Progressives had some fun last week with Frank Luntz, who told the Republican Governors' Association that he was scared to death of the Occupy movement and recommended language to combat what the movement had achieved. But the progressive critics mostly just laughed, said his language wouldn't work, and assumed that if Luntz was scared, everything was hunky-dory. Just keep on saying the words Luntz doesn't like: capitalism, tax the rich, etc.
It's a trap.
When Luntz says he is "scared to death," he means that the Republicans who hire him are scared to death and he can profit from that fear by offering them new language. Luntz is clever. Yes, Republicans are scared. But there needs to be a serious discussion of both Luntz's remarks and the progressive non-response.
What has been learned from the brain and cognitive sciences is that words are defined by fixed frames we use in thinking, frames come in hierarchical systems, and political frames are defined in moral terms, where "morality" is very different for conservatives and progressives. What lies behind the Occupy movement is a moral view of democracy: Democracy is about citizens caring about each other and acting responsibly both socially and personally. This requires a robust public empowering and protecting everyone equally. Both private success and personal freedom depend on such a public. Every critique and proposal of the Occupy movement fits this moral view, which happens to be the progressive moral view.
What the Occupy movement can't stand is the opposite "moral" view, that democracy provides the freedom to seek one's self-interest and ignore what is good for other Americans and others in the world. That view lies behind the Wall Street ethic of the Greedy Market, as opposed to a Market for All, a market that should maximize the well-being of most Americans. This view leads to a hierarchical view of society, where success is always deserved and lack of success is moral failure. The rich are the moral, and they not only deserve their wealth, they also deserve the power it brings. This is the view that Luntz is defending.
Referring to the rich as "hardworking taxpayers" ignores the fact that a great percentage of the rich do not get their wealth from making things, but rather from investments in other people's labor, and that most of the 1% are managers, not people who make things or directly provide services. The hardworking taxpayers are the 99%. That is not the frame that Luntz wants activated.
But Luntz is not just addressing his remarks to Republicans. He is also looking to take Democrats for suckers. How? By choosing his frames carefully, and getting Democrats to do the opposite of what he tells Republicans. There is a basic truth about framing. If you accept the other guy's frame, you lose.
Take "capitalism." It arises these days in socialist discourse, and is seen as the opposite of socialism. To attack "capitalism" in this frame is to accept "socialism." Conservatives are trying to cast progressives, who mostly have businesses or work for businesses or are looking for good business jobs, as socialists. If you take the Luntz bait, you will be sucked into sounding like a socialist. Whatever one thinks of socialism, most Americans falsely identify it with communism, and will reject it out of hand.
Luntz would love to get Democrats using the word "tax" in the conservative sense of taking money from the pockets of hardworking folks and wasting it on people who don't deserve it. Luntz doesn't want Democrats pointing out how private success depends on public investment -- in infrastructure, education, health, transportation, research, economic stability, protections of all sorts, and so on. He doesn't want progressives talking about "revenue" which is defined in a business frame to mean money needed for any institution to function and flourish. He doesn't want Democrats talking about the rich paying their fair share for the massive amount they have gotten from prior investments in a robust public. Luntz would love to lure progressives into talking about government "spending" rather than investments in education, health, and infrastructure that will benefit most Americans.
He doesn't want progressives pointing out that corporations govern our lives far more than any government does -- and for their profit, not ours. He doesn't want any discussion of corporate waste, or military waste, which is huge.
Luntz would love to have Democrats talking about "entrepreneurs," which evokes a Republican view of the market as a tool for self-interest. His proposal to discuss "job creators" instead hides the fact that the business community has not been hiring despite record profits. He certainly does not want discussion of outsourcing and minimizing pay for work, which leads corporations to eliminate or downgrade jobs and hence keep wages low when profits are high.
Hidden behind his proposal to substitute "careers" for "jobs" is his attempt to appeal to young people just out of college and grad school who expect more -- a profession -- not just a mere "job." But of course, corporations are downgrading positions away from professional careers and more toward interchangeable McJobs requiring minimal ability and with minimal pay and benefits.
Luntz is right about not saying "sacrifice." He is right that most Americans are already hurting more than enough. They want a viable present and a future for themselves and their children and grandchildren. He is right to suggest "talking about how 'we're all in this together.' We either succeed together or we fail together." But that is the opposite of conservative morality. It is the progressive view of a moral democracy that all of Luntz's conservative framings contradict. It is an attempt at co-opting the progressive moral system, because the Occupy movement is showing that it is an idea of democracy that makes sense to most Americans. And it is an attempt to take Obama's strongest moral appeal away from him.
Unfortunately, Luntz is still ahead of most progressives responding to him. Progressives need to learn how framing works. Bashing Luntz, bashing Fox News, bashing the right-wing pundits and leaders using their frames and arguing against their positions just keeps their frames in play.
Progressives have a basic morality, which is largely unspoken. It has to be spoken, over and over, in every corner of our country. Progressives need to be both thinking and talking about their view of a moral democracy, about how a robust public is necessary for private success, about all that the public gives us, about the benefits of health, about a Market for All not a Greed Market, about regulation as protection, about revenue and investment, about corporations that keep wages low when profits are high, about how most of the rich earn a lot of their money without making anything or serving anyone, about how corporations govern your life for their profit not yours, about real food, about corporate and military waste, about the moral and social role of unions, about how global warming causes the increasingly monstrous effects of weather disasters, about how to save and preserve nature.
