We’ve not seen anything quite like it, and by that I don’t just mean the loosely-connected Occupy movements that are snaking their way round the west as a curious counterpoint to, perhaps caricature of, the Arab Spring. I’m seeing a broader movement arising from the grassroots of American soil that for all its disparate elements can be grouped under one heading: “exopolitics” – politics, as it were, outside politics. And it’s worth making the connections before we zero in on the bankers and the campers.
While the global dimensions of the Occupy phenomenon are fascinating, as Twitter becomes the communication medium of choice, the context in the United States is potentially profound.
We had those rallies, from right and left, in Washington DC – in which cable television celebrities usurped the role of political leaders and drew great numbers of ordinary Americans to the Mall (the mall they usually do not visit on weekends) in vast displays of people power. I was in town both days, jostling on a packed metro with mostly very ordinary citizens for whom a trip to DC was a costly investment, and who were much more like each other across the two weekends than most of the commentariat was prepared to acknowledge.
We had the birth of the Tea Party, which seemed an eccentric political joke until the electoral process brought a kind of anti-politician to town and, for good or ill, shifted the debate in Washington on debt and spending decisively in their direction.
And now Occupy Wall Street. Like all movements from the grassroots it is untidy, with all manner of malcontents joining in and making it easier to dismiss. It has been aided by a depressingly incompetent response from police departments in various cities who seem unable to distinguish between chaotic well-meaning citizens, whom they have a duty to protect, and potential rioters, for whom the public purse has equipped them with nightsticks and cans of chemical sprays.
There’s much more to be said, but three things seem very clear to me.
1. Politics-as-usual has taken quite a beating, and is unlikely to be the same again.
2. For similar reasons, business-as-usual is under a new kind of threat. For example, the move to shift personal banking to Credit Unions may gain traction (I can’t see why retail banking needs to be for-profit, and a fundamental re-alignment could result very rapidly). But this goes well beyond that. The politicization, as it were, of Wall Street as the banks were “bailed out” while waves of mortgage foreclosures continue to sweep through our communities, and the loss of personal equity remains huge for scores of millions who are keeping their homes, has perhaps forever changed the way in which Americans look at their financial institutions.
3. While the politics of most Occupy activists seems to be way on the left, they have huge popular sympathy from across the spectrum. An astonishing example, from the right: a poll of 300,000 FoxNews online readers came down 60% in their support. And, let’s be honest, it’s hard to find anyone who has good things to say about bankers – not one of whom has yet joined the Enron-era business leaders on the wrong side of the walls of a federal penitentiary. And while it is frustrating to those who support markets and see capitalism as the key to economic progress for the left to be leading the critique, it’s in all our interests to get what regulation we do have in place to be more effective; to make boards properly responsible; to have markets operate responsibly and their actors honorably. Otherwise, they should fail, their investors lose, and heedless executives face impoverishment or worse. That’s capitalism. Feather-bedding is not. It should not be left to the left to make the case. At the same time, our great institutions if they are smart will shoulder the kind of long-term responsibility for creating what Michael Porter has recently called “shared value,” in which the good of the community and the good of business are brought into alignment.
Yet in achieving alignment, as the example of board responsibility underlines, two issues emerge again and again. And they are as evident in the political realm as in that of corporate America. The first is the significance of the long term. The second is generally referred to as the “principal-agent problem.” Their importance here is stressed by the fact they lie at the heart of both our political and corporate malaise.
On the long term: Our politicians think shorter-term, not least as we make shorter-term demands on them, through lobbying of all kinds and, in the House, the tyranny of the two-year cycle that means electioneering never stops. Our business leaders, meanwhile, are also accountable to shorter-term market considerations, as stock is held for much shorter spans of time than it used to be, and markets respond dynamically to quarterly reports. So both pols and CEOs are beleaguered by short-term pressures, and respond accordingly.
The principal-agent problem would seem to work in the other direction. The core idea is that “principals” (whether stockholders or citizens, the owners, as it were, of the enterprise) find it a constant struggle to get their “agents” (corporate directors and executives; politicians) to act in “our” interests rather than “theirs.” Agents’ interests tend to diverge from those who are supposed to be their bosses. So politicians and business leaders tend to want above all else successful careers – while citizens want a certain kind of society, and investors seek value creation. It is, ironically, the careerist interests of leaders in both contexts that can outweigh the short-term pressures and lead them to deliver “long-term value.”
Long story short: These grassroots movements, a rising exopolitics, press the need to align the short with the long term; the interests of leaders and those whom they lead; the need to build value that will last. Whatever the campers in Zuccotti Park have in their minds and on their placards, the message is clear.
First posted on the U.S. Chamber BCLC site.