I am writing this in response to the push for "Bank Transfer Day" on Nov. 5th across various Occupy movements. The logic behind Bank Transfer Day runs something like this: since Wall St. has hurt us, we must send a strong message to Wall St. and divestment will accomplish precisely that.
I have concerns with the above course of action. First, there's several genuince grievances facing the US public now – unemployment, poor health care, homelessness just to name a few. Whatever else we might say about divestment from Wall St., it does not address any grievance directly. It does not, in of itself, lead to employment, better health care or give people back their homes.
What is worse is that it carries the risk of actually harming the public. Suppose that the action does bear fruit, the divestment plan succeeds, millions of people do withdraw their money from Wall St. to the extent that the Wall St. banks go under. What happens then? It is worth remembering what happened with Lehman Brothers. In economist Dean Baker's words:
"In the wake of the Lehman collapse, the economy lost more than 700,000 jobs a month over the next nine months. While much of this job loss was probably an inevitably result of the bursting of the housing bubble, the financial freeze up associated with Lehman's collapse almost certainly worsened the situation."
I do want to acknowledge that I am no economist. Perhaps what I am saying above makes no economic sense. Perhaps we can keep the economy running even if the Wall St. banks go down just as the British economy did when Northern Rock filed for bankruptcy; it was nationalized. Perhaps. But what I do know is that the potential consequences of divestment need to be carefully thought through.
One might argue that millions divesting from Wall St. is simply not going to happen. So not enough money is going to be transferred for it to cause any serious damage. But then what is the point of doing this? Given that divestment does not empower people in of itself, is this really a wise investment of our time?