Back in mid-December, Hernando de Soto published on the Foreign Policy website a detailed study of the background to the uprising in Tunisia that brought down the dictatorship of Zine El Abidine Ben-Ali (pictured below). As you may remember, the incident that set the whole thing off was the self-immolation of Mohamed Bouazizi, a fruit-seller in the little town of Sidi Bouzid.
De Soto, who knows a thing or two about the informal sector in third-world economies, has this to report:
Bouazizi wanted two things: to earn a living for his family and to accumulate capital (ras el mel). He was a young man, only 26, of no other discernible interests. His life was consumed by his role as the primary breadwinner for his family of seven — a role he had played, according to his mother, ever since he started working in the market at age 12. His father died when Bouazizi was 3. He had five siblings. His mother later remarried, but his stepfather, also his uncle, plagued by health problems, was unable to support the family.
As those who knew Bouazizi tell it, he was the very opposite of an activist. “He never even watched the news,” his mother told us. “People like Mohamed are concerned with doing business. They don’t understand anything about politics.” The $73 he earned each week was the family’s main source of income.
Above all, he was a repressed entrepreneur — which is why Bouazizi’s death resonated so strongly and became a unifying force across the culturally, politically, and religiously diverse Arab world, from Morocco to Syria. For decades, market economies have been growing in the Middle East and North Africa, albeit in the shadows of the law. The ILD has estimated that 50 percent of the region’s entrepreneurs operate outside the law. They share Bouazizi’s desire to prosper — and his despair in the face of the insurmountable obstacles in their way.
Bouazizi’s talent was for buying and selling. Each evening he picked up fruit and vegetables from the wholesale market to sell from his street-side cart at a spot facing the office of the district administration. His dream was to buy an Isuzu pickup truck to get his supplies directly from the farmers. He was known in his neighborhood for his shrewd practicality. He was trusted by his peers: His colleagues in the wholesale fruit market sometimes hired him to do their accounts. “He also wanted a permanent stand at the wholesale market,” his mother Manoubia told us. “If they had given it to him, it would have changed his life.”
For years, Bouazizi had endured harassment at the hands of deeply corrupt petty officials — most notably, the municipal police officers and inspectors who lived off street vendors and other small-scale extralegal business-people. The police officers helped themselves to the vendors’ fruit whenever they felt like it or arbitrarily fined them for running their carts without a permit. Bouazizi complained about the greed of local officers for years. He hated paying bribes.
But on Dec. 17, 2010, this otherwise uneventful life took its place in history. That morning, Bouazizi got into a tussle with town inspectors who accused him of failing to pay a fine for some arbitrary infraction. They seized two crates of pears, one crate of bananas, three crates of apples, and his electronic scale — worth some $225, the entire capital of his business. A municipal police officer, a woman named Fedia Hamdi, slapped Bouazizi across the face in front of the crowd that had gathered at the scene. With his uncle’s help, Bouazizi appealed to the authorities for the return of his property. But he got nowhere — a common outcome in a society where small-scale business-people were treated with contempt by local officialdom. One hour after the confrontation with Hamdi, at 11:30 a.m., he doused himself with paint thinner and immolated himself in front of the governorate building in Sidi Bouzid. Bystanders tried to put out the flames with a fire extinguisher. But it was empty.
According to de Soto, the key to understanding why Tunisia exploded – followed by Egypt, Libya, and Syria – was the fact that Bouazizi’s disheartening experience with the authorities matched quite well that of hundreds of thousands of Arabs who eke out a living in the private sector. In the face of corruption and petty tyranny, Bouazizi became as mad as hell and decided that he was not going to take it any more, and his suicide made his fellow Arabs across the entire region profoundly ashamed of their own passivity in the face of corruption and petty tyranny.
Anger about corruption is now fuelling protests in Moscow, too. Although the two extraordinary demonstrations in the past month were provoked by the stolen parliamentary elections, the groundwork was laid by the anti-corruption blogger Alexei Navalny and his colleagues. In recent years, Navalny founded, among other things, a website dedicated to the investigation of local and municipal corruption and a website which collects and publishes photographs of potholes, cracking bridges and other examples of slovenly road construction and repair.
Navalny writes a running commentary on the nefarious activities of Russia’s largest companies, on their profoundly opaque business practices and their attempts to avoid real scrutiny. He advises readers how to confront and complain about such behaviour in their towns and villages, and how to use the legal system to get satisfaction. By doing so – and by maintaining clarity about who funds his efforts (reader donations, largely) he has won himself a kind of credibility that Russian political leaders lack.
