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The Lesson the Left Can Learn on Inequality from Occupy Wall Street

Oct 17, 2011Mike Konczal

The protesters' particular focus on inequality is a perfect starting place for a progressive movement revival.

The protesters' particular focus on inequality is a perfect starting place for a progressive movement revival.

Right now Occupy Wall Street has favorable polling. So did the Tea Party at its beginning. As Seth Ackerman pointed out to me, once people saw that the Tea Party wasn't a new thing but this old, arch-conservative thing, one that wants to take our global historical moment and wage total war against public sector workers and uteri, they turned against it. One symptom that it was an old thing was the books that it circulated: from Hayek's underwhelming Road to Serfdom to Bircher Cold War tracts from the types who thought Eisenhower was a member of the communist conspiracy.

Ackerman noted that it isn't clear what will happen with Occupy Wall Street ideologically, if only because at this point the left-liberal project and progressivism more generally is chaotic and up for grabs. This makes for a fun, fascinating, and scary moment for a potentially insurgent left.

This movement is very focused on inequality. But why? A lot of different ideas have already surfaced. With so much of the debate about the 99% and the 1% framed in the context of extreme inequality, it might be worthwhile to step back and examine the liberal arguments against inequality and discuss what I see of them in Occupy Wall Street.

This is a great cheat-sheet -- a list of objections to inequality resulting from the high liberalism tradition from TM Scanlon's "The Diversity of Objections to Inequality" (article not free online, here's a summary). Liberals, in general, have five objections to inequality:

A sixth point will hopefully be added in the future: A more equal distribution creates a better economy. There's an assumption that the market, instead of creating concentrations of wealth and power that slow growth, assigns resources to where they are best used in both the short and long term. However, it is hotly contested whether income inequality causes crashes; researchers at the IMF found models where it can. And a whole other strain of research finds that equality causes growth to be more sustained (see summaries by Georgia Levenson Keohane and Brad Plumer).

As Scanlon is quick to note, only a few of these are necessarily egalitarian -- you can be concerned with relieving the suffering of the poorest without actually caring about disparity of incomes. And there is usually a huge emphasis on how the power referred to in number three is primarily a problem of electoral politics and policy instead of a problem of dominating, controlling power relations between individuals.

So where does Occupy Wall Street stand on these? What I find fascinating is that there is much more of a focus on forms of power and domination as opposed to the more general concerns of egalitarian liberalism, those focused on stigmatization and fairness. This is a healthy move for the debate.

On Oct. 23, the FDR Library presents a free forum on FDR’s foreign policy advisers. Click here to find out how you can join the conversation!

One of the major concerns you hear from people in occupations is that the political process has become fundamentally corrupted. This gets right at number three: Money has become so concentrated and such an overwhelming presence in our politics that we need some ways of reforming it at a structural level. The stakes are higher in Occupy Wall Street. The government blurs into the private sector, wealth is no longer a measure of contribution but instead rent extraction, and no party or individual can be trusted to work within the system. There needs to be a reboot. How did we get here? Hacker and Pierson's Winner Take All Politics is a good place to start when looking for the answer.

Another argument is that Wall Street itself is out of control. Having failed quite profitably in its sole responsibility -- allocating capital responsibly, not towards Pets.com, junk mortgage debt, strip-mining companies for short-term gains, and worthless housing stock nobody wants -- and then getting bailed out when it all collapsed, the sheer presence of the financial sector among the top 1% feels like a crime. This power is more ruthless than than that in the normal discussion. It drives the entire economy, and it appears to have just driven it off a cliff. For more, 13 Bankers, Econned, Age of Greed, and Wall Street from the 1990s all walk readers through this story.

What about the 99%? I've previously looked through the We Are the 99% Tumblr and found that the biggest emphasis was on debt, ranging from student loans to medical debt, and a lack of enough employment to get by month-to-month. Here inequality is less a problem related to the more traditional liberal concerns of fairness or the idea that a few are left behind, and more a problem in which inequality is making indentured peasants of a huge part of the population. Risks are shifted to individuals who are already struggling, opportunities and possibilities are ruthlessly revoked, employment is nonexistent, and month-to-month survival is a battle for more than the just the very bottom. Books such as Graeber's Debt: The First 5,000 Years approach this from an anthropological point of view. Other works include Elizabeth Warren's book on how fixed costs of the middle class drive even two-income families into poverty, as opposed to more general discretionary spending (read: "frivolous" spending), or Tamara Draut's Strapped.

This ties into traditional liberal concerns. Liberals want institutions that allow people to develop their talents and also ones that insure them against the bad luck of health and unemployment. These institutions have been unraveled, and their public nature has been replaced with debt. And when people involved in Occupy Wall Street talk about this phenomenon, they connect how debt functions as a new safety net with the experience of servitude and suffering. Not in a relative sense of inferiority and shame (although that's there too), but in actual deprivation and the feeling of powerlessness against creditors, bosses, and the top of the elite.

Indeed, these concerns are reflected in the format of the general assembly and other current, institutional characteristics of Occupy Wall Street. Without permanent, clear leaders, there is no one to arrest, corrupt, or otherwise take over. That address their concerns about political domination from sources internal and external. The focus on mass participation and consensus derives, in part, from inequality in political access. Resources and responsibilities are distributed in the most egalitarian manner because physical deprivation is just one bad month away for many in the occupations (indeed, in the country). Collective enterprises offer a potential solution to giving workers real power in the workplace, power that can be put into action across the country and isn't dependent on Obama and the Senate.

