Occupy USA?

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For over a week protesters have been growing in numbers on Wall Street, with unclear demands but clear rage.  Hundreds have been arrested as they shut down the Brooklyn Bridge and sympathy protests spread to other cities.   Left wing notables such as Chris Hedges, Michael Moore and Matt Taibbi have described this as the start of a new movement (Hedges said it was the ‘best hope’ for America to recover from this crisis) and slowly the media is starting to take note.

So what’s happening?   First, the left has been silent for much of this economic crisis because until early 2011 the Democrats held power in Congress and the Presidency.   As health care reform passed, “Don’t ask don’t tell” repealed and other changes made, most on the left held out hope that Obama would pursue a truly progressive agenda.   To be sure, the Hedges, Moores and Taibbis gave up on Obama long ago.  He stayed in Iraq and Afghanistan, had policies very friendly to Wall Street, and the call for tax increases on the wealthy — something which gets labeled class warfare on the right — is seen as pathetically trivial.    The far left wants real class warfare because, they argue, it’s been waged on the US by Wall Street and the business elite for years.

Students and others whose hope was kindled by the Obama candidacy, and who look at the tea partiers as almost anachronistic, wanting to go back to America like it was decades ago, had drifted towards apathy.   Now a movement is starting that might ignite their interest again — sort of an anti-tea party.

The cause of their ire is clear: Wall Street and big money.   These are firms that created the debacle of 2008 thanks to unregulated derivatives trade and what in retrospect can only be called fraudulent but legal deals.   They raked in hundreds of millions of dollars of bonuses for deals that were setting the stage for a crisis as serious as the Great Depression.   Then when all hell broke loose and Americans were out of work and unable to keep up their mortgages, the government made sure the financial sector did not collapse.   Soon they were back making record profits, even as the world economy sunk.

Beyond that the wealthy have managed to create for themselves a zone of safety where their wealth is not at risk and they don’t have to do anything special to be a top earner.   Just being born in the wealthy class virtually guarantees you will stay there unless you really screw things up.   Meanwhile being born poor assures you’ll remain poor unless you undertake a heroic effort with luck and creativity.   Some accomplish that, but overall class mobility in the US is low.

In the last thirty years as the wealthy have received record tax cuts to the lowest levels in history (and have loopholes and other ways to avoid more), the top one percent have had their income grow by 281%

This chart shows that the more you earn, the greater your income growth.  For the nearly thirty year period the bottom 60% — more than half of the population — had earnings increase by 25%, the bottom 20% only 16%.    Politics is about relative gains and loses, and obviously there has been a relative shift of wealth to the highest earners.   281% for the top 1%, only 25% for the bottom 60%.   For the last thirty years the wealthy have done very well, even as the rest of the country has stagnated.    As unemployment officially lingers at near 10%, but if you took into account everyone who would want to work could be close to 20%, it’s very clear that Americans are hurting, even as the wealthy hold on to their gangs and Republicans scream “class warfare” whenever someone wants to increase their taxes even a little.

This is going to get people mad.    People accepted the massive growth in income disparity over the last 30 years (we were most equal in 1976 in the last year of the Ford Administration, now income distribution is like that of the late 19th Century) thanks to lower prices via foreign goods and the illusion that the economy was a success.   Now that illusion has faded and people are coming to grips with the fact that the US is in decline, with an economy based on consumption rather than production.   Massive debt by both the government (100% of GDP) and the private sector (total debt government and private sector: 400% of GDP) have created a structural crisis, one that can’t be fixed with a quick stimulus or a few policy changes.

The tea party’s rage is real, but they so far have gone for illusory solutions.   If only government spent less and cut regulations, then “job creators” would move in and magically fix the economy.  It sounds so easy, so painless, and thus they are angered by those ignorant Democrats who can’t see that they are standing in the way of a simple, clear solution to America’s ills.  If only it were so easy!    That solution is pure fantasy.   Of course, the Democrats had their painless solution.   Spend more money, save jobs, help out states and don’t worry about the debt — we’ll pay it off when we’re growing again!   They are angered by those ignorant Republicans who don’t understand that cutting spending slows the economy even more than tax increases would!

The “Occupy Wall Street” movement, which is starting to spread, seems to recognize the folly of the “easy solutions” have been fed to us by an elite which wants to protect its advantage and avoid anything that might get in the way of continuing to profit without significant competition.    They call themselves capitalists but they do all they can to avoid having to undertake the risks capitalism is supposed to entail.  They’ve convinced many people that the choice is “capitalism or socialism” and they’re the good side of that false dichotomy, while “big government” (by definition socialism in that world view) is the bad side.

