The 99% and 1%: Not so different, after all
Here’s your “whoa” moment of the day: In a Friday research note, Jan Hatzius and Sven Jari Stehn begged the Federal Reserve to put its foot on the gas already and simply declare that they will do whatever is necessary to get growth back on track (read the whole document here). Who are Jan Hatzius and Sven Jari Stehn, you ask? They’re two of Goldman Sachs’s chief economists. They’re the guys who send economic analyses out to the firm’s paying clients. And they’ve just endorsed a policy that should thrill the 99 percent.
This helps to make the point, I think, that though the Occupy Wall Street folks are right that Wall Street has done a lot of damage to the economy and the top 1 percent have developed a curious ability to prosper while most Americans fall behind, in the long run, almost everyone’s interests are aligned here. Banks and corporations might be able to prosper in a bad economy for a couple of years, but they can’t do it for very long. Indeed, it seems like time might already be running out for Wall Street.
As Annie Lowrey* points out in Slate, the good times look to be over for Wall Street. Profits in the first half of 2011 are projected to be a third of what they were in the first half of 2010. Goldman Sachs is shedding 1,000 workers, and Bank of America is letting go of 30,000. Overall, financial employment in New York is down 20 percent since 2008. The traders who are sticking around aren’t seeing bonuses. The KBW Bank Index, which tracks a composite of bank stocks, has fallen about 30 percent this year.
The point here isn’t to induce sympathy for traders who won’t get a bonus three years after they helped crash the global economy. It’s to say that in the long run, Wall Street can’t prosper if the economy isn’t prospering. That’s true both in a straightforward economic sense — it’s hard to skim the cream when there’s no milk — and in a political sense, as a stagnating economy leads to populist unrest, and populist unrest will lead to policies that hurt Wall Street. That’s what you’re seeing with Occupy Wall Street, and the White House’s effort to adopt parts of their message.
So Wall Street has as much incentive as everyone else to focus on getting the economy back on its feet over the next few years, and this proposal from Hatzius and Stehn would be a good start.
*Full disclosure: Lowrey is, according to the census form I filled out this year, my unmarried domestic partner, and as of this weekend, she will be my married domestic partner.