This strikes me as firmer ground on which to try and build up a resurgent left. What's your take?

Mike Konczal is a Fellow at the Roosevelt Institute.

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Occupy Wall Street's Middle Class Vision for the Left

Oct 17, 2011Joan Williams

occupy-journalOccupy Wall Street could bring disaffected blue-collar workers back into the progressive fold by recasting the left as the voice of the middle class.

occupy-journalOccupy Wall Street could bring disaffected blue-collar workers back into the progressive fold by recasting the left as the voice of the middle class.

When the second Google hit (after Wikipedia) for "corporate cronyism" links to a speech by Sarah Palin, you know why progressives need Occupy Wall Street.

Occupy Wall Street's power lies in the "We are the 99%" theme. The poignant and evocative stories on the Tumblr of that name feature hard-working, settled, middle-class families who have had the rug pulled out from under them by recent economic conditions. A single mom who put herself through college and grad school only to lose her job due to chronic illness, who now can't sell her house and worries that her children and grandchildren don't have much of a future. A 38-year-old cancer survivor, unemployed and with $50,000 in student loans, who can't get health insurance. A 21-year-old making $10.50 an hour at one job and looking for another so she no longer has to choose between paying bills and eating, who sleeps in her car because she can't get approved for an apartment. Her parents can't help because her father lost his job, "the bank took our house," and her mother is sick and can barely afford her medicine.

These are stories of the tremendous toll taken by the Great Recession on middle-class Americans who have done everything right: they work hard, seeking a second job if the first cannot support them; they scrimp and save to buy a house; they pay their bills on time. And then they tumble out of the settled middle class due to illnesses, or a lost job, or an accident -- things over which they have no control.

These are stories of the group that has shifted sharply Republican since 1970. Actually, it's only the whites in this group who have shifted: Blacks of all classes still vote overwhelmingly Democratic. But Democrats have lost many nonunionized whites in what Theda Skocpol has called the "missing middle" -- the middle 50% of Americans, whose median income is $64,000. I will call them blue collar, although the sad fact is that many of the blue-collar jobs that offered a stable middle class life have long since disappeared, leaving many in low-paid pink or routine white-collar jobs that offer very low pay and no benefits.

On Oct. 23, the FDR Library presents a free forum on FDR’s foreign policy advisers. Click here to find out how you can join the conversation!

Occupy Wall Street's focus on this group is a big change from the Democrats' focus, since about 1965, on the poor -- the bottom third of Americans whose median income is $19,000. While the poor no doubt need help, so do the missing middle. While the standard of living of blue-collar families doubled between the end of World War II and 1973, blue-collar jobs disappeared after that, and the standard of living in blue-collar families stalled out despite the fact that wives entered the workforce. Even more devastating, the cherished stability these families enjoyed in the 1950s and 1960s evaporated due to the "great risk shift" documented by Jacob Hacker. That's the message of the "We are the 99%" movement.

Understandably, Republicans are alarmed. They have launched a counteroffensive called "We are the 53%" -- that's the percentage of Americans who pay federal income taxes. This represents a move that, for Republicans, is tried and true: it seeks to bond the missing middle to the business elite. For once, progressives are contesting this narrative by articulating in very clear and concrete terms what blue-collar families share with newly vulnerable professionals.

So Occupy Wall Street has definite potential. It's worth pointing out, though, that this potential can easily be squandered. Republicans already have begun to malign the movement as composed of "trust fund hippies." This is a smart move. One of the things that drove blue-collar whites out of the Democratic camp was the rise of hippies and yuppies (or trustafarians) whose willingness to take risks were -- unbeknownst to them -- perceived as enactments of upper-middle-class privilege. It didn't help when hippies called the police -- who had good, stable, respected blue-collar jobs -- "pigs."

I hope that Occupy Wall Street avoids all this. If they reinforce the trust fund narrative, their activism will further reinforce the hold of Wall Street Republicans. But if they avoid that, and if the Democrats take the hint and begin to listen to the 99%, Occupy Wall Street could be the beginning of something big.

Joan Williams is the author of Reshaping the Work-Family Debate.

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Who are the 1% and What Do They Do for a Living?

Oct 14, 2011Mike Konczal

mike-konczal-newThere's good reason to focus on the top 1%: they're distorting our economy.

Look, a crazy anti-capitalist anarchist carrying a bizarre sign incompatible with the basic tenants of liberals:

Or not.

There's good reason to focus on the top 1%: they're distorting our economy.

Look, a crazy anti-capitalist anarchist carrying a bizarre sign incompatible with the basic tenents of liberals:

Or not.

A lot of emphasis is on the "99%" versus the "1%" in these protests. But who are the 1% and what do they do for a living? Are they all Wilt Chamberlains and Oprahs and other people taking part in the dynamism of the new economy? Nope. It's same as it ever was -- high-level management and the financial sector.

Suzy Khimm goes through the numbers here. I'm curious about occupations. I'll hand the mic off to "Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data" by Bakija, Cole, and Heim. This is the latest and greatest report on occupations and inequality. Here's a chart of the occupations of the top 1%:

distribution_1_percent

Inequality has fractals. Let's go into the top 0.1% -- what do they look like?  Here's the chart of the occupations of the top 0.1%, including capital gains:

It boils down to managers, executives, and people who work in finance. From the paper: "[o]ur findings suggest that the incomes of executives, managers, supervisors, and financial professionals can account for 60 percent of the increase in the share of national income going to the top percentile of the income distribution between 1979 and 2005."

