The Occupy movement that began as a protest against Wall Street has been showing some worrying signs of devolving into a protest against capitalism. We have previously praised the attention drawn by these protests to critical issues of economic inequality and unrestrained financial sector risk-taking, among other things, but we believe this change of course threatens to detract from the group’s original purpose. By associating certain policies with extreme viewpoints and poorly conceived economics, the Occupy protesters risk doing serious damage to the causes they support.
A few recent cases typify this trend. Last Friday, Occupy protesters in San Francisco took to blockading Macy’s and other retail outlets, discouraging shoppers from patronizing major corporations or from shopping at all. These protests, in addition to causing traffic jams and other disruptions, made no sense. They ignore the obvious reality that consumer spending is necessary for the labor market to recover and the jobs everyone wants so badly to return. They also perpetuate a misguided notion that small businesses are inherently better than large businesses. In fact, increasing the size of businesses often enhances efficiency through economies of scale, lowering the costs of production and prices for consumers. The trillions of dollars on corporate balance sheets right now reflect not evil greed, but rather a slow economy that discourages businesses from reinvesting their funds in new productive opportunities. Moreover, Thanksgiving shoppers are exercising a very basic liberty that a free society guarantees.
Another episode at Harvard University saw students walk out of an introductory economics course taught by Professor Greg Mankiw, a former adviser to President George W. Bush. These students complained of the supposed biases propagated by the course while offering no real evidence to show that the material covered anything other than standard basic approaches to economics. Along the way, the protesters demonstrated their ignorance by grumbling nonsensically that Professor Mankiw did not teach Keynesian theory as an “alternative” to Adam Smith, even though the two are compatible and are used to explain completely different things, when all they had to do was wait until the macroeconomic portion of the course for this material. Such a fundamental misunderstanding of the “mainstream economics” they railed against only reinforced that the protests were rooted in ideological preconceptions rather than actual analysis.
Similar strains of confused rhetoric have begun making occasional appearances at Stanford. A recent, widely distributed message encouraging students to “Occupy the Future” emphasized “the link between unrestrained economic growth and the current economic crisis.” Since the word “crisis” itself is being used to describe a large contraction in GDP and the subsequent weak recovery marked precisely by a lack of growth, it seems difficult to imagine why economic growth would be considered the problem. Similarly, the message goes on to lament flat wages for much of the population when rising wages would, of course, result from the very growth they criticize. Like the Harvard students who appeared to oppose markets just for the sake of doing so, these advocates appear to use decrying growth as a convenient catchphrase without considering the implications of their words.
In this discussion, it is worth emphasizing just what it means to have a market-based economy. Free markets do not have to mean low taxes or favorable treatment for the rich. Indeed, high-tax Scandinavian economies with lavish welfare states consistently score near the top of the Heritage Foundation’s Economic Freedom Index. The decision to use markets to maximize wealth creation exists separately from policy choices regarding the proper levels of taxation and income redistribution. Similarly, free markets do not mean allowing an unregulated frenzy of risk-taking on Wall Street. The hated bank bailouts that resulted from failed financial sector policy were outside of the normal capitalist framework where businesses are allowed to fail and succeed on their merits. Efforts to prevent the next bailout, as the Dodd-Frank regulatory reform bill or Republican presidential candidate Jon Huntsman’s plan to curb large banks endeavor to do, would actually strengthen capitalism and allow it to function properly. So too, would environmental protection, reforming politics to reduce the power of special interests, and other worthy goals of the protesters.
This brings us to our central point: we point out the erroneousness and futility of these episodes in an attempt to strengthen the focus of the protests. We admittedly pick a few examples out of a much broader context. By doing so, we intend not to paint the protesters all with the same brush or to use a small number of statements to undercut a wider effort, but rather to point out where the movement has gone astray in hopes of pushing toward what we view as the right track. For the most part, we share the goals of Tuesday’s “Occupy the Future” op-ed published by six professors on this page as well as, we imagine, many of the policies they would support. But we aim to stress that a country with slightly higher taxes on the wealthy, a carbon tax, robust financial regulation and other reasonable aims the protesters should adopt to pursue their goals would still be a place with a free-market, capitalist economy. Opponents of such types of progressive policies often try to paint their supporters as communists or radicals that seek to undermine American prosperity. The last thing that would help push public policy in this direction would be to prove them right.