President Obama until now has tried to reform rather than radically alter the system.   As an outsider, he’s been keen to reassure the moneyed elite that he’s not a threat, believing that will be more effective than creating animosity from those who have the power to make or break his Presidency.   While the tea party complains about “establishment Republicans,” Obama remains an “establishment Democrat.”

So the protests grow.   The left is starting to counter the right in both rage and demands for radical change.   Beneath the surface organizations are being built that can be mobilized for political action going forward, the infrastructure of a true progressive movement is starting to grow.   Just as the tea party irritates establishment Republicans, this group will be a thorn in the side of establishment Democrats.

To many people the idea of protesters in a prosperous democracy modeling their movement after protests that overthrew an oppressive dictatorship in Egypt is silly.   Yet they have felt helpless as both parties have courted the business elite, had the same insiders (Clinton’s economic team was more free market than Reagan’s had been, and many of them were brought into the Obama Administration), and stood back as jobs moved off shore, the middle class lost ground, and the country drifted into decline.

These folk are finding their voice as this crisis, now three years old, enters a new stage.

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  1. #1 by Sean Patrick Hazlett on October 2, 2011 - 23:04

    But, Scott, like most of the left’s protests, this one has no point. What do they hope to achieve from this? What are their demands?

    At least the Tea Party has a focus – smaller government. These lefty protestors seem to be protesting for protest sake.

    Nicholas Kristof, someone with whom I disagree 99% of the time, actually makes my point in a recent op ed he put out today.

    Additionally, these so-called “banksters” culled hundreds of thousands of jobs in recent years. I believe Citigroup alone cut 100,000 jobs. Bank of America plans 30,000 to 40,000 lay offs.

    I’m not surprised that President Obama’s class warfare approach has had such great appeal with a directionless mob.

    • #2 by Scott Erb on October 2, 2011 - 23:34

      These protesters don’t like Obama — they’re protesting him as much as they’re protesting the banks. The protesters believe tax warfare has been waged by big money against the middle class. They say Obama has been too friendly to Wall Street and too willing to work with Republicans. There is no way anyone can seriously accuse Obama of class warfare — just for wanting a slight increase in taxes and the closing of loopholes? The focus is clear for these protests — they blame big banks and big money for the debacle of both the crisis and the loss of the middle class. They probably will set the foundation for a true progressive wing of the Democratic party. The result will be that the Democrats probably will have the same pressure from the left that the tea party gives the Republicans from the right. Obama’s managed to neutralize that, hence he can propose cuts to the point that domestic spending is lowest since Ike’s Presidency, call for only mild closing of tax loopholes, and have a very Wall Street friendly approach. If a true left wing counter rises in the Democratic party, the Republicans will probably not be offered a deal as good as the one they rejected from Obama this year. Obama has been very centrist in his approach — but I don’t think the left is going to let him get away with that if he wins another term.

      If the two parties can’t reach some effective agreement soon, ultimately we’ll see US politics fragment into a greater left-right divide, and probably even more gridlock at a time when we need solutions.

  2. #3 by Sean on October 3, 2011 - 20:49

    I’ll have to take a few exceptions with this post.

    “Beyond that the wealthy have managed to create for themselves a zone of safety where their wealth is not at risk and they don’t have to do anything special to be a top earner” is not true. Look at the graphy immediately beneath it and you see the top 1 % income fall dramatically in ’87 and between 00-02. Interestingly you did not include a graph showing up to 2010 whereby the fall will occur again.

    The wealthy have a disproportionately large amount of their stock of wealth invested and hence it is a “risk”. When the markets took a dive (e.g. 1987) or entered a bear market (e.g. 00-02) the impact on the stock of wealth was dramatic. This concept that it is not at risk is wrong, but the “zone of safety” only operates once the stock of wealth is at a level where a dramatic decline in markets does not materially affect their standard of living. Something we all aspire to.

    Also given the stock of wealth tends to be invested, many people benefited from the 30-year stock run and again during the recent bond and commodities bubble. In effect, taking advantage of enhanced market liquidity to boost their overall stock of wealth. Of course, all of this is via taking risks in the marketplace.