And she cites India, where “Anna Hazare, a 74-year-old activist, has used civil disobedience and hunger strikes to force the Indian parliament to pass anti-corruption legislation this year,” and Brazil, “where public campaigns have also forced politicians to act,” adding that “bubbling under the surface, anger about corruption in China is widespread.” The rebellion against corruption and petty tyranny is a world-wide phenomenon.
Applebaum misses the mark, however, and misses it badly when she turns to the United States. “I don’t care for the tactics of the Occupy Wall Street movement (let alone its ridiculous Occupy St Paul’s offshoot),” she writes, “but I see why the protesters are angry.”
In 2008, greedy and incompetent bankers provoked an enormous financial crash. The bill for that crash was paid by taxpayers. There might be good explanations for why that was necessary, but it still feels deeply unfair, as though the financial markets had rigged the system so that they never suffer for their mistakes. The person who figures out how to turn this theme into a mainstream political issue (as opposed to a reason to construct tent cities in municipal parks) might enjoy enormous popular success.
Applebaum is very capable, and she should have known better. With regard to this country, she is wrong on all counts. First, as Gretchen Morgenson of The New York Times and Joshua Rosner have shown in fine detail in their splendid book Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armaggedon, the financial crash of 2008 was not “provoked” by “greedy and incompetent bankers.” The verdict is now in: it was caused by Fannie Mae, Freddie Mac, and the individuals in the federal government who forced banks to issue subprime mortgages to individuals highly unlikely to keep up with the payments. It was facilitated by Alan Greenspan, Ben Bernanke, and those on the Federal Reserve Board who kept interest rates artificially low for a very long time and nourished the dot-com bubble and then the housing-bubble. Responsibility belongs to the admirers of “enlightened administration,” who supposed that the experts could successfully manage and manipulate the markets.
I do not mean to say that the bankers on Wall Street were not greedy. They are so almost by definition. They are in business to make as much money as they can, and, if the government distorts the housing market, they will play along. Nor do I mean to suggest that these bankers were impressive for their competence. Some of them saw what was coming, but most were bamboozled by the wizards at Fannie Mae, Freddie Mac, and the Fed. What I am saying is that the real villains – and Barney Frank, Chris Dodd, Maxine Waters, and the people running Fannie Mae and Freddie Mac really were villains – were in or closely associated with the federal government.
Applebaum’s other blunder is to suppose that Occupy Wall Street (OWS) is in any way comparable to the movements sweeping the countries of the Arab world, Russia, India, and Brazil and that it has anything in common with the sentiment threatening the Communist Party dictatorship in China. The angry people in these other lands are ordinary hard-working individuals – often petty entrepreneurs – trying to make a living in circumstances where they are threatened by government corruption and the petty tyranny of officials. The real analogue is the Tea-Party Movement, which emerged in the Spring of 2009 in response to the Democratic Party’s passage of the so-called “stimulus bill.” It was a spontaneous eruption very much like what happened in the Arab world. It was set off by a single remark on CNBC, and it was driven by the well-founded suspicion that the immensely long and complex “stimulus bill” was nothing more than a massive pay-off to favored constituencies – an attempt to secure the re-election of the Democrats by means of a redistribution of the wealth of the small businessmen and other ordinary hard-working Americans who would ultimately be left with the bill. “Honk,” read the placards of these American demonstrators, “if I am paying your mortgage.”
OWS was not a spontaneous eruption. It originated as an ACORN operation backed by the Service Employees International Union and the American Association of University Professors. As the arrest records in New York revealed, the participants were for the most part young people in or just out of college who belonged to well-to-do families, and it quickly garnered support from the sponsors and admirers of government corruption and the petty tyranny of officials: starting with the current President of the United States, the Mayor of the City of New York, and the mayors of the other cities where ACORN and its associates set up encampments, and going on to include Columbia University, which will even be giving students academic credit this term for participating, and Newsweek magazine — which just published a piece by Michael Thomas designed to deflect attention from the purveyors of of government corruption and petty tyranny with inflammatory rhetoric like the following:
As 2011 slithers to its end, none of the major problems that led to the crisis point three years ago have really been solved. Bank balance sheets still reek. Europe day by day becomes a financial black hole, with matter from the periphery being sucked toward the center until the vortex itself collapses. The Street and its ministries of propaganda have fallen back on a Big Lie as old as capitalism itself: that all that has gone wrong has been government’s fault. This time, however, I don’t think the argument that “Washington ate my homework” is going to work. This time, a firestorm is going to explode about the Street’s head—and about time, too.
