echo of “rugged individualism”.  And that filled my mind with images of John Wayne and Charlton Heston, bringing an ethos of self-reliance from 19th century prairies (where physical isolation made of this sort of autonomy not only a virtue but a necessity), to a 21st century in dire economic and environmental straits, where it will take not the individualism expressed in the attitude, “You leave me alone and I’ll leave you alone, and then everything will be ok”, but rather a global sense of solidarity.
    Maybe part of our difference comes from the fact that my political sensibilities were developed in the sixties while yours were developed in the new millennium.  During the intermittent generations, it seems to me, Libertarianism and even Anarchism became increasingly acceptable.  Both ideologies place a premium on freedom.  But it strikes me that Libertarians are willing to sacrifice egalitarian principles in order to be free while Anarchist imagine that freedom is the path to an egalitarian society.  
    (My own philosophies of politics and economics (and culture), developed in the many years since 1985, when I began, in earnest, to try to figure out how to “save the world”, don’t look much like any of these “ism”s.)

    1. Hi Alan, Thanks for this and your previous comment. I see why you took offense with the way I ended on radical individualism, and I see how I implied, in the way I wrote that sentence, my support for its exhibition at the Occupation. First of all, you are right that my generation on the Left, for better or for worse, has become sympathetic to anarchism – which, at its heart, deeply values individual voices and differences. This valuation of the individual operates in the General Assemblies at OWS as well as in the way people can choose to participate as much or as little as they want to, and that’s acceptable. But I also want to be clear that, while I find it very interesting and remarkable, I am not quite convinced that this scenario of individualism is either good or bad. I think it’s a way for the New Left to stay true to a vision of solidarity while also recognizing that we have, with Neoliberalism, been raised in a culture of strong individualism. Maybe it’s a way of turning the capitalism idea of individualism, which focuses on consumerism and one’s image, into a radical vision, where individuals are not expected to give up their unique attributes in order to be part of a movement. (In which case, I do think it’s good.) Thanks so much for reading! Are you in New York?

      1. I’m in Norwalk, CT.
        I’ve been thinking of coming down to Wall Street one of these days.
        I want to piece together another comment on “individualism”.
        Maybe I can find a way of making the term less ambiguous by approaching it from a perspective of Pragmatist Philosophy.
        Also, I think the spontaneous and self-organizing nature of Occupy Wall Street and also the reluctance to make specific demands are positive things, but at some point, if the political & economic systems are to be sufficiently changed, it will take more than a few reforms. It will take the development of alternative systems which, in turn, it seems to me, will require some fairly coherent and well developed political and economic models, grounded in philosophies as fully developed as Liberalism and Socialism. I have developed my own body of ideas along these lines but would be curious to know if others have. Is there a current Anarchist literature, for example, that specifies replacements for current political and economic institutions?

  4. I’m not sure if this is the right forum for disquisitions (comments on blogs generally seem shorter and more informal), but I had already planned to do one on “individualism” and now I’m thinking of doing one on the potlatch, so here goes.
    Is “individualism” about the freedom to be yourself and do your own thing your own way, and to have this accepted and valued by others, or is it a withdrawal from communal into autonomous living and an abdication of responsibility to care for those who are unable to make it on their own? The American Pragmatist Philosopher Richard Rorty wrote that “Anything can be made to look good or bad depending on how it is described.” “Radical individualism”, when associated with words like “freedom” and “tolerance”, sounds like a good thing. But “Rugged individualism”, when associated with words like “authentic, strong, self-reliant” may also, still, sound like a good thing. So what is the issue?
    The original American Pragmatist Philosopher, Charles Sanders Peirce, once asked (in a speech at a high school reunion), “What sufficient nature is there for man, a being in whom the natural impulse is–first, to sensation, then reasoning, then imagination, then desire, then action–to stop at reasoning, as he has been doing for the last 250 years?” (From the mid-19th century, he was referring back to Decartes.) One approach to trying to clarify the gap between the meaning that you wrote into “individualism” and the meaning I read into it , would be to trace our linear movements through sensation, reasoning, imagination, desire and action. But It might be easier to reconstruct the link between what is explicitly stated and some implicitly imagined consequences. If the Wall Street protesters value “radical individualism”, then they will not be inclined to engage in struggles to get everyone to go along with one political “line”, or to envision reforms that limit individual freedoms. But if the Wall Street protesters value “rugged individualism”, and “self-reliance”, then they might be inclined to resist the kinds of solidarity and mutual support that are needed to formulate and engage in an agenda of social change that calls for the “haves” to help the “have nots” get a foothold rather than leaving them to pull themselves up by their own bootstraps.
    This analysis leaves me unsatisfied. I think that while you and I are both on the left and have similar political and social sensibilities, we have differing approaches to social change. I thought I might be able to clarify that difference and possibly “resolve” it through an analysis of “individualism”. But it didn’t work. I could leave things here (in the spirit of tolerating and valuing diversity). But I feel a need to pursue this. Would I have more luck analyzing the syllogistic lines of reasoning (and imagination, desire and action) that run from “anarchism” to our divergent “implicitly imagined consequences?”
    I’m not sure, but I think an analysis of the potlatch might help me to figure it out.
    But I fear that the frequency and lengths of my comments here might be inhibiting others (like Michael, whose comments on “gift exchange” encouraged me to take a closer look at the nature and promise of the potlatch. I hope he adds more comments, giving more detail.) I saw your email address on the “about” tab, and when I’ve found the time to put together some thoughts on potlatch and anarchy I’ll send them there.
    This exchange has helped me clarify and further develop my own ideas about the nature and goals of social change. I want to echo the gratitude expressed, in this blog, by John, Yvonne, Geared2research and Michael. Your dedication is inspiring and your work is impressive and helpful.

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