On Oct. 23, the FDR Library presents a free forum on FDR’s foreign policy advisers. Click here to find out how you can join the conversation!

For fun, there are more than twice as many people listed as "Not working or deceased" than are in "arts, media, sports." For every elite sports player who earned a place at the top of the income pyramid due to technology changes and superstar, tournament-style labor markets that broadcast him across the globe, there are two trust fund babies.

The top 1% of managers and executives often means C-level employees, especially CEOs. And their earnings versus the average worker have skyrocketed in the past 30 years, so this shouldn't be surprising:

How has this evolved over time?  Can we get a cross-section of that protest sign above?

Same candidates. There's a reason the protests ended up on Wall Street: The top 1% and top 0.1% comprises all the senior bosses and the financial sector.

One of the best things about Occupy Wall Street is that there is no chatter about Obama or Perry or whatever is the electoral political issue of the day. There are a lot of people rethinking things, discussing, learning, and conceptualizing the kinds of world they want to create. Since so much about inequality is a function of the legal structure known as a "corporation," I'd encourage you to check out Alex Gourevitch on how the corporate is structured in our laws.

The paper notes that stock market returns drive much of the manager's income. This is related to a process of financialization, something JW Mason has done a fantastic job outlining here. The "dominant ethos among managers today is that a business exists only to enrich its shareholders, including, of course, senior managers themselves," and this is done by paying out more in dividends that is earned in profits. Think of it as our-real-economy-as-ATM-machine, cashing out wealth during the good times and then leaving workers and the rest of the real economy to deal with the aftermath.

Both articles mention chapter 6 of Doug Henwood's Wall Street; anyone interested in how things have changed and where they need to go would be wise to check it out. It's even available for free pdf book download here.

There's good reason to focus on the top 1% instead of the top 10 or 50%. There is evidence that financial pay at this elite level is correlated with deregulation and the other legal changes that brought on the crisis. High-ranking senior corporate executives' pay has dwarfed workers' salaries, but is only a reward for engaging in shady financial engineering practices. These problems require a legal solution and thus they require a democratic challenge and a rethinking of how we want to structure our economy. Here's to the 99% and Occupy Wall Street helping get us there.

Mike Konczal is a Fellow at the Roosevelt Institute.

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We are the 99%: A Progressive Narrative in One Powerful Phrase

Oct 14, 2011Richard Kirsch

Occupy Wall Street's message goes a long way toward crafting a solid progressive story about the economy.

One of the most common criticisms of progressives is that, unlike the right, we don't have simple messages that tell our story. Our young leaders at Occupy Wall Street have come up with a powerful answer: We are the 99%.

Occupy Wall Street's message goes a long way toward crafting a solid progressive story about the economy.

One of the most common criticisms of progressives is that, unlike the right, we don't have simple messages that tell our story. Our young leaders at Occupy Wall Street have come up with a powerful answer: We are the 99%.

For the past several months, I've been working with a group of progressive leaders and communicators on the development of a "progressive economic narrative," a way of telling our story about the roles of the individual, business, and government in creating shared prosperity. The right has a well-developed view, to the point where after several decades it can now be summarized in three brief phrases: free markets, limited government, and individual liberty.

If we as progressives do our job well, we will also get to the point where we have three such phrases that are widely recognized. But that actually takes a long time. (Here are three candidates, but the fact that you may not nod your head readily when you read them is because you can't shorten the process: shared prosperity, government that works for all of us, and liberty and justice for all.)

For now, I'm celebrating the fact that we now have one phrase that tells much of our story: "We are the 99%."

This phrase's power is in the emotions it elicits. It is triumphant, not defeatist. It says, "We have the power and the moral authority, not you!" It conveys action -- we're standing up for ourselves and occupying your turf. It declares our common humanity. It is hopeful.

The progressive economic narrative I've been helping to draft has five conceptual pillars, and understanding them helps illustrate why "we are the 99%" also works intellectually. The first pillar of the narrative defines the progressive view of our economic problem: the crushing of the middle class by the rich and by corporate America. "The 99%" is a great unifying expression of inequality, as it avoids the separations that come from labels like "the middle class," "working class," and "poor." It says we're all screwed together by rising inequality and highlights those who are responsible: the super-rich and big corporations.

The second pillar defines what makes a successful economy: the well-being of our families in a big middle class and the productivity of our nation, not the stock market and corporate profits. "The 99%" is a simple declaration that our economy is driven by the vast majority of people, not a few super-rich.

On Oct. 23, the FDR Library presents a free forum on FDR’s foreign policy advisers. Click here to find out how you can join the conversation!

The fourth pillar (I'll come back to the third) defines the political problem: our government has been captured by the super-rich and corporate America, corrupted by big money and politics. "We are the 99%" affirms that we have to take our democracy back to ensure that our economy works for all of us, not just the richest few. This has been a consistent message from the Occupy Wall Streeters, who seamlessly link inequality, corporate power, and corruption.

The fifth pillar is a call to action. And here's where the triumphant power of "We are the 99%" works so well. It's no accident that the phrase took root in an action that people could easily do -- posting a picture of themselves with their story -- and was adopted instantly by a movement.

