Archive: wall street

October 11th, 2011 | By Glen Hiemstra | Posted in Business & Economy, Innovation | 2 Comments

Occupying Wall Street and Economic Futures

I began thinking about the long term impact of the growing gap between rich and poor, and the flat-lining of middle class incomes, several years ago. I began the chapter on The Great Divides in my 2006 book by discussing the growing wealth divide, and in a 2006 keynote for the American Red Cross I called out the looming rich poor gap as an issue for philanthropic organizations.



Since 2006, the situation has gotten worse, of course, with the collapse of 2008, and the long non-recovery recovery that has followed. But now the issue has leaped from speeches about future trends to the front pages.

For over three weeks Occupy Wall Street protestors have been rallying against a number of grievances focused on a jobless economy and the Wall Street, regulatory, corporate and other policies that they see as combining systemically to prevent improvement. The website for Occupy Wall Street claims that,

The one thing we all have in common is that We Are The 99% that will no longer tolerate the greed and corruption of the 1%. We are using the revolutionary Arab Spring tactic to achieve our ends and encourage the use of nonviolence to maximize the safety of all participants.

Street demonstrations are a quintessential American tradition and right, and thus the demonstrators are carrying on in the footsteps of many who have come before them. What makes Occupy Wall Street unique is the intent to carry on an occupation as a tactic. Momentum for Occupy Wall Street has gathered speed in the last several days with the inclusion of local labor unions in the protests, and the spread to cities in almost every state in the Union. While many mainstream media and financial commentators have expressed opinions that range from confusion to disgust, others are beginning to catch on that something is happening here. Even President Obama has said Occupy Wall Street protests are a reflection of a ‘broad-based frustration about how our financial system works’, though I am not sure he grasps how much of the frustration is with his own ineffectiveness in dealing with that financial system (along with the rest of Washington DC).

Many of the Millennial Generation are involved in this protest, lending credence to the generational theory forecast that the Millennial Generation would be an activist generation. Amongst the thousands of protestors, hundreds have been arrested or aggressively handled in some way by the police, which is evident in the following video.




So what does it mean and where do things go from here? I have two primary observations today.

First, when in recent months I have mentioned the “rich poor gap” to business audiences, I have noticed that while some are glad to hear this reality pointed out, others bristle. I will put up a chart like the one below, and explain that I am not making a political statement, rather simply pointing out that the rich poor gap, which had closed between 1946 and 1979, has been widening due to a combination of factors including economic, global, technological, tax and government policy issues, and then I ask whether we really think that a society in which such a gap continues to grow can be a functioning society?

The second observation is that a good deal of my thinking on the likely long-term negative impacts of increasing wealth disparity comes from a quite earth shaking 2007 book by Robert H. Frank, entitled Falling Behind: How Rising Inequality Harms the Middle Class. When societies become more and more unequal, they become less healthy, less happy, less productive, less capable of producing innovation, more volatile, more prone to crime, and so on. Frank concludes his fascinating analysis of the drivers and the impacts of inequality with these two very prescient paragraphs,

Income and wealth inequality have been rising sharply in the United States for several decades, exacting a heavy toll on middle-income families. When market forces cause inequality to grow, public policy in most countries pushes in the opposite direction. That was also once the pattern in the United States. But more recently, we have responded by cutting taxes for the wealthy and reducing services for the needy. Historians will someday struggle to explain this puzzling reversal.

As the economist Herb Stein once famously remarked, if something can’t go on forever, it won’t. At some point, we will take steps to limit the damage caused by rising disparities in income and wealth. With a push from intelligent political leaders, such steps can be taken sooner rather than later. For even in an age of thirty-second sound bites, American voters have demonstrated their ability to see things from a different angle.

I have little doubt that the elections of 2008 and 2010, although the winning political parties differed, were both mostly a cry for addressing the decades-long economic patterns leading to the decline of the middle class, as described by Frank among others. The OWS demonstrations are likely to continue at least into the cold of winter, and then re-emerge even more full-throated in the spring. The choice they have made to call themselves “the 99%” is brilliant marketing, and the 99% will shape the 2012 elections. I concluded the section on wealth disparity in my book Turning the Future into Revenue this way,

The bottom line is simple. We can sugercoat economic statistics, point to skyrocketing housing values [in 2006], crow about GDP growth figures that mean little to average wage earners, and the reality is that the wealth divide is growing at the present time, and in the long run is deeply problematic.