It’s funny; the Big Lie has a long pedigree. A year or so ago, I was leafing through Ron Chernow’s indispensable history of the Morgan financial interests, and found this interesting exchange between FDR and Russell Leffingwell, a Morgan partner and Washington fixer, a sort of Robert Strauss of his day. It dates from the summer of 1932, with FDR not yet in office:
“You and I know,” wrote Leffingwell, “that we cannot cure the present deflation and depression by punishing the villains, real or imaginary, of the first post war decade, and that when it comes down to the day of reckoning nobody gets very far with all this prohibition and regulation stuff.” To which FDR replied: “I wish we could get from the bankers themselves an admission that in the 1927 to 1929 period there were grave abuses and that the bankers themselves now support wholeheartedly methods to prevent recurrence thereof. Can’t bankers see their own advantage in such a course?” And then Leffingwell again: “The bankers were not in fact responsible for 1927–29 and the politicians were. Why then should the bankers make a false confession?”
This time, I fear, the public anger will not be deflected. Confessions, not false, will be exacted. Occupy Wall Street has set the snowball rolling; you may not think much of OWS—I have my own reservations, although none are philosophical or moral—but it has made America aware of a sinister, usurious process by which wealth has systematically been funneled into fewer and fewer hands. A process in which Washington played a useful supporting role, but no more than that.
Over the next year, I expect the “what” will give way to the “how” in the broad electorate’s comprehension of the financial situation. The 99 percent must learn to differentiate the bloodsuckers and rent-extractors from those in the 1 percent who make the world a better, more just place to live. Once people realize how Wall Street made its pile, understand how financiers get rich, what it is that they actually do, the time will become ripe for someone to gather the spreading ripples of anger and perplexity into a focused tsunami of retribution. To make the bastards pay, properly, for the grief and woe they have caused. Perhaps not to the extent proposed by H. L. Mencken, who wrote that when a bank fails, the first order of business should be to hang its board of directors, but in a manner in which the pain is proportionate to the collateral damage. Possibly an excess-profits tax retroactive to 2007, or some form of “Tobin tax” on transactions, or a wealth tax. The era of money for nothing will be over.
But it won’t just end with taxes. When the great day comes, Wall Street will pray for another Pecora, because compared with the rough beast now beginning to strain at the leash, Pecora will look like Phil Gramm. Humiliation and ridicule, even financial penalties, will be the least of the Street’s tribulations. There will be prosecutions and show trials. There will be violence, mark my words. Houses burnt, property defaced. I just hope that this time the mob targets the right people in Wall Street and in Washington. (How does a right-thinking Christian go about asking Santa for Mitch McConnell’s head under the Christmas tree?) There will be kleptocrats who threaten to take themselves elsewhere if their demands on jurisdictions and tax breaks aren’t met, and I say let ’em go!
It is, I think, telling that Thomas makes no mention at all of Fannie Mae, Freddie Mac, and their enablers — mainly from within the Democratic Party — in Washington, DC. Of course, if the folks at Newsweek were to tell the truth, it would strengthen the Tea-Party Movement and reveal OWS for what it really is: an instrument deployed by those seeking the re-election of Barack Obama. And this they will not do.
As my colleague Paul Moreno pointed out in The Wall Street Journal, on Friday, to find something similar to Occupy Wall Street, one would have to turn back seventy-five years to 30 December 1936 – when the United Auto Workers staged a “sit-down” strike in the General Motors plant in Flint, Michigan, and the recently elected New-Deal Democratic Governor of Michigan sent in the National Guard to prevent the police from clearing the UAW toughs out of the plant and arresting them for trespass. OWS was not directed against government corruption and the petty tyranny of officials. Like the “sit-down” strike in 1936-37, its purpose was to bully private corporations and promote a redistribution of wealth at the behest of the government and its officials – and it was far less effective initially and backfired far more quickly than the “sit-down” strike of 1936-37, which — with its lawlessness — struck fear into ordinary Americans and helped bring the second New Deal to an abrupt halt.
Here is a sign that the thuggery openly encouraged in the pages of Newsweek by the likes of Michael Thomas is backfiring. When asked by pollsters what we should most fear — big government, big business, or big labor — 48% of Democrats now single out big government. With every passing day, the impulse represented by the Tea Party in 2009 gets stronger and stronger. Barack Obama’s efforts to secure re-election by promoting class strife serve only to reinforce the trend, as does the work done on his behalf by those in the mainstream press who once belonged to Journolist and still function as “the unofficial campaign.”
So I say, “Give us more, Michael Thomas! Give us a whole lot more! Do not restrain yourself! Vent your hatred! Tell us what you really think!” For, when, at your instigation and that of Organizing for America, OWS demonstrators try to shout down speakers and break up Republican Party rallies, as they did in Iowa on Monday night, it will only serve to unmask the Democratic Party and instruct the American people as to the tyrannical ambition of Barack Obama and the thuggish demeanor of his minions.
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