The third pillar explains the role of government in building a successful economy and the relationship of public action to individuals and business. It can be summarized thus: We build a large and prosperous middle class through the decisions we make together, investing in our people, expanding opportunity and security, paving the way for business to innovate, and doing business in ways that create prosperity and economic security for Americans.

This third pillar is essential to explaining how we should solve our problems and refuting the conservative view that the economy is driven by natural forces, best left on its own without government interference. "We are the 99%" opens the door for us to tell that story, but we need to fill in the blanks. When people say that Occupy Wall Street doesn't have demands, we should look at that not as a criticism, but as an invitation to complete the story. Everything about the phrase establishes the point that we build an economy that works for all of us when we make decisions that benefit the 99%.

Helping the American public understand a progressive worldview about the economy starts with our being clear on what we believe and telling that story consistently and widely. The best evidence that we're on the right track is when a simple message captures the hearts and minds of us, the 99%.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute and a Senior Adviser to USAction, whose book on the campaign to win reform will be published in 2012. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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How the Top One Percent Ripped Off the Bottom 99 Percent

Oct 11, 2011Jon Rynn

wall-street-150As the financial sector sucks up more and more money, the rest of us are left making less and less.

wall-street-150As the financial sector sucks up more and more money, the rest of us are left making less and less.

Occupy Wall Street has put a spotlight on the vast and growing economic inequality in the United States. It now takes its place as a top progressive priority -- perhaps the highest priority it has experienced since the Great Depression.

Underlying this greater and greater inequality is a shift of wealth from manufacturing to the top 1 percent and the financial sector. Over the past 40 years, the sectors of the economy that grew in output share grew very little in employment share -- making more money but paying it to a small group of people. The sectors of the economy that grew in employment share did not grow in output share, meaning that a growing number of workers had to share in a smaller pot of profits. From 1969 to 2007, the richest 1 percent has grabbed 15 percent more of the income of the United States, to a total of about 24 percent. Meanwhile, the manufacturing sector has lost a similar 15 percent of gross domestic product (GDP). This has led to a downward shift in income for the bottom 99 percent.

Let’s look at the shift among sectors of the economy in a bit more detail, because as finance has risen, so have other lower pay sectors. A good way of looking at the health of an economy is to see if there is a difference in how much income a particular sector, such as manufacturing or finance, pulls in -- that is, how much of the economy (GDP) it constitutes versus how much employment it accounts for. You might think of this as what percentage of the economy each working person receives, viewing each sector as a whole. I will call this the “the ratio”: that is, the ratio of the GDP (value-added) share of the economy to the percentage of the employment share of the economy for a particular sector; I will always compare 1968 to 2009 (all data sourced from the Bureau of Economic Analysis).

Manufacturing has historically been the quintessential middle class sector because its share of GDP declined slightly, from 28 percent to 25 percent, between 1948 and 1968 in tandem with its share of employment (its ratio was 104 percent in 1968). Thus someone working in the manufacturing sector made an average income for the economy as a whole -- that is, he or she was right smack in the middle of the middle class. Since 1968, the employment share of manufacturing has been heading down by .38 percent per year, so that it is now 8.7 percent, while its share of the economy is 11.2 percent. The average employee is making about 30 percent more than the average for the economy, most likely because so many of the low-skill jobs were outsourced (along with most high-skilled ones).

At the same time, the finance, insurance, and real estate, or FIRE, sector increased its share of the economy from 14.2 percent to 21.5 percent, while the employment share only rose from 4.4 percent in 1968 to 5.7 percent in 2009. So this sector went from a ratio of 322 percent to 376 percent; for finance alone, the ratio almost doubled from a fairly middle class 116 percent in 1968 to 197 percent in 2009. Real estate always had a ratio of about 1000 percent, which is one more reason, perhaps, that society should not encourage real estate bubbles. Overall, the pot of money has exploded without an increase in payrolls.

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So FIRE took about half of the share of GDP that manufacturing lost while barely increasing employment. The rich got richer.

On the other hand, in what is called “accommodation and food services,” or basically hotels and restaurants, the share of the economy moved from 2.2 percent to 2.7 percent in the 41 years between 1968 and 2009, but its share of employment rose from 4.5 percent to 7.2 percent; the ratio fell from 49 percent to 33 percent. The “health care and social assistance” sector, dominated by the health care industry, saw its ratio decline from 73 percent to 63 percent; its share of GDP rose from 2.8 percent to 7.5 percent, but its employment soared from 3.8 percent to 11.9 percent. The other sector that saw a major decline was retail, which actually saw a decline in economic share from 7.9 percent to 5.8 percent at the same time that its employment share increased slightly from 9.9 percent to 10.8 percent. Call this the “Walmart” effect: driving out mom-and-pop stores, leading to a greater efficiency, but lowering the average wage from 79 percent to 54 percent of the economy-wide average.

If we combine these employment “growth” sectors, GDP share moves from 12.9 percent to 16 percent between 1968 and 2009 but the employment share grows from 18.2 percent to 29.9 percent. The ratio fell from about two-thirds of the average to less than half. More and more Americans are employed by sectors that aren’t bringing in a large share of the economy.

So where did the employment and economic output of the manufacturing sector go? When it declined, most of the income went into FIRE and the top 1 percent, and most of the employment -- such as it is -- went into lower paying service jobs or has ceased to exist.

Counter to conservative ideology, the economic role of the government has actually gone down -- at least when measured, as I have been doing here, by value-added data, which eliminates the effect of transfer payments. From 1968 to 2009, the share of employment for the federal government decreased from 9.7 percent to 3.8 percent, and its GDP share went from 6.9 percent to 4.3 percent, while for the state and local governments the employment share rose from 11.7 percent to 14.4 percent and GDP share went from 7.6 percent to 9.3 percent. So much for “big government." FIRE’s share of GDP is at 21.5 percent, while government at all levels is at 13.6 percent. Sounds like “big finance” to me!

All of these statistics point to the need to understand the “natural history” of the economy. The health of a particular sector of the economy is a relevant political issue, as is how we might change the relative importance of each. I have argued previously that manufacturing is at the center of the economy. If we were to move from a manufacturing sector with 9 percent of employment to 20 percent, the economy would add over 14 million jobs. To achieve a change like that, we need to redirect our resources from the “economic royalists” and top 1 percent to the bottom 99.

Jon Rynn is the author of the book Manufacturing Green Prosperity: The power to rebuild the American middle class, available from Praeger Press. He holds a Ph.D. in political science and is a Visiting Scholar at the CUNY Institute for Urban Systems.

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Madrick, Dean Win Big Defending Social Security and Medicare

Oct 10, 2011

We've all heard it before, repeated ad nauseam by conservative critics of Social Security and Medicare: "Grandma's benefits imperil junior's future." That's the claim Roosevelt Institute Senior Fellow Jeff Madrick and former DNC chairman Howard Dean sought to debunk at last week's Intelligence Squared debate. Arguing for the motion were Fox News commentator Margaret Hoover and media mogul Mort Zuckerman. So how did the progressives fare? Before the debate, the audience was split 33/32 in favor of the motion, with 35 percent undecided. By the time Madrick and Dean were finished, they'd swayed 56 percent of the crowd to their side.

We've all heard it before, repeated ad nauseam by conservative critics of Social Security and Medicare: "Grandma's benefits imperil junior's future." That's the claim Roosevelt Institute Senior Fellow Jeff Madrick and former DNC chairman Howard Dean sought to debunk at last week's Intelligence Squared debate. Arguing for the motion were Fox News commentator Margaret Hoover and media mogul Mort Zuckerman. So how did the progressives fair? Before the debate, the audience was split 33/32 in favor of the motion, with 35 percent undecided. By the time Madrick and Dean were finished, they'd swayed 56 percent of the crowd to their side.

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Madrick notes that Social Security and Medicare are already fairly stingy but are critical for keeping the elderly out of poverty. He also points out that these programs didn't produce our current debt levels, which "are a function of the great recession brought on, in my view, mostly due to the excesses of Wall Street, the Bush tax cuts in the early 2000s, and the spending on the Iraq and Afghanistan War." Both sides agree that there should be "tweaks" to the system, but Madrick and Dean argue that these should be progressive changes, like higher taxes on the rich, rather than regressive benefit cuts. "The programs are in some jeopardy," Dean says, "because one side of the political aisle wants them to be in jeopardy... I do not think it's fair to take away Social Security because there is an intransigent group of people in the House who refuse to do anything about it at all."

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Is Occupy Wall Street Our Triangle Moment?

Oct 10, 2011Frank L. Cocozzelli

triangle-fireToday's outrage has the potential to be another turning point in American politics.

triangle-fireToday's outrage has the potential to be another turning point in American politics.

Frances Perkins, FDR's future Secretary of Labor, was an eyewitness to the Triangle Shirtwaist Factory fire of March 25, 1911. It was a tragic day in our history, one in which 143 workers lost their lives due the indifference of their employers.

Triangle was the culmination of licentious economic behavior. Powerful business interests fought on-the-job safety regulations; exit doors that were kept locked to keep out union organizers also kept workers from escaping the building; proposed fire safety standards were fought tooth and nail, all in the name of economic freedom.

But as tragic as the fire was, it was also a turning point. The tragedy of that horrible fire made Americans begin to truly realize that working people were not merely a means to wealth, but ends in and of themselves, worthy of being treated with dignity. On a political level, it was the singular event that transformed Al Smith and Robert Wagner Sr. from Tammany Hall hacks into champions of reform. It caused the Democratic Party to better live up to its moniker, “the party of the people.” It is why Perkins came to say that day of that fire was “the day the New Deal began.”

Similarly, today we now endure an economy set on fire by this same perverse notion of “freedom.” Freedom? What many on Wall Street call economic freedom is nothing more than anarchy and license. While workers see wages and benefits taken away, the top one percent live lives filled with conspicuous consumption -- and conspicuous waste. True freedom requires discipline, the structure of regulation, laws of oversight that curb and deflect destructive greed. And yet after thirty years of savings and loan failures, fraudulent CDOs, and Wall Street bailouts followed by million dollar bonuses, economic libertarians still want to tear down the very framework that provides order.

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But something has stirred in the American people. We are witnessing protests on Wall Street demanding that this stilted notion of freedom be revisited and revised. Despite what many free market types claim, a healthy form of capitalism cannot survive by being indifferent to the workers who physically build the products or provide the services. As Paul Krugman put it, “…we may, at long last, be seeing the rise of a popular movement that, unlike the Tea Party, is angry at the right people.”

Just as it was in the wake of the Triangle Shirtwaist Factory fire, the public is outraged and is demanding change. The rising of a popular movement comes at a moment none too soon. It is an opportunity for the Democratic Party to again turn out its present-day hacks and replace them with advocates of an already proven New Deal capitalism.

Then perhaps one day we will look back at the events of today and be able to say, “that was when the New Deal was reborn.”

Frank L. Cocozzelli writes a weekly column on Roman Catholic neoconservatism at Talk2Action.org and is contributor to Dispatches from the Religious Left: The Future of Faith and Politics in America. A director of the Institute for Progressive Christianity, he is working on a book on American liberalism.

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Occupy Wall Street’s Outrage at Greed Can Expand to Corporate Stock Manipulation

Oct 6, 2011William Lazonick

stockmarket-1500001Rather than invest profits in building a strong economy, corporate execs invest in their own pay.

stockmarket-1500001Rather than invest profits in building a strong economy, corporate execs invest in their own pay.

Occupy Wall Street is keeping our focus on the insatiable greed and undemocratic influence of those who run our major financial institutions. But the quest for personal wealth and political power by the top executives of U.S. business corporations goes well beyond the Wall Street banks. It pervades industrial as well as financial corporations.

Even though, as Table 1 shows, the pay of top corporate executives is down from its pre-financial-crisis levels, it remains out of control. The average remuneration of the top 100 highest paid corporate executives (named in annual proxy statements) was $33.8 million in 2010, up 10 percent from a 2009 average of $30.1 million (in 2010 dollars). Since the financial meltdown, executive pay has remained far higher than it was in the early 1990s, when it was already viewed as extraordinarily excessive.

Table 1.  Mean pay of the highest paid corporate executives and percent of pay from exercising stock options, 1992-2010

lazonick-table-1

As can be seen in Table 1, much, and in many years most, of this exorbitant pay comes from the exercise of stock options. The gains from stock options depend on rising stock prices. What better way for corporate executives to give a manipulative boost to a company's stock price than to spend hundreds of millions, or even billions, of dollars buying back its stock.

As Figure 1 shows, in 2003 buybacks were already substantial among S&P 500 companies, with an average of $300 million. But over the next four years, that amount quadrupled, so that on the eve of the financial crisis these companies averaged over $1.2 billion in buybacks. During the financial crisis, they dropped back down to about $300 million per company, but in 2010 doubled to around $600 million. In 2011, buybacks of S&P 500 companies are on pace to hit an average of $900 million, and there is every indication that they will continue to escalate in 2012 and beyond, as happened in 2003-2007. For overpaid U.S. corporate executives, this form of stock-price manipulation has become an addiction.

Figure 1.  Repurchases (RP) and dividends (DV), 1997-2010, of 419 companies in the S&P 500 Index in January 2011 that were publicly listed back to 1997; mean distributions and proportions of net income (NI)

lazonick-figure-11As shown in Table 2, the top 50 repurchasers from 2001-2010 represent a range of industries. Combined, over the decade they spent more than $1.5 trillion repurchasing their own stock.

Of these 50 companies, 11 spent more than 100 percent of their net income over the decade on buybacks, 32 more than 50 percent, and 43 spent 30 percent or more. When dividends are added to buybacks, half of these 50 companies expended all of their profits and more in distributions to shareholders from 2001 through 2010.

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Table 2. Top 50 stock repurchasers among U.S. corporations, 2001-2010

lazonick-table-2-revised

Research on these various industries and companies has revealed the deleterious impacts of stock repurchases on economic performance. For example, over the decade 11 of the 12 ICT companies on this list spent more on buybacks than on R&D, while for the twelfth, Intel, the proportion was 93 percent. Most of the financial services companies on the list had to be bailed out by the federal government in 2008-2009. Led by Exxon Mobil, the three petroleum refining companies in the top 50 wasted a combined $222 billion on buybacks while charging high oil prices and neglecting substantial investments in alternative energy. For the three aerospace companies, defense contracting generates much of the profits that they then use to manipulate their stock prices through buybacks. Pharmaceutical companies charge drug prices that are twice as high in the United States as in the rest of the world, yet use much or all of their profits for buybacks. Health insurers use their profits to jack up their stock prices, and executive pay, while giving us high cost, low quality health coverage.

Executives like to say that buybacks are financial investments that signal confidence in the future of their company as measured by its stock price performance. In fact, however, companies that do buybacks never sell the shares at higher prices to cash in on these investments. To do so would be to signal to the market that their stock prices have peaked, something that no executive would ever do. Executives often say that they do buybacks because of a lack of more attractive investment opportunities. Yet we live in a world of rapidly changing technology, burgeoning new product markets, and intense global competition. Any CEO of a major U.S. corporation who says that buybacks are the best investments that his or her company can make should take the next logical step: fire him or herself!

William Lazonick is director of the UMass Center for Industrial Competitiveness and president of The Academic-Industry Research Network. His book, Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States (Upjohn Institute 2009) was awarded the 2010 Schumpeter Prize.

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Why the 99 Percent is Crying Out

Oct 5, 2011Bryce Covert

Occupy Wall Street is right to be angry. Americans are falling farther and farther behind.

The biggest controversy over Occupy Wall Street is about what they stand for. Are they a bunch of dirty hippies with no agenda? Do they really think they can change the entire system? Why won't they just put out a concrete list of demands and policy prescriptions?

Occupy Wall Street is right to be angry. Americans are falling farther and farther behind.

The biggest controversy over Occupy Wall Street is about what they stand for. Are they a bunch of dirty hippies with no agenda? Do they really think they can change the entire system? Why won't they just put out a concrete list of demands and policy prescriptions?

While signs at the protests have many, many messages -- from BP to Iran to capital punishment -- the affiliated Tumblr, We Are the 99 Percent, exposes what's motivating people to get on the streets. With over 700 submissions at this point, Americans from all over have been writing down personal stories to explain their frustrations. While those protesting on Wall Street have grievances that are far ranging, those on the Tumblr are almost all sparked by a combination of a few common things: joblessness, debt, and low wages. They are the stories of those who can't make ends meet. These days, that covers a lot of us.

Here's a sampling just from the most recent page (my bold):

My mother (leader in her field of pathology, MA) is upside-down on her house. My father (multiple PhD's) lives in his car so that he can do what he loves for a living rather than be a slave to the system.

I am 45 years old. I was laid off twice in 18 months... I am "unemployable" because of layoffs. I have not worked since November 2008.

I am 27 years old with $100,000 in debt. I was laid off in 2009 and have been struggling ever since then. I have not made more than $10,000 a year since then.

My husband and I have $80k in student loan debt. I am in the process of being diagnosed with Multiple Sclerosis, a hard enough thing in and of itself. I also have over $30,000 in medical debt because of that... We own cheap cars, live frugally, have a roommate to help, and try hard to keep up... I work when I'm not too sick, and he works full time.We have a combined annual income of less than $40k annually.

I have an MS from a top state university- & $135k in student loans (& growing). I've lost 2 jobs in 3 months.

Lost my job in 2006. Sold my home and moved in with my 87-year-old mother.... Cancer survivor. Need medical care. Can't afford health insurance... TOO YOUNG TO RETIRE. Watching my retirement funds and savings shrink.

As a newer, less established member of the faculty I was out of work when my college cut classes. Over a year later and I still can't find work... Because of deferments my $41,000 loan has become $62,000.

Adjusted for inflation, a smaller American reality than that of my dad -- a civil servant who dropped out of college... My son is learning to speak Mandarin.

I am 29 years old. I have a Master's degree. I am $120,000+ in student loan/medical debt. In the past 18 months I: was diagnosed with cancer, lost 2 jobs, worked 70 hours/wk and unable to keep up. I get more calls from creditors than I do friends... I have $4 in my bank account and no job.

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And I find this one perhaps the most emblematic of the average American's experience:

We live within our means, we own our cars, yet cannot accumulate much savings. We live responsibly, and consider ourselves "citizens" and not "consumers." We find it troubling that living simply can still accrue so much debt... We are one emergency away from financial ruin.

"Living simply can still accrue so much debt." That's been the American experience for years now. As Ezra Klein put it, the Tumblr is full of "small stories of people who played by the rules, did what they were told, and now have nothing to show for it."

For those who are lucky enough to work, the money we take home has been either stagnating or decreasing, and it's getting worse in the aftermath of the recession. As reported by Bloomberg:

Take-home pay, adjusted for prices, fell 0.3 percent in August, the third decrease in five months, and personal income dropped for the first time in two years, the Commerce Department reported last week. The declines followed news from the Census Bureau that median household income in 2010 fell to $49,445, the lowest in more than a decade, and the poverty rate jumped to 15.1 percent, a 17-year high.

That figure, $49,445, isn't going to cut it. A recent report showed that a household with two working parents and two young children needs to earn $67,920 to meet basic needs without relying on public support. It only drops to $57,756 for a single parent with two young kids. Not to mention that rent, food, and health costs are rising. On top of this, 14 million Americans don't even have jobs. When we don't bring in enough money to pay for the basics, the next place we have to turn is debt. Our total revolving debt comes to $796.1 billion, with the average household carrying $14,743 in credit card debt. Household debt is currently 90 percent of GDP, up from 70 ten years ago. It's no wonder, then, that despite making some headway in paying down our debt loads, consumers are still struggling to do so.

And student debt is a whole other story. The total is on track to reach $1 trillion this year, more than our combined credit card debt. Alongside this surge is a rise in delinquencies post-recession. This is partly fueled by the government, schools, and hard-pressed parents pulling back on support. It is also certainly fueled by the dismal job market and graduates' unemployment rate -- which will have ramifications for their earning capacity for years to come.

I'm not surprised that people are at their wit's end over personal finances. I'm not surprised that they're blaming the banks that make money from keeping us in debt. I'm just surprised it took this long for the anger to find its voice.

Bryce Covert is Assistant Editor of New Deal 2.0.

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What Would Our Founding Radicals Have Thought About Occupy Wall Street?

Oct 5, 2011William Hogeland

american_colonial_flagOccupy Wall Street isn't just a threat to financial elites -- it's a challenge to lazy historians.

american_colonial_flagOccupy Wall Street isn't just a threat to financial elites -- it's a challenge to lazy historians.

Among other intriguing and possibly problematic features, Occupy Wall Street, now in its third week and spreading, seems to represent an inchoate attempt at reviving an American radicalism that has deep roots in our founding period. The Tea Party has of course made its own highly explicit and politically successful claim on that period. Because OWS, like the Tea Party, focuses on national economic and financial issues, the new movement offers a disquieting, potentially illuminating alternative to the Tea Party's right-wing interpretation of America's founding economic values.

