Sunday, 4 December 2011

The meek and the outraged

Once upon a time there was a prosperity...

In one country in which several years ago one could rise from rags to riches, everyone, including drunkards having no jobs, no assets and no income, could get a mortgage without having to prove their creditworthiness. They could buy dreamt-up houses they had never afforded to buy and everyone was happy.

In another, once poor country, government, trade unions and employers entered into a social partnership, which gave rise to over a decade of fast, yet sustainable growth. When natural growth ran out of steam, economy was boosted by construction boom that did not last long, as everything what is credit-fuelled and based on low-efficiency sectors. They government would run budget surpluses thanks to rising property taxes and people could afford to buy houses despite prohobitive prices, thanks to easy credit conditions. Everyone was happy...

Once a country, which was facing bankruptcy in 1998, got up off its knees and rose to prosperity thanks to huge revenues from export of gas and oil... Only tycoon were happy... The rest were only proud of their new empire.

Another country, which joined the European Communities in 198,1 could rig statistics, wheedle out subsidies from the EU and live off the backs of German taxpayers. But actually eveyone was happy.

Once the biggest CEE economy was run by reckless politicians who at the same time cut taxes, raised government spending and despite this had a nearly balanced budget. But people weren't happy and in early election kicked out those magicians.

The times of living beyond one's means are gone. Good times will roll in sometime, but I suppose not before long. Come to terms with it, there's no such option as 'ship out' now.

Then the house of cards fell apart and Mr Crisis knocked on our doors. Believers of American Dream were evicted from their over-mortgaged houses and complex securities engineered by brainy quants from investment banks turned out to be a load of junk scattered all over the financial system. The government rushed to help out the troubled, but those bailed out were financial institutions. The case was that someone had been arranging the world in such way that banks had grown too big to fail and their collapse could trigger a knock-on effect, i.e. their bankruptcies would wipe out the 'real economy'. Thus the bankers were helped out and got away with the punishment and things went on.

At that time voices of people outraged at policies focused on big players, rather than ordinary people, were heard. But nothing, virtually nothing has changed.

As part of tacking the crisis, zillions of money wer pumped into financial system and some money was even injected into real economy. Economies somehow revived, but did not thrive as good as the financial system did. Drip of newly printed dollars flowed into banks' balance sheets and the banks did not, as the decision-makers had intended, turn them into loans for firms and individuals, but put them on financial markets. Between late winter of 2009 and mid-spring of 2011 stock prices doubled and commodity price tripled, not really reflecting economic recovery (often, like oil prices, threatening to hamper it).

In the meantime countries using fiscal stimuluses to prop up their economic, nations living beyond their means and those whose growth prior to the crisis had been totally unsustainable (these were the countries that had experienced property booms) fell into trouble. In 2011 banks are solvent (unless they have bought up too much "risk-free" Greek bonds), in 2011 the governments are about to go bust.

Poland got off the first wave of the crisis lightly. In early 2009 it was the only economy in Europe that did not contract. Neither the current (PO-led), nor previous (PiS-led) government could take credit for it. Accolades go to resilient Poles and their remarkable consumer confidence (in fact verging on profligacy), sound monetary policy pursued by the Polish central bank, wise financial supervision that curbed lending and resilience of Polish entrepreneurs. But lower budget proceeds and higher expenditures and inevitable in economic slowdown and so Poland as well has to tighten the belt...

But not only us. People feel it and someone roused up and discerned that ordinary people are paying for the crisis, while bankers, still untouched, are doing well. In 2008 Barack Obama won by promising the 'change'. The matter (or rather lobbyist) proved too resistant, and the change has not been brought about, leaving more and more people livid. They gathered in one New York district and dubbed themselves Wall Street Occupiers. The movement gained popularity in many countries, but I didn't think it would fell on a fertile fround in Poland. Yet for a moment it did. On 15 October hundreds of protesters marched through Warsaw's streets, but who were they? As right-wing journalists claimed, those were children of wealthy parents who thought it would be fun / trendy to protest again cruel capitalism and spent afternoon in such way. They even received support from a prominent leftist politician who came to the demonstration in his brand-new Jaguar...

In all countries they protested against the palpable distortions of capitalism, yet did not come up with any counter-ideas. Some of their postulates are even self-contradictory - how can you raise public spending and cut public debt at the same time? I don't feel affinity with those people. We are simply worlds apart, and not because we have different descents, but because our mindsets are worlds apart. I have a job that gives me a lot of satisfaction and offers me financial independence (limited, as without ruining my personal finances I cannot afford to move out from my parents' house) and... I'm afraid of losing the job, for reasons other than my performance. They are often jobless and with bleak future prospects. But where we are now is a result of how we got there and this in turn is a testimony of effort or lack of it over the past years.

And no, you are no longer entitled!

While others are outraged, I stay disturbingly meek. VAT increased by one percentrage point - other fulminate against the government, I say it is essential to bring extra revenues to the state budget. Raising the retirement age - my colleagues say they won't make it until they hit 67, I declare to toil away even longer without murmur to make budget'e ends meet. Scrapping tax deductible expenses - others are livid as they will not be allowed to claw back some money from the state, I happily commend the idea which simplifies tax system. I was even asked by my colleaugue, with a big tinge of malice, how I would be fixed for shortening paid holidays by some five days each year, cutting sick leave benefit, raising social sickness benefit contributions and restoring tax rates and brackets effective until 2008 (19% / 30% / 40%). Without much hesitation I said I would approve this, if only the money collected thus was spent wisely, i.e. on investments in infrastructure, education or, above all, contributed to reduction of public debt.

