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America's Indignados Should Occupy Wall Street

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OCCUPY WALL STREET
AP

Julien Harrison mans a desk in the middle of a Manhattan parkette and deals with potential protesters who want to demonstrate at the New York Stock Exchange on behalf of the unemployed and under-employed in the country.

This anti-Wall Street protest of a few hundred people was ignored for weeks by the media. Last week, they noticed after filmmaker and iconoclast Michael Moore, and movie star Susan Sarandon, paid visits to lend their support. Then last weekend, the protest spread to other cities, and 700 were arrested for blocking the Brooklyn Bridge. Now, Zuccotti Park is a focus of media mind share and is, appropriately, a small patch of green space between Ground Zero and the Exchange.

The scene is laid back. A few people sing chants and drum and the square is dotted with sleeping bags, fast food, police and camera crews. This is a strangely existential movement: It is not the Tea Party railing against the size of government, it's not Republicans versus Democrats, capitalists versus communists or about an issue like taxing the rich. Harrison speaks for most gathered here when he says: "We are not anti-Obama or anti-capitalist, but we want changes because this system is just not working for most Americans. We don't have the answers, but America, the world, is simply not working."

Harrison hands out the protest schedule to interested bystanders. Its interesting and begins with a morning march past the Exchange for its Opening Bell and another for the Closing Bell, then a three-hour lunch break. Three hours. In fact, the workload is tailored for people who are not used to hard work because, which is to their point, there simply isn't any hard work around.

So far, say the cops, it's been a gentler, kinder protest apart from some trespassing. However, the threat of violence hangs in the air and there are people with pierced ears, noses and punk hairdos in the assemblage who appear to be looking for trouble. They refuse to talk or be photographed.

There's little doubt that eventually, and not necessarily here, America's proclivity toward violence may come to the fore if this rough patch becomes a chronic recession. New York's savvy Mayor Michael Bloomberg took lots of people by surprise last month when he warned that joblessness may lead to large-scale civil unrest in America's cities. So far, so good and the Molotov cocktail parties are being thrown by the Greeks in Athens, not in America's hard-hit poorer neighbourhoods where unemployment matches North African or Greek and Spanish levels of 40 per cent or more among young people.

The protesters and public all feel a collective gloom, and political helplessness, about economic strife. The danger is, as always, pessimism is self-fulfilling, a form of anti-bubble mentality that is psychologically difficult to reverse. If a recession is expected, and that speculation repeated and amplified often enough, it often becomes reality. If the system is failing, as it is, and that fact becomes mantra, then it could become reality. And there is skepticism about capitalism and politics and a wall of worry around the world.

People are depressed and this has led consumers and investors to avoid big purchases, or small ones for that matter. U.S. corporations have good looking balance sheets and several trillion in the banks awaiting deployment. But they are pessimistic and are postponing takeovers, expansions and new projects. Savings rates for Americans have gone from zero to five per cent since the economic catastrophe and the deleveraging of decades of over-spending may take a few more years to finish. This is not good news for Walmart or for workers hoping to be recalled or for the president and congress.

People see protests, strife and political dysfunction around the world and it feeds a collective concern. The death watch over Greece and thrashing stock markets forces investors and banks to remain on the sidelines. Young people are the biggest victims and are those throwing bricks or abuse at police and politicians or, in New York, picketing the New York Stock Exchange. Their situation is grim according to The Economist.

Between 2005 and 2010, youth unemployment has increased dramatically everywhere except in Switzerland, Netherlands and Germany due to training programs and easing job market restrictions. But Spain has gone from 22 per cent to 42 per cent; Ireland from 10 per cent to 30 per cent; the U.S. and UK from 12 per cent to 19 per cent and France from 20 per cent to 28 per cent. That's a formula for societal disaster.

"Indignados" (the indignants) occupy city squares in Spain on a permanent basis, and now the Wall Street protests have taken root, captured media attention and will only grow in size and intensity. These protests, while poorly organized and rag-tag, will become the migraine of politics, not fatal but nagging and potentially dangerous.

This is, in effect, what the "great markdown" in terms of living standards looks like. The "markdown" is too much debt and chronic unemployment as public debt costs devour government budgets and more taxes eat up job-creating capital. There's also the demographic markdown: Aging populations don't consume as much and well-paying American or European jobs will be filled by robots or, alternatively, five cheap, younger workers in Asia. People in developed countries will have to work longer for less to a riper age and that also shuts out younger workers.

The result is income disparity everywhere, even in Canada. Between 1976 and 2009, the average gap between the richest 20 per cent of Canadians and poorest 20 per cent widened from $92,300 to $117,500, according to the Conference Board of Canada.

As these facts translate into hardship, then voting booth anger; the biggest risk of all is the election of trigger-happy populists in these countries who prescribe medicines that do not cure, but kill.

Which brings me to the greatest danger out there right now: A protectionist bill, and another which would impose retaliation against China, that are both currently before the U.S. Congress. These are both predictable and catastrophic. These proposals should keep everyone up at night because it's the old movie that took place in 1932, three years after the 1929 stock market crash.

The U.S. Congress back then, as now, imposed protectionist legislation and slapped high tariffs on trading partners and that led to tariffs in all countries in defence and turned the financial meltdown on Wall Street in 1929 to the world's full-blown Great Depression. Ending the trading system would not only shoot America and its trading partners in the foot, but in the head.

"I don't know about any of that," commented Harrison. "But I just know that what everyone has now is just not working."

This blog originally appeared in the Financial Post

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