Progressives have magnificent stories of their own to tell. They need to be telling them nonstop.
Let's lure the right into using OUR frames in public discourse.
Last week, I was talking to my friend, Landon Rowland. Landon is the kind of guy who knows what is going on in the business world. He's highly respected as a national leader in the industrial space, having run a major railroad. But he's also Chairman Emeritus of Janus Capital, he understands finance like the back of his hand, and he is a major civic leader with a deep knowledge of politics and the regulatory world. Last week, he says to me, "Dylan, no matter who I talk to, no one can give me the total American bank exposure to the Eurozone." Landon knew how much his own bank stood to lose directly if the Eurozone banks couldn't pay their debts, but as to the total risk to our system, no way. He couldn't find out. And it's not because people were keeping secrets, it's probably because no one knows. So the danger is that some random strikes in Greece, a country whose economy is the size of Dallas, could set off a chain reaction destroying the American banking system.
The world's financial system is so tightly linked, so tightly coupled, that semi-random events halfway around the world with zero real economy impact on anything American can still crash our economy. And the links are opaque, so we don't really know who is vulnerable or how to firewall off the real economy from financial speculation.
The root cause is something I've written about in my book, Greedy Bastards: leverage. Leverage means borrowing money and using the proceeds to invest or speculate -- it's a way to multiply gains and losses. Leverage isn't good or bad -- like dynamite, it can be used on construction projects, or as a dangerous weapon. When you buy a house with a mortgage, you're using leverage. When you borrow from your father to go gambling in Las Vegas, that too is a form of leverage. And let's not even get to complex betting instruments used by big banks known as derivatives, because then leverage starts to get dangerous.
Leverage matters on a systemic level because it is the mechanism that links your financial condition to that of your debtors and creditors. You might look solvent, or even wealthy, but if one of your debtors goes under can't pay you back, suddenly you are broke too. And then your own creditors might also be broke, and on up the chain. If enough entities are borrowing and lending enough money to each other, the net effect is that their balance sheets effectively combine into one mega-balance sheet. Since you look wealthy, neither you nor regulators would even know how close to going bankrupt you might actually be. This is why Federal Reserve Chairman Bernanke called the subprime crisis "contained" in 2007. He thought, like many officials, that there would be a mild economic disruption due to falling housing prices, but he had no idea that the entire financial system was on the verge of a meltdown. He simply didn't know how interlinked subprime mortgages had become with global bank balance sheets.
When you prudently borrow money to buy a house or build a factory, you are investing in the future using leverage. But when a bank uses fancy complex derivatives through opaque secret deals, a bank is linking its balance sheet to risks it may not understand and to systemic threats regulators can't track. Banks are essentially making money by throwing dynamite into random mine shafts and hoping they dig a gold mine. Goldman Sachs and JP Morgan have written credit protection on $5 trillion of global debt, but can't say how much is Eurozone debt. This is why our markets have gone crazy -- last week, the Dow jumped by 400 points in one day, after swooning in November and nearly crashing in August. Asset prices these days reflect guesses about which stick of dynamite will go off, as opposed to doing what markets are supposed to do, which is reflect prudent profit making potential of securities and credit instruments.
When balance sheets are linked across the world, that creates the possibility of a systemic collapse. One day, you're wealthy, the next day, you're insolvent, and so is everyone you know. Secrecy magnifies the problem, because it means that we cannot prepare for shocks. None of this is inherent. If derivatives were put on exchanges with multiple bidders and sellers, at least we could more easily see price movements that indicate risks. As Gretchen Morgensen reported, the financial reform bill passed in 2010, known as Dodd-Frank, actually accomplishes this. Last week, however, Democratic Congresswoman Carolyn Maloney and Republican Congressman Scott Garrett passed a bill in the House Financial Services Committee to gut the main provision forcing a mandatory display of pricing. This kind of bipartisan collusion is increasing risks to our system. Policy-makers like Maloney and Garrett, bought as they are by bankers, are making it worse. They are the reason that neither my friend Landon Rowland nor anyone else can figure out our banks' Eurozone exposure.
The scale of the problem is enormous, but so is the scale of the opportunity. As I write in my upcoming book, there are three paths out of this trap. One, we can hope that the problem goes away, as we've done before when previous shocks (like the East Asian crisis) have hit the financial system. Two, we can prepare for the social unrest coming due to policies that retain this tightly coupled poverty-inducing policy framework. Possible consequences to prepare for include increasing nationalism, a trade war, or even real wars. Or three, we can engage in a Marshall Plan style debt restructuring now, to write down debts to a manageable level. This is the global solution, and hopefully, we'll do it before a cataclysmic event.
I did podcasts with Morgensen on this problem, as well as blogger Yves Smith of Naked Capitalism and financial analyst Chris Whalen. I would give them a listen, because it's clear we're in serious trouble, but also that we have an enormous opportunity in front of us. The volatility we're seeing in our credit and equity markets is an indication that we're heading off the rails. And it's not just a few people carping about the problem -- legendary investor George Soros says the system is on the brink of collapse.
So it's time to grab a hold of this scary problem, and build the society we want.
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