On a drizzly evening in Zuccotti Park this week, where the Occupy Wall Street protesters are camped out with the modern revolutionary's gear of iPhone, blue tarp and cappuccino, I spotted one young man wearing a T-shirt with an image of Ronald Reagan and the words "Bad Religion."
It was the right outfit for the occasion. That's because the greatest significance of the wave of leftist demonstrations that started in Lower Manhattan and rippled across the United States over the past few weeks is the potential challenge it poses to the Reagan Revolution.
During the 2008 campaign, Barack Obama drew shrieks from the Democratic base, particularly its Clinton wing, by naming Ron rather than Bill as a president who had "changed the trajectory of America."
But Obama was right. We are all living in a world shaped by Reagan and his ideology of small "l" liberalism.
Three decades later, the triumph of Reaganism is remarkable. In the United States and Britain taxes shrank, regulation, especially of the financial sector, was pruned back, and state companies were sold off. Even Brussels was nudged toward liberalization.
The impact on the rest of the world was even more profound. Soviet Communism collapsed, China converted to capitalism and entered the world economy, India dismantled its protectionist License Raj, and many emerging market economies in Latin America and Africa embraced liberalization as the path to growth.
"Going back to the 1970s and 1980s is crucial," said Branko Milanovic, a World Bank economist and author of The Haves and the Have-Nots, a 2010 book about income disparity around the world. "The ideology drove everything that happened in the next 30 years. Deng Xiaoping captured it best "” "?to get rich is glorious."'
One result has been an unprecedented global economic boom. Its biggest beneficiaries have been some of the world's poorest people, particularly in China and India: Shaohua Chen and Martin Ravallion of the World Bank have found that between 1981 and 2005, the number of people living in poverty in the developing world fell by 500 million. The West prospered as well, with relatively strong and consistent economic growth over the past three decades.
But something else has been happening, too. The triumph of economic liberalization has coincided with a sharp increase in income inequality. The growing gap is a worldwide phenomenon "” it has been most striking in the United States and China, but income inequality has also grown, especially in the last past decade, in most developed countries, and in many emerging markets.
"What we now call the Reagan Revolution was a turning point in the American economy," said Jacob S. Hacker, a political science professor at Yale University in Connecticut and author, with Paul Pierson, of Winner-Take-All Politics. "These patterns of rising inequality were established then."
Economists, most notably Thomas Piketty and Emmanuel Saez, the data jocks who are the gurus of income inequality studies, have been pointing out the growing gap for a decade. But, particularly in the United States, which still determines the ideological weather for the rest of the world, that increasingly skewed distribution failed to catch fire as a political issue.
"Among elite opinion, this wasn't talked about," Jeffrey D. Sachs, director of the Earth Institute at Columbia University in New York and author of The Price of Civilization, published this month, told me. "It was viewed as impolite, it was viewed as class warfare."
One reason the rest of society went along with that reticence is suggested by University of Chicago economist Raghuram Rajan, in his 2010 book Fault Lines "” that the credit bubble of the 1990s and 2000s masked the stagnating wages of the U.S. middle class.
The financial crisis of 2008 brought that self-deception to an abrupt halt. And while the middle class is still in the doldrums, the top 1 percent has largely recovered, thanks in part to muscular intervention by the state. That one-two punch is why the old American taboo on talking about income distribution is lifting, particularly in Zuccotti Park.
""?Class warfare' has seldom had much traction in American politics because Americans tend to idealize the "?free market' as a separate sphere of life, with its own (rough) justice," Larry M. Bartels, a political science professor at Vanderbilt University in Tennessee and author of "Unequal Democracy," wrote in an e-mail reply to my questions.
"Escalating inequality and the wreckage of the Great Recession may now be focusing increasing anger on that top sliver "” especially bankers, who are, conveniently, prominently implicated in the malfeasance that led to the financial meltdown of 2008 and (still) immensely rich."
But the left shouldn't declare victory quite yet. That's because the anger of the United States' squeezed middle class is also being harnessed by the right, and, at least so far, with greater and more focused political effect.
If you doubt that the winner-take-all U.S. economy is one of the Tea Party's inspirations, consider the remarks this week by its heroine, Sarah Palin. In a speech in Seoul, she railed against "crony capitalism," complaining that "well-connected banks get bailed out" and "certain companies get special deals through governments."
Palin's remedy to crony capitalism is to double down on the Reagan Revolution "” lower taxes and shrink government further. Progressives have not yet come up with a solution of such seductive simplicity. Their standard prescription "” higher taxes, more regulation, a stronger social welfare net, and more investment in education "” may be sensible. But it lacks the rallying power of Palin's call to smash crony capitalism by depriving the elites of their political tool "” big government.
Even the energized protesters in Zuccotti Park know their left-leaning populist movement has found its complaint "” "we are the 99 percent" "” but not its remedy. They heard as much from Slavoj Zizek, the best-selling Slovenian philosopher, who was this week's celebrity intellectual speaker: "We know what we do not want. But what do we want?"
After a lecture on income inequality and its pernicious consequences delivered on the square on Tuesday by Sara Burke, a policy analyst at a New York research organization, and illustrated with charts from I.M.F. economists, one listener said she was keen to "educate" people about the issue. But to do that, she wanted Burke to help her with something: "What's my sound bite?"
The politician who answers that question will be the Reagan of the left.
Articles like these only serve to distract from the heart of the problem. America’s economy is controlled through the Federal Reserve and therefore is not a “Liberalized” market.We have been suffering in this system since 1913. The income disparity is due to their control of the dollar and their policies more so than any policy during the Reagan years. That is a fact.