I began writing New Deal 2.0's "Founding Finance" series last winter in hopes of shining light both on the financial elitism of the famous American founders, who we often wrongly cast as pioneers (or at least half-conscious seed-sowers) of equality, and on what I see as historical tendentiousness on the part of the Tea Party, whose claims on the founding period are meant to support a low-tax, small-government, anti-debt agenda. I've tried to show that this agenda, which may or may not have its merits as policy, in no way accords with the avowed purposes of the founders across their own political spectrum from Hamilton to Madison.

In the series, I've also tried to bring to the fore some routinely marginalized yet highly resonant 18th century economic thought, as well as the actions of those who sought to obstruct wealth concentration and make cash and credit more readily available to ordinary Americans. It's an unsettling fact that our founding democratic, economic activism was not against England but against the homegrown American investing and creditor class that was leading the resistance to England.

I've explored that founding economic radicalism in the debtor riots and "regulations" of the late colonial period; in the overthrow of Pennsylvania during the run-up to the Declaration; in the period after victory over England, when foreclosed Massachusetts debtors, the so-called Shays Rebels, marched on the armory at Springfield; and in the early Federal period, when the so-called Whiskey Rebels of trans-Appalachia, criticizing the new U.S. Constitution on bases very different from those of antifederalist elites, went so far as to fly their own flag, hoping to launch a new, more economically egalitarian country in what was then the American West.

Throughout those struggles, the activists' goal was to pressure and in some cases to use government to restrain the power of wealth and promote economic equality through legislation. They wanted to outlaw monopolies, build debt relief into currency, institute easy-term, small-scale government lending, and take banking charters away from crony insiders. Some wanted progressive taxation on income; some wanted what we call Social Security. Much later phenomena like the Square Deal, the New Deal, and the Great Society, which can seem hypermodern (and even, to the Tea Party, unconstitutionally anomalous), actually have deep American roots. However, those roots are not in the thinking of the famous founders -- New Dealers' claims on Jefferson possibly to the contrary -- but in grassroots, 18th century movements that, while little-known today, were of immense importance during our founding.

So important in their day were those now-buried radical movements, in fact, that much of the famous founders' behavior can't be understood without the context of elite dedication at times to collaborating uneasily with the economic radicals, at other times to squelching them and pushing back their political advances. Many historians of the period ignore that context. Hamilton's biographers, for example, do not deem the people's movement important. Hamilton did; he spent his career trying to kill it. We therefore learn almost nothing important about Hamilton's purposes by reading his biographies. Much founder biography, and much mainstream history, operates on just such comfortably foregone, ultimately useless conclusions.

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In place of founding radicalism, historians tend to emphasize the emergence, from the Revolutionary period through the Jackson era, of a rowdy, fluid, non-deferential, competitive America. They place developing ideas of American democracy almost solely in that 19th century context. But Thomas Paine, the best-known of the radical 18th century egalitarians, would surely have been crushed if he'd glimpsed the kind of society that passed for a democratic one in Jacksonian America.

Paine's intensity gives both liberals and radicals a problem. It was a widely held view in the Washington administration -- and it's been widely held in more or less liberal American history ever since -- that Paine's awful experiences in the French Revolution give us cause to celebrate the failure of Paine-ite radicalism in America. Fair enough: Today, as every day, it would be wise to recall not only crimes against humanity committed by bankers but also those committed on behalf of a supposedly collective, supposedly revolutionary "People," from the French Terror to the Stalinist mass murders and well beyond.

Still, the French Terror, which almost killed Paine, has served as a convenient pretext for exercising historical complacency about the suppression of his and others' fervently democratic visions for America in 1776. Without those visions, anathema as they were to the famous founding elitists -- anathema as they were, for that matter, to Jacksonian capitalism and are today to high-finance "neo-liberalism" -- we might never have declared independence at all.

So from a certain historical point of view, I think Occupy Wall Street rebukes, even more sharply than it rebukes rightist Tea Party claims on the founding, a familiar and complacent history of American democracy -- especially that history's failure to confront our long struggle over the relationship between high finance and government. Occupy Wall Street may be going about things all wrong, as some on what remains of the American left have asserted. I find those assertions hard to dispute. I've been critical of what I suspect may turn out to be a cultural premium, part and parcel of objections to elitism, on intellectual sloppiness and incoherence. That mode was never adopted by the activist 18th century working class, whose objections and demands (pace the lazy snobbism of Hamilton's biographers) took the form not only of action but also of crystal-clear, deeply informed, published resolutions. The 18th century activists remind us that resolutions don't have to be handed down from above; they can filter up and be adopted by majority or by consensus.

The very concept of "up" may be anathema to the new movement. We'll see.

But the most honest answer to any and all objections to Occupy Wall Street may be "So what?" Criticism often comes down to no-cost fantasizing about more appealing actions that nobody has actually bothered to take. When American high finance takes over America, "occupy" is what some American people do, and have always done.

William Hogeland is the author of the narrative histories Declaration and The Whiskey Rebellion and a collection of essays, Inventing American History. He has spoken on unexpected connections between history and politics at the National Archives, the Kansas City Public Library, and various corporate and organization events. He blogs at http://www.williamhogeland.com.

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