All in all, I have all makings of a ruthless technocrat who could turn an almost bankrupt country around and leave the office after four years, hated by 95% of the society. Or am I simply a naive sucker?

PS. This post written without effort. Was it read without pleasure?


DC said...

You're a naive sucker. Well not really - you just haven't been exposed to some of the extreme circumstances that many who are hurting now have been, and you don't seem to understand them.

Do you remember martial law in Poland? Perhaps the US should do the same and in the process do away with the protestors who are otherwise exercising their constitutional rights. Would that make you feel better? So you think you don't agree with them - so what? Why does their mere existence bother you so much? Here and in your post "The Guilt" all I can guess is that your are sore about all bankers being painted with the same brush. If that's your biggest problem, be happy.

I think we both agree that we are not sympathetic to those wanting something for nothing, so lets discard any of those arguments and talk about what matters. And you really should get rid of the condescension toward who these people are as individuals. Anyone in the US with a job is holding on for dear life so they are not camped out. But many are as angry as the protestors. So of course it's people who are less responsible, in your estimation, who are manning the protest sites.

It is a protest and different protestors have different ideas of course. Why are you demanding a coherent plan from protestors? That would be more like a political party.

So what value are the protestors? I hope we agree that Wall Street regulation needs to be overhauled to get rid of "too big to fail." Republicans, so far, have managed to portray this as a move toward socialism and so there is inadequate public support. For now. Nonsense. It's mostly a re-introduction of some key common-sense laws that were first put into place after the Great Depression back in the 1930s. See:–Steagall_Act

During our economic hubris of the 1980s (in the US), those who would harm our country for their own personal profit convinced Congress that it wasn't needed anymore. Much of the pain now is a hang-over from this crucial mistake. The problem is that we are also still in a hang-over from the Reagan years where many American think "All government is bad." So right now there is not enough popular support (let alone understanding) to make these crucial corrections. And of course there are many other changes needed, but I'll just stick to this one example because this comment is already going to be far too long.

Back to the protestors. If they lead to anything good, it will be to signal politicians that it is once again OK to publicly express outrage about the thefts that have occurred on Wall Street. And to act. Our lame-ass politicians, of both parties are currently so wobbly that they can be easily cowed by someone labeling them a socialist, or accusing them of advocating class warfare. If protest can help change this, it is WELL worth it.

The sooner we get this done, the better for all (poor and wealthy, US citizens and elsewhere). The longer it is thwarted, the more we are headed for even worse disaster. See the thing is, since Reagan, the underpinnings of the US middle class have slowly been eroded. And until now, most of us went along willingly. Now there are millions who are one step away from personal calamity. Yes, some of this is due to poor personal decisions, but to close your eyes to paint all Americans this way is just inaccurate and obscures the structural changes that are needed. Avoid the broad brush and look more closely.

DC said...

PART2: If it gets so bad that there is violence, legislation will be forced through that could be rushed and ill-conceived. It's better for everyone (including bankers) to get this done with a cool head.

You've worked hard and followed a clear career path. Laudable. But don't forget you've also had a bit of luck. What if you had followed the same path and a few months into your new career, you discovered that your bank was deliberately producing toxic assets?

You're also young and presumably healthy. In the US, we have the added bonus of losing your health insurance when you lose your job. Losing one's house, not from financial irresponsibility, but from illness is not uncommon here. Again with the brush.

You referenced the wikipedia article about the OWS protest. It's very long. Did you notice this part?

"The age group that most strongly supports OWS are 50 to 64, rather than under 35."

Not hard to see why, is it? These are people who are too old to change employers to avoid producing toxic assets. There is a lot more to why this age group is feeling so unsettled, but you get the idea. Some people who tried to blow the whistle on forged documentation for mortgages were fired for reporting it. They eventually won their case in court, but the Bush regime ignored this warning.

It is not socialist coddling to make sure that corporations play fair against unwitting consumers and employees. It is in our national interest to try and ensure that individual people are not pitted against teams of sophisticated thieves, at least not without reasonable and affordable recourse. I'm deeply pessimistic about the US middle class's chance right now. The canary in the coal mine might be the campaign of Elizabeth Warren for a Senate seat from Massachusetts. She represents everything anti-reformers hate. They will put tremendous effort into defeating her in 2102. It's going to be interesting:

I have no idea why you think the changes you suggest for Poland would make you ruthless. If only the situation in the US were that simple…. Too bad your scope of vision seems to be limited to what individuals can concede. Or is there more to your platform?

Anyway, enough for now. I'm glad your career is going well. You've earned it (although since the The Guilt, there apparently is now the possibility of a lay-off). As a writer, you're at your best when you avoid looking down on people who have not made the same choices or have the same God-given intelligence that you enjoy. Not everyone in trouble is a free-loader. This urge will diminish with age and a few hard knocks of your own. Protestors are individuals. I guarantee that some of them have played by the capitalist rules, worked hard, and still somehow find them selves with nothing better to do than protest. You're not as different from that subset of the protestors as you think.

student SGH said...

DC, apologies for the late answer. My modem packed up and got a substitute device yesterday.

I gather you live in the United States, but are of the Polish descent. I can't remember martial law, I was born in late 80s, I can't even remember communism, but to recap in a few words: Poland and the US are worlds apart and I'm immensely grateful I live in Poland. This country still has untapped potential to develop and if it is run wisely its people act reasonably it has a birght future ahead. For the reasons you quoted America is inexorably going downhill, but still stands a chance to turn around.

Best wishes!