    Secondly, are you serious when you wrote about the Democrat’s “painless solution”? I certainly hope that you were being sarcastic because your orthodox Keynesian view of “borrow and spend” tends not to stack up with reality. The Democrats did spend, but they made two key mistakes: 1) the mistook a structural economic problem for a cyclical one and 2) Obama allowed the Congress to determine where the money was spent rather than doing his job and directing it himself.

    The US has had massive fiscal and monetary stimuli in addition to the automatic stabilisers inherent within fiscal policy. It has not worked. The problem is you have the worst of both worlds: crushing debt burden combined with anaemic economic growth.

    • #4 by Scott Erb on October 3, 2011 - 21:25

      Even with dips, the wealthy have benefited the most, and overall I don’t think stock market drops have hurt their status. But I’ll try to dig through the numbers a bit more carefully. The bubble economy meant that investments did not go to building the economy and creating jobs but went to efforts to earn easy money in the market.

      I tried to be clear that I was putting both “painless” solutions on equal footing — they aren’t up to the task. This isn’t your normal recession, this isn’t just part of a business cycle, this involves heavy deleveraging as consumers, businesses and governments try to reduce debt. That paying off of debt slows the economy. Neither ‘painless solution’ will work. So in that I agree with your criticisms of the 2009 stimulus above. I’m not sure exactly how we get out of this, though I’m increasingly thinking that we need a global effort; the Bretton Woods era institutions and agreements are becoming obsolete thanks to globalization.

  3. #5 by Airat Teregulov on October 5, 2011 - 05:54

    New Economy – New Policy.

    The call “Gobs, not Cuts” needs new industries. The call “People, not Profits” means the industries should be based on plan, not market. Such new economy needs a new policy, i.e. new elections based on wisdom, not force. This’ll be done by the tech and social general ideas on Optimal Development based on a compromise between force and wisdom, market and plan. There’s a need to unite the mass protests by “Clever World – General Business”, where Clever World is the new policy and General Business is the new economy. Otherwise the mass protests will be useless, for the authorities ensure by market survival during the crisis, but can’t stop it.

    General Ideology for Success of Mass Protests (Occupy Wall Street etc.).

    General Ideology is the ideology of wisdom as an opposite to the present ideology of force. There’s a need of a General Ideologist to deal with the representatives of protesters in big cities of big countries, who’ll deal with the representatives of protesters in other cities and small countries etc. Please, inform me what is your opinion.

    Main means to get rid of unemployment, countries’ debts, global crisis.

    The tech and social general ideas on Optimal Development based on a compromise between force and wisdom are obtained. They show: the global crisis is caused by an excessive power of force and give means to reduce it by the power of wisdom; the XXI century’s feature is globalization to be based on an interaction of the eastern features (Russia, general ideas) and western features (USA, big capitals). wayoutofglobalcrisis.blogspot.com

    Power of Wisdom will stop price rise, give good part-time jobs, fuel savings etc.

    POWER OF WISDOM. Elections are power force. Hence, force lives on account of wisdom. This has exhausted basis of science, thus causing stagnation, price rise, crisis. Double power of force (elections of deputies and president) gives sharp rise of fraud, theft, violence. Way out is power of wisdom. For its peaceful way appeared one author of tech and social general ideas on Optimal Development to use them together, since tech general ideas will give mass goods for social general ideas, i.e. there’ll be no need to take goods from rich people, but need of credits. “Clever World – General Business” will stop price rise, give good income, fuel saving and so on to its members, elect country’s head of wisdom (cleverworld-generalbusiness.blogspot.com). Got Univ. ed., scientific degree & title. A. Teregulov. Ph + 7 843 2365517. E-m razum21@hotmail.com

  4. #6 by Elliot (@myweeklycrime) on October 8, 2011 - 10:05

    This chart shows that the more you earn, the greater your income growth. For the nearly thirty year period the bottom 60% — more than half of the population — had earnings increase by 25%, not even keeping up with inflation (and lowest 20% earned only 16% more).

    I looked up the original source at cbpp.org and it clearly states that the graph you include above is using inflation-adjusted dollars. If the line were straight, that would mean it was keeping up with inflation. An increase means improvement in purchasing power.

    From our years and years of on-line arguments, you know why I disagree with just about all of your arguments and I don’t care to repeat them here. Just pointing out that your information on inflation outstripping gains is flat-out false.

    Elliot

    NOTE: The error has been corrected in the post. Thanks for looking at the data more carefully and pointing out my mistake.

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