Pre-Occupied with Wall Street: A Systems Thinking Perspective

The Occupy Wall Street movement has grown exponentially over the past week. What began as a movement targeting Wall Street has turned into something larger than just economic circumstances, but encompassing social and environmental concerns.

Let’s take a systems thinking look at just blaming Wall Street, and why Wall Street is only a symptom of the underlying problem.  Furthermore, how do return to a sustainable, robust, economy? The underlying problem is the collusion (whether intended or not) of Wall Street, the Federal Government and the Federal Reserve.  What we see with our eyes is just the greedy Wall Street corporations making a quick buck, benefiting first from artificially low interest rates from Federal Reserve before the crash, and government bailouts after the crash.  Their benefit is to our detriment, as the rest of America is struggling with foreclosures and joblessness.  What we don’t see is the entire system being skewed by the government in favor of these very corporations.

Bill McKibben, co-founder of 350.org, said it best in an email to supporters, “For too long, Wall Street has been occupying the offices of our government, and the cloakrooms of our legislatures.  They’ve been a constant presence, rewarded not with pepper spray in the face but with yet more loopholes and tax breaks and subsidies and contracts.”  It goes further into just plain collusion.What are some of these collusive acts?  For one, ratings agencies like Moody’s and Standard and Poor’s are licensed by the Federal Government.  These are the very agencies that gave high ratings to mortgage backed securities which eventually became worthless.  Wall Street made a profit, we suffered a loss via our 401k or retirement funds, because of this systemic scheme.

Fannie Mae and Freddie Mac are other examples of government-corporation collusion, this in front of our very eyes.  These so-called Government Sponsored Enterprises, are the very entities that backed adjustable rate sub-prime loans.  Homeowners were not able to keep up with such loans, thus ending in foreclosure.

But if we trace the Wall Street debacle back far enough, it leads back to the Federal Reserve System.  The Fed is known as quasi-public, quasi-private (can we say government-corporate collusion) institution.  It was the institution that artificially lowered interest rates that allowed for the housing bubble to grow.  Imagine if money wasn’t easily loanable, maybe we would have never seen the severe domino effect of subprime mortgages, ratings agencies, mortgage-backed securities, to the stock market collapse.

So how do we solve this problem of government-corporate collusion and move towards a sustainable economy?  Some suggest we need more regulations on Wall Street.  However, if the collusion is as tight as it has been, I think more regulations would only be to the benefit of Wall Street.  If we use systems thinking, we ultimately see that the corporations “own” the government, and the government “regulates” the corporations.  My question to you is, how do we get out of this circular flow?

Image Credit: Wikipedia

Jonathan Mariano is an MBA candidate with the Presidio Graduate School in San Francisco, CA. His interests include the convergence between lean & green and pursuing free-market based sustainable solutions.