Self-responsibility, the GFC and where the occupiers got it wrong

George Packer has written an incredibly moving profile in this week’s New Yorker on Ray Kachel — a nerdy loner who worked as a freelance tech-support contractor until his business dried-up post GFC (although this does not seem to have been a direct result of the GFC), then decided to move across the country to join Occupy Wall Street when his savings ran out. By the way, he is still living homeless in New York and can be followed on Twitter.

There is no doubt that Kachel’s story is a sad one, as are the many other stories of people struggling in a depressing economic climate, and I would encourage everyone to read the article – it puts a great human face on the OWS movement and does seem to just “tell the story”, rather than taking an ideological bent.

In the middle of the piece, something did strike me about the slogans that the “occupiers” were using. 

Ray Kachel’s Journey from Seattle to Zuccotti Park : The New Yorker.

At the east end of the park, along the wide sidewalk next to Broadway, beneath a sculpture of soaring red steel beams called “Joie de Vivre,” the occupation and the public merged. Demonstrators stood in a row, displaying signs as if hawking wares, while workers on their lunch hour and tourists and passersby stopped to look, take pictures, talk, argue. An elderly woman sat in a chair and read aloud from Hart Crane’s “The Bridge.” Another woman stood silently while holding up a copy of Ron Suskind’s “Confidence Men”—day after day. An old man in a sports coat and golf cap: “For: Regulated Capitalism. Against: Obscene Inequality. Needed: Massive Jobs Program.” A union electrician in a hard hat: “Occupy Wall Street. Do It for Your Kids.” A woman in a blue nurse’s smock: “This R.N. Is Sickened by Wall Street Greed. Trust Has Been Broken.” A young woman in jeans: “Where Did My Future Go? Greed Took It.” The crowd was dense, the talk overlapping.

The issue is this “greed” that they are talking about. The whole movement is there to end “corporate greed” and blames the GFC/the current economic crisis on the apparent “greed” of the bankers and politicians.

Why is that a problem? I’ll refer you to this little anecdote with which Michael Lewis began a recent essay in the New York Review of Books:

 How We Were All Misled by John Lanchester | The New York Review of Books.

Most people with a special interest in the events of the credit crunch and the Great Recession that followed it have a private benchmark for the excesses that led up to the crash. These benchmarks are a rule of thumb, a rough measure of how far out of control things got; they are phenomena that at the time seemed normal but that in retrospect were a brightly flashing warning light. I came across mine in Iceland, talking to a waitress in a café in the summer of 2009, about eight months after the króna collapsed and the whole country effectively went bankrupt under the debts incurred by its overextended banks. I asked her what had changed about her life since the crash.

“Well,” she said, “if I’m going to spend some time with friends at the weekend we go camping in the countryside.”

“How is that different from what you did before?” I asked.

“We used to take a plane to Milan and go shopping on the via Linate.”

An Icelandic waitress spending her free time going on shopping trips to Milan. What’s wrong with that picture? It is little wonder that the banks in Iceland collapsed – this is the culture that Iceland had pre-2008. As Lewis also points out, the reason that Germany is doing so well at the moment is that simply that they did not live like this. In German culture, accumulating huge amounts of debt is simply not acceptable, so they didn’t.

HERE’S my problem with the whole “occupy” paradigm: who’s fault was it that the Icelandic waitress thought it was acceptable to accumulate huge amounts of debt in order to have the kind of lifestyle that people who earn 2-3 times as much can’t really afford? Was it the bank teller who gave her the credit? The banker who gave that teller the discretion to do that? The politicians who didn’t make laws about how much credit a waitress is entitled to?

Maybe all of them a little, but there is much more to it than that. Essentially, it was half of the free world. 

This is what everyone isn’t telling you. The GFC was not caused by bankers, political donations or market deregulation. It was caused by waiting staff, engineers, schoolteachers, freelance tech guys, middle-managers and sales reps. It was  everyone who decided to get a mortgage for a house worth 10x their annual salary and the sales rep who sold them the mortgage even though they knew it would probably not be paid back. It was the guy who wanted a bigger TV, the girl who wanted a fancier car and the couple who wanted to take their kids to Disneyland.

THE financial crisis wasn’t caused by corporate greed or Wall Street greed, it was caused by societal greed and a culture of entitlement. The West lost its work ethic. People had the idea that they could drop out of high school, then get a low-skill job working a 35-hour week with generous leave and a pension but still live like someone with two degrees working double the hours.

People need to stop pointing fingers at the tops of skyscrapers and start pointing at themselves. It’s easy to just shift the blame onto abstract entities who still have all of the stuff that others had repossessed,  but it was those peoples’ fault for buying things they couldn’t afford in the first place. I’m not saying that the senior executives didn’t make mistakes, but they are being unfairly scapegoated by people who need someone to blame and sure as hell “know” that it wasn’t their own fault.