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September 16th, 2008 | By Glen Hiemstra | Posted in Business & Economy, Environment & Energy, Innovation | Comments Off

The future way out of financial mess

Last night I was interviewed by a columnist for the Puget Sound Business Journal, about the financial crisis shaking Wall Street and reshaping the U.S. Presidential election. I reprised much of the previous blog entry, and concluded that an amazing series of bad decisions are now cascading into this debacle, with a variety of unintended consequences. As a futurist speaker, I am always trying to discern what is next, and what are preferred directions. The near term demands regulation and sane banking policies. The longer term calls for innovation.

The columnist (Patti Payne, whose column will appear later this week) had a good question. In the previous blog I suggested that the only way out was innovation. How, she asked, could innovation occur without capital?

After the federal bail outs are complete (tonight we learn that the Fed is bailing out AIG with a loan of $95 billion), there will be some capital to invest, in something. What?

For the answer to that, I want to recommend three recent columns by Tom Friedman, in case you missed them. He had fallen out of favor with me with his bellicose advocacy of war after 2001, but as he researched his most recent book, he made an important discovery which has been obvious to many of us for a long time.

The biggest opportunity in the 21st Century is staring us in the face, and is not drill baby drill but innovate baby innovate, in the next energy era. It is too late to do that elegantly and without disruptions, but as Friedman argues effectively, who leads this revolution determines global economic leadership though most of the rest of the century. At this point, it is clear that the U.S. will cede leadership to others, unless we change policy direction. That is the most critical economic investment issue of the current era.

Friedman, “Flush with Energy” on why we need to follow green examples.

Friedman, “Georgia on My Mind,” on why we ought to invest at home.

Friedman, “And then there was one” on the green innovation imperative in this election.

It is no mystery what is necessary. It only a question whether the forces of innovation can overcome the intrenched interests of the past.

Glen Hiemstra is a futurist speaker, consultant, blogger, internet TV show host and founder of Futurist.com. To arrange for a speech contact Futurist.com.

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September 15th, 2008 | By Glen Hiemstra | Posted in Art & Society, Business & Economy | 3 Comments

Future of Wall Street – A futurist perspective

The 500 point drop in the Dow today, 6th largest drop in stock market history, is indicative of three interrelated social-cultural-economic factors. First, in response to 9/11 various economic actors cooperated to loosen credit as a way to prop up the economy. Ironically, in retrospect this response perfectly enabled the fulfillment of the prime goal of the 9/11 attack, which was to financially destabilize the U.S. Second the mortgage problem at the root of the current Wall Street debacle is itself a continuation of a two-decade long trend in which the financial sector became not the enabler of U.S. productivity, but a primary economic activity unto itself. Rather than earning money, we have simply borrowed it, or created it from rather thin air with creative but ultimately fictitious financial instruments. Finally, the mortgage problem is also the ultimate expression of a cultural trend in which we have valued gluttony over frugality, a lesson that people apparently have to re-learn on a continual but painful basis. The primary example of the latter is the build out of far more $600,000-$800,000 houses than any objective analysis of household earning power could ever support, under standard banking practices. We fooled ourselves.

These three factors are also examples of one of the primary tools of systems-oriented futuring processes, which is to consider not just first order (or primary) consequences of things, but also their second-order consequences. Attempting to use easy credit to off-set economic problems did stimulate the economy, but had the second order consequence of eventually destabilizing things. Attempting to spread risk with creative financial instruments did spread risk, but hid true values, and spread the fallout when the risks proved too risky. Attempting to raise standards of living to heights not supported by actual income will have the eventual effect of lowering standards of living.

Ahead we will see several more major institutions wobble and likely fail or fundamentally transform into shells of their former selves, including obviously AIG and WAMU. For consumers and home buyers, the news is not good. House prices will continue to fall well into 2009 or 2010, or until values have fallen at least 20% from the 2007 highs, more in some markets. It will be several years until prices recover to earlier values. There is even reason to suspect that values will not return to earlier values for a generation, reasons having to do with further impending economic problems caused by peaking oil supplies without enough lead time for new supplies or substitutes, and by continual financial blows from climate change.

What can we do? Get smart, get frugal, start innovating again, start producing real things again. I will have more to say about that tomorrow.

Glen Hiemstra is a futurist speaker, consultant, blogger, internet TV show host and founder of Futurist.com. To arrange for a speech contact Futurist.com.

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