Wall Street lessons for Shanghai's finance
- By Dan Steinbock
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Shanghai Daily, December 28, 2011
![Sparking the wildfire [By Jiao Haiyang/China.org.cn]](http://images.china.cn/attachement/jpg/site1007/20111228/001372acd0b51065147b08.jpg "Sparking the wildfire [By Jiao Haiyang/China.org.cn]") |
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Sparking the wildfire [By Jiao Haiyang/China.org.cn] |
The Occupy Wall Street movement began in New York City. But its lesson is relevant worldwide.
The protests are against social and economic inequality, high unemployment, greed, corruption, and the undue influence of financial giants on government.
The underlying tension between Wall Street and Main Street, or the financial sector and ordinary America, permeates US history.
From the days of the Independence, American politics has witnessed a history of attacks on Wall Street and financiers whose great personal fortunes seem disproportionate to their contribution to national prosperity.
The OWS protesters' slogan, "We are the 99 percent," refers to the growing difference in wealth in the United States between the prosperous 1 percent and the rest of the population. As a movement, it reflects a growing unease in the United States and worldwide.
In the post-war era, roughly until the late 1970s, the financial sector was a relatively boring industry and certainly not the most lucrative one. If you were an engineer, you wanted to be in General Electric; if you were a blue-collar worker, you wanted to work for one of Detroit's "Big Three" car giants. High finance was for the unimaginative and conservative.
After the Great Depression, walls were erected between commercial and investment banks in the United States. President Franklin Roosevelt hoped to ensure that risky speculation would never again cost so much to America.
In the course of the past three decades, however, those walls have crumbled down.
Until the global crisis, the average salary in Wall Street was four times higher than that of an engineer.
Students got the message. They shunned engineering sciences; they wanted to work for Goldman Sachs, Citibank, or perhaps McKinsey. That's where the action was.
The point is not that Wall Street employs only the greedy (although that's not exactly an exception).
Rather, the question is whether a nation can sustain its prosperity through financial wealth alone - without technological innovation.
When a nation focuses exclusively on the financial sector and opts for unequal opportunities at the expense of industrial innovation and egalitarian opportunities, that often heralds economic, political and moral decay.
As industrial strengths eroded in Britain in the late 19th century, London's financial district prospered; and it remains powerful even today. (One reason Prime Minister Cameron vetoed the Euro Treaty was that he was concerned of the proposed financial transaction taxes.)
Since the 1980s the United States has become more dependent on the financial sector, while industrial innovation has been outsourced, hollowed out and finally off-shored. Meanwhile, politics has grown more reliant on the financial sector, through campaign financing.
In the future, large emerging economies must cope with comparable pressures. Like London's City in the early 20th century and New York's Wall Street in the late 20th century, Shanghai is now evolving into the world's largest and most influential financial engine.
As such, of course, that is not the problem. China should have a strong financial sector to support its rapidly growing industrial might.
Rather, the challenges emerge when such financial power is sought at the expense of industrial innovation and deepening income polarization. That's the global lesson of Occupy Wall Street.
Dr Dan Steinbock represents India, China and America Institute (USA), the Shanghai Institute for International Studies (China), and the EU Center (Singapore). Shanghai Daily condensed the article.