The people of Iceland faced up to the reality of what they had done and allowed themselves to be punished for it. Their banks failed, their life savings were wiped out and their retirement moved much further away, but their economy is recovering and they are slowly going back to work. The people of Greece, on the other hand, refused to give up the idea that they could work 9-5 plus breaks plus annual leave, retire at 55 and then live comfortably off other people’s money for the next 30 years. THAT is greed.

Greed is not limited to the ones at the top, they just worked hard enough to get what you want. Ending corporate greed doesn’t just mean cutting the CEO’s bonus, it means that the worker on the floor needs to start taking more camping trips and stop taking any shopping trips to Milan.

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  1. #1 by obbop on December 4, 2011 - 3:34 am

    “There’s class warfare, all right, Mr. (Warren) Buffett said, but it’s my class, the rich class, that’s making war, and we’re winning.”

    “There has been class warfare going on,” Buffett, 81, said in a Sept. 30 interview with Charlie Rose on PBS. It’s just that my class is winning. And my class isn’t just winning, I mean we’re killing them.”

    • #2 by MK on December 4, 2011 - 8:04 pm

      I don’t understand your point.

  2. #3 by Frank J. Parnell on December 5, 2011 - 1:44 pm

    There’s lots of blame to go around, but for another perspective I’d strongly recommend checking out the episode of the “This American Life” radio show titled “The Giant Pool of Money.”

    • #4 by MK on December 5, 2011 - 7:08 pm

      Thanks for that, it’s very interesting so far. It’s the first thing I’ve seen/heard that explores “every link in the chain” as they say.

      I’m particularly bothered by it because I have first-hand experience with the other end, I’ll write on that later.

  3. #5 by George on December 8, 2011 - 3:40 am

    Complete and utter BS. Even many people who work in the financial industry don’t believe this theory! Do you seriously think if all those excessive waitresses, etc. had “lived within their means” the financial crash wouldn’t have happened, and everything would be just fine? Really? You still believe this in 2011?! No serious economist would agree with the premise of your post. BTW, at no point in the New Yorker profile did it describe this man as living beyond his means as being the cause of his troubles, so you basically misread the entire point of the article.

    • #6 by MK on January 18, 2012 - 5:54 pm

      Serious economists do believe this. I cited one, there was another in the “Giant Pool of Money” show that Frank mentioned. What you haven’t done is provide any kind of counter-argument except for talking about how crazy you thought mine was.

      Plus I think you missed the point of my post, I definitely did not miss the point of the Ray Kachel profile. In all honesty, it doesn’t sound like his condition is even because of the financial crisis. He was an ageing guy working freelance for mostly one client in a profession that isn’t in very high demand (it’s not difficult to customise DVDs these days). He happened to lose that client when the GFC hit, but the reason he found himself homeless was because he had allowed himself to get into a position where he was far too reliant on the one client and on a rapidly dating skill set.

  4. #7 by mizpat on December 10, 2011 - 6:38 pm

    “Greed is not limited to the ones at the top, they just worked hard enough to get what you want.” Nice little Freudian slip there, “the ones at the top…get what you want.”

    Greed at the top is absolutely the cause of the global financial crisis; that’s been thoroughly documented from the beginning. Where have you been?

    Working people like the waitress who lived beyond their means was encouraged and exploited by the big banks who gave out credit like candy, by the corporate advertisers who made it sound like “we’re in the money” and make you feel like a fool if you didn’t join in, and by the media that glorified unfettered consumerism. It was encouraged to cover up the fact that for the last 40 years the majority of working people have had to borrow to make up for the steady loss of buying power while incomes of the top 1% (and more) grew at ever faster rates.

    The excesses of working people like the waitress occurred only in the mid-2000s, after big investors blew up the dot-com bubble and crash, and then blew up the housing market before the crash. Working people just followed the lead of “the ones at the top,” fully encouraged by “the ones at the top.”

    Where is your critique of their excesses? And where is their suffering because of it?

    • #8 by MK on January 18, 2012 - 6:13 pm

      Working people like the waitress who lived beyond their means was encouraged and exploited by the big banks who gave out credit like candy, by the corporate advertisers who made it sound like “we’re in the money” and make you feel like a fool if you didn’t join in, and by the media that glorified unfettered consumerism.

      This is exactly the attitude I was taking issue with. Sure, the banks gave out credit, but working people took the credit and then spent more than they could afford to with it. Corporate advertisers tried to sell their stuff, and working people bought it. As for the media, they only write what people want to read. Everyone keeps complaining about how disgusting the media are and yet you still go out and buy Us Weekly. It’s a two-way street! You need to stop blaming other people and take some goddamn responsibility. If you earn $2,000 a month and buy a house worth $400,000 then I struggle to have any sympathy for you when you default.

      And my critique of the bankers? I don’t think that’s necessary really, there are plenty of those already.

  1. That awkward time when income inequality did NOT cause GFC « Major Karnage

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