OWS: A Protest Against a Broken Economic Compact

Amy Dean Dec 23, 2011

During the early months when Occupy Wall Street maintained tent cities in lower Manhattan and other metropolitan areas around the country, the occupations attracted an array of young counter-culturalists and itinerant radicals. To many people seeing the images of the encampments on the news, it looked like a motley assembly, not something out of the American mainstream.

But while some of the images of Zuccotti Park that defined Occupy Wall Street in its infancy may have appeared to depict a fringe, the movement as a whole is far bigger than any of its encampments. In truth, the Occupy movement is a protest against a broken economic compact that reaches into the very middle of America and that is resonating in other parts of the world as well.  

With the movement's permanent occupations now largely disbanded, the protesters are looking for ways to escalate and keep the spotlight on their issues. But regardless of what strategies they adopt moving forward, they have already left behind a transformed framework for public debate in America. Occupy Wall Street has struck a chord with a wide swath of the country by highlighting issues that had been all but hidden in mainstream news coverage prior to the street protests. According to a poll conducted by The Hill in October 2011, 74 percent of likely voters say that inequality is a problem in the country, with the great bulk of that group indicating that it is a big one. Moreover, a Gallup poll from February 2011 reveals that in large majorities, Americans believe that corporations should have less influence on our politics.  


The same thing that gives Occupy Wall Street strong appeal in the United States also gives the movement international resonance. In an integrated international economy, profound inequality is a global phenomenon. Virtually anywhere protests have emerged—whether in Europe, Asia, or the Americas – participants can point to examples of how the most affluent members of their societies have benefitted at the expense of the majority. They can tell stories that bring to life the reality of how economic downturn has affected their families and their communities.  

Back in the United States, even leaders in the financial community credit Occupy Wall Street protesters with pinpointing concerns that are central to our democracy. In mid-November of last year, former Treasury Secretary Robert Rubin said that the occupations "identified issues that are really central to what's going to happen to our economy and our society.” President Obama, after being confronted by protesters during a speech, stated, "There is a profound sense of frustration about the fact that the essence of the American Dream – which is if you work hard, if you stick to it, that you can make it – feels like that's slipping away. And it's not the way things are supposed to be.”  

The Way Things Are Supposed To Be: Linking Productivity and Wages  

Both Rubin and Obama's reaction to the Occupy movement point to something important and often overlooked. The central slogan of the Occupy movement, the call of "We Are the 99 Percent," has led many people to focus on inequality as the central issue. Indeed, this is an important concern, as economists such as Nobel Laureate Joseph Stiglitz have persuasively argued. In a May 2011 article in Vanity Fair, Stiglitz wrote, “The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent…Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.” The division between the top 1 percent and the rest of the population is particularly apparent among political officeholders. As Stiglitz further explained, many senators and representatives in the House “are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office.”  

Yet inequality is only part of the picture, and perhaps not the most important part. Republicans have seized upon denunciations of inequality to claim that protesters are calling for class warfare and unfair redistribution. But what Americans are truly speaking out against is not that some affluent people have done well in our economy. It is that they have left the rest of the country behind. While inequality is a symptom, the root imbalance leading to the protests that have swept the country is the severing of increasing economic productivity and the wellbeing of most Americans.

Historically—and particularly during the post-World War Two economic boom that created a vibrant middle class in our country – productivity increases have translated into tangible benefits for ordinary working people. As Steven Greenhouse and David Leonhardt of the New York Times wrote in a 2006 article, “For most of the last century, wages and productivity — the key measure of the economy’s efficiency — have risen together.” But in the last three decades that linkage between workers’ wages and their productivity, a core component of America's economic compact, has been severed. A March 2011 study by the Economy Policy Institute stated that “the typical worker [in both public and private sectors] has had stagnating wages for a long time, despite enjoying some wage growth during the economic recovery of the late 1990s.” The same study indicated that “while productivity grew 80 percent between 1979 and 2009, the hourly wage of the median worker grew by only 10.1 percent, with all of this wage growth occurring from 1996 to 2002, reflecting the strong economic recovery of the late 1990s.”  

Young people who have entered the labor market in the last ten years, burdened with historically onerous student debts, have experienced the broken compact in a particularly striking way. As the same report notes, "The fading momentum of the 1990s recovery failed to propel real wage gains for college graduates… from 2002 to 2010, despite productivity growth of 20.2 percent over the same period." It is little surprise that students and recent graduates have identified in large numbers with Occupy Wall Street.  

Although the encampment in Zuccotti Park provided a focal point for the movement, one of the great strengths of the Occupy efforts is that they have allowed even people who live far from Wall Street to identify targets in their local communities that embody our economy's imbalances. Unlike in the 1990s, when activists followed trade meetings to Seattle or Genoa, the Occupy movement has allowed protesters to stay at home and to demonstrate ways in which a wide range of communities have been directly affected by an economic system that no longer translates rising productivity into widely shared gain