Occupy Blogspot

Hi all,

I had a student journalist ask me my opinion of the Occupy Wall Street movement. I have actually been following this movement for a while and this gave me a little push to look more closely. Originally, there were no specific grievances on their website, but now they have made a Declaration.

The common theme is that corporations are responsible for all of these things. I have two kinds of objections to the arguments on this list. One, some of these things aren't true and two some of these things aren't really bad.

So, for fun*, I thought I would go through some of the items and make my case.

They have taken our houses through an illegal foreclosure process, despite not having the original mortgage.

Mortgage companies are not all good. I will be the first to hate on Freddie Mac and Fannie Mae. And certainly the foreclosure process has had some instances where people have acted illegally or even unethically. I would say that is largely not the issue here. Banks actually do not want to foreclose it presents a huge cost for them. This study estimates the cost to foreclosure at $50,000 for a bank but only $7,200 for the homeowner.

Ironically, it is the bank that suffers the most from a foreclosure and banks would like to avoid the foreclosure if they can.

They have taken bailouts from taxpayers with impunity, and continue to give Executives exorbitant bonuses.

Actually, I would agree with this. I don't believe in corporate welfare and I am not a fan of lobbying in general. This sort of thing is rent-seeking and makes the country poorer. I am, however, not against exorbitant bonuses. I think executives should make what the shareholders think is wise to give them. If the shareholders are too generous, well, that's the shareholder's problem.

They have perpetuated inequality and discrimination in the workplace based on age, the color of one’s skin, sex, gender identity and sexual orientation.

Disney tells its employees to treat Gay Day like any other day. A local Doubletree hotel serves as the main hub and probably makes a pretty good profit by being tolerant. If corporations are greedy then they will definitely want to make money by selling to a wider market, which includes all of the above mentioned groups.

But what about when they hire? Economists/lawyers Gary Becker and Richard Posner write a great article about this here. The main proposition of the Occupy movement is that corporations (by which I suppose they mean the mangers of corporations) are greedy. What they fail to realize is that greedy people would be fine hiring minorities and women and other socially ostracized groups. There is evidence of this in India where corporations hire untouchables. Here in the US, the same thing would be true.

But Bryan, greedy people would hire minorities at a lower wage thus we get the inequality that Occupy Wall Street is mad about. True, but here's the thing, greedy people are hiring when non-greedy people won't. So their greed is actually helping to improve the situation. In fact, as greedy people compete with each other to get access to all this minority cheap labor, they actually bid the price up.

So prejudiced managers are the problem, they are they ones who don't hire and thus lower the wages of these groups. Greedy managers are exploiting the opportunity afforded by the prejudiced managers and thus by exploiting it, actually raising the wage of the workers.

The fact that managers were greedy and liked to hire minorities was well understood 100 years ago. Eugenicists of the late 1800's knew that companies would gladly hire a foreigner or a black worker because they were willing to work for lower wages. The eugenicists wanted a minimum wage to prevent greedy corporations from hiring these people at all!

If corporations are being greedy, then huzzah! They are also colorblind. Or least colorblind to anything other than the color of money.

They have poisoned the food supply through negligence, and undermined the farming system through monopolization.

Well, you got me here OWS. Yes, there has been an increase in the market share of the four largest agricultural firms. This USDA study confirms it, but read the whole study. It goes on to say that the mergers that concentrated the industry have largely lowered the cost of producing food. Lower food costs is good right?

Not if you are worried about external costs. But even when you consider the environmental costs of big agribusiness, local grown food isn't that much cleaner. This study estimates the costs of big agribusiness versus locally grown foods and finds that there is only a small difference between the two. In fact this study finds that if you want to eat food that is better for the environment, then it's bigger beneficial impact on the environment to switch from red meat to chicken rather than switch from agribusiness food to local food.

But what about genetically modified (GM) frankenfoods? There are many studies (here, here and here) that show that there is no real data to support the claim that GM foods are bad for you. In fact, GM food are actually better for the environment when grown because they use less fertilizer, pesticides and space!

They have profited off of the torture, confinement, and cruel treatment of countless animals, and actively hide these practices.

Eh, sure. Probably. But if consumer's want to pay for free range chicken, what do they get? Free range chicken! That's the magic of capitalism. The problem isn't the corporations, its the customers. As Adam Smith says:

"It is not the multitude of ale-houses . . . that occasions a general disposition to drunkenness among the common people; but that disposition, arising from other causes, necessarily gives employment to a multitude of ale-houses."

They have continuously sought to strip employees of the right to negotiate for better pay and safer working conditions.

Yup, those greedy corporations. Again, the argument is that corporations want to pay less and that is true, but the result isn't that they always get to pay people less. If you go to Wal-Mart and find a gallon of milk is $10, do you have to pay it? No, especially if there is a Target nearby that sells the same thing for less. You might be desperate and willing to pay $10 for milk if you have to, but competition between Target and Wal-Mart prevents you from having to.

Similarly, you might be desperate and willing to work for $5 an hour in an unsafe Wal-Mart, but if there is a greedy Target manager, she will say, "look at all this cheap labor that Wal-Mart has. I can open a new Target and staff it by stealing workers from Wal-Mart if I pay a couple cents more and make it a little safer. That way I get all the profit instead of those loser managers at Wal-Mart!"

This is what happens in developing countries today and it's what happened to the US and Europe during the Industrial Revolution.

That's all for now. Whew.

*Yes, this is how economists have fun.