Protesting Wall Street and Warping History

In a recent speech to the Occupy Wall Street protestors in New York, Naomi Klein presented a thoroughly warped interpretation of recent political and economic history.

She begins with the undeniable observation that the establishment exploits crises for its own gain. This is obviously true. The government took advantage of the post-9/11 panic to pass the Patriot Act, launch two major wars, and establish the Department of Homeland Security. It took advantage of the recent economic crisis to pass two huge economic "stimulus" bills, create dozens of new regulatory boards, and give even more power to the Federal Reserve. The government is far larger and more powerful as a result.

This graph clear illustrates the Federal government's growth over the last ten years:

And this graph shows the trend over a longer period:

Yet, according to Klein, the establishment uses crises to "push through their wishlist of pro-corporate policies: privatising education and social security, slashing public services, getting rid of the last constraints on corporate power." I'll address these claims one at a time.

First, public schools rule throughout the United States, and that's not going to change anytime soon. Judging from Klein's past writings, she seems to have in mind the rise of charter schools in New Orleans during the aftermath of Katrina. Charter schools, however, are not private. While they are exempt from some of the statues that apply to other public schools, they are publicly funded and are still subject to government oversight. Charter schools in New Orleans, for example, are part of the Recovery School District (RSD), which is administered by the Louisiana Department of Education. If something is administered by a department of some government, it is not private.

Second, public pension and entitlement plans at both the state and federal level are humming along at their current unsustainable rates. If these programs are not changed, all levels of government will consume 60 percent of the country's GDP by 2050. They have not been slashed; they have not been privatized.  

Third, the regulation of corporations has not abated in recent years. There was never any serious deregulation during the Bush or the Clinton years; on the contrary, the amount of money spent regulating corporations--Wall Street in particular--has been steadily rising for decades. In 1960, the federal government spent about $190 million on banking and financial regulation (in constant 2000 dollars). By 2000, it was spending $1.9 billion, a 1000% increase. By 2008, it had risen to $2.3 billion.

Sometimes progressives point to the Gramm-Leach-Bliley Act as an example of the kind of "deregulation" that supposedly led to the financial crisis of 2008. But this Act, which loosened some of the restrictions that strictly separated investment and commercial banks, had nothing to do with the financial crisis. Even Bill Clinton argues:

it wasn't a complete deregulation at all. We still have heavy regulations and insurance on bank deposits, requirements on banks for capital and for disclosure...I don't see that signing that bill had anything to do with the current crisis.

That "heavy regulation" encompasses the entire economy. The Federal Register, the annual catalog of the federal government's regulations, was 81,405 pages long in 2010. Yet Klein somehow believes that the political establishment is dismantling the "last constraints on corporate power."

I shudder to think how many pages there would be in the Federal Register if Klein got her way.