Good article. However, you might want to at least give credit to the band (Bad Religion) whose t-shirt the kid was wearing. They’re a band, they’ve been together for 20 years.
Like the listener, this blog is also about ‘whats my sound bite’ ! Capitalism is not a panacea and socialism was never allowed to work in the United States. “Free to fear” shall we say.
How about responsible capitalism for a sound bite? There is no doubt that capitalism is the only viable economic system, but in order to preserve it and make it enduring, every individual actor has to act with a responsibility to both himself and to the larger community as a whole. My garden looks better when my neighbor’s garden is green and not covered with weeds. In other words the quality of my individual prosperity does hinge on the quality of my neighbor’s status.
Boom and bust or serene stagnation are current options for discussion and policy. Reagan championed the former, and Johnson the latter. The former concent had been used by America until the early 20th Century. Thereafter, the concepts of regulation and taxation, and later introduction of sponsored research, help, and societal safety programs emerged. America had thrived, but was in stagnation by the 1970′s. What is needed is a potentate of preservationism championing the best of both conservative and progressive policies. We can only hope ….
Calling for anyone to be the Reagan of the left is ludicrous. He was everything they hated! He busted unions, let business get ahead of regulations, spent blindly on the military and on and on. I do believe that most on the left and the right, are sick of seeing big everything. Someone who can capture and slay the 99% of that angst will be Americas next hero.
I have no problem raising taxes on the rich, so long as every penny goes to reducing the national debt. I have a lot of issues with redistributing wealth; if this is indeed the direction the country wants to go, then the protesters should work to get the appropriate constitutional amendments proposed and enacted. I think that this will not happen. Not because the process cannot be done, and not because the political elite won’t allow it. No, these constitutional amendments will not be proposed because the majority of the nation will not vote them in – and the protesters know it. I believe that the majority of the nation would not support redistribution of wealth.
There is a need to define what kind of country we want in the 21st century United States, and the founding fathers were smart enough to provide mechanisms for change – if that is what the people want. Use of the courts or media to force change is improper; it is the under-handed method used by people who know their agenda is unlikely to be approved by the American mainstream.
Until the “99″ change their methods, they will not be important to me. I understand the frustration, I see the emotion. But without focusing their efforts into the proper channels – which clearly are available – they are just noise in the ears.
The Tea party is pushing to reduce government (40% iof US GDP now) and the latest protesters are pushing to increase government! Which approach do you suppose reduces spenbding-be intellectually honest now! Hint: remmber: our debt is over 100% of US GDP and we’re bleeding over $ 4 Billion every day 365 (deficit) and it costs us 40 cents on the dollar to spend more! Thank you, that what I thought, honesty is the best policy, now make the cuts!
A long time ago someone really wise told me: “You have to know what you want”. If you don’t actively chose your own destiny, then your destiny will be chosen for you. Knowing what you don’t want is not the answer.
As the author stated, that is one of the big problems with this OWS movement and why it will probably end up being hijacked by a bigger group with a political agenda.
It’s a good start though and I think many Americans are surprised they’ve lasted this long. I think the attendance at all the planned protests this weekend all over the US will be very telling as to what kind of momentum this movement ultimately has.
The solution is simple. Adopt the shrink the government stand,but what’s left should be focused like a laser beam on the middle class.
Move to the Fair Tax, cut the military in half, get rid of all corporate welfare.
Over simplistic explanation of the so-called Reagan Revolution. Like any system, if it swings too far in one direction, it will ultimately swing back. The Reagan Revolution should have bee tempered by introducing smart regulations particularly in the financial sector. That would have helped avoid the nasty consequences 2008 and its ongoing repercussions. At the end of the day, the economy should in the service of the people not abstract financial transactions taking place in etherland disconnected from reality!
What do we want? Government acting to protect the interests of people against those of massive corporations, especially those in the finance business.
At my age (+70) retired from globalization trade politics, I must admit that economic inequality is already a central political issue in emerging markets, in particular, mainland China and India.
Some 750M citizens are apparently living with R37/m, less than $1USD, according to current debate in India (see The Hindu). Establishment is being challenged to explain how citizens can live on such subsistence budget in rural India.
Me thinks, Indian politics is going to be challenged to look inwardly at its immense inequality – caste system! -and recognize that emerging India cannot reach its pinnacle of economic power when more than 2/3 of is 1.2B population is not only under-nourished but without baasic social security and health care.
The sound bite is “liberté, équalité, fraternité”
since we added 2 billion people, (China, India, et al) to the work force…………the commodity value of labor, has become extremely low……and with all the productivity enhancements available to business, that value is not going to increase, if the population keeps growing.
the class of people that depend on ‘employment’ are going to suffer first, even well educated workers…..
the process of reducing labor costs is depleting the pool of available customers, with enough purchasing power to buy products……..cost cutting is a short term solution.
are corporations not seeing it? or not talking publicly, about the shortage of customers, that is contributing to the current malaise?
Eventually the ownership class is going to get sucked into this issue, too.
Reagan’s view was that you could ignore poor people…….they were important as herd voters at election time……..but not really a vital part of society…….that view is not going to hold up in the long run.
The unfortunate reality lies in taxation policy. The Rich make a great deal of their income from investment from already exiting equity and debt. That income, in the United States, is nominally taxed at 15%. Because most corporate “incentive” programs are equity based we find the incentives for both bankers and executives based on the perceived value of their company’s equity value.
The incentive to create new equity, a major component to job creation, is lost. Instead they horde their cash – roughly $1.5 trillion domestically and an equal amount internationally waiting buy another company or “Invest” in existing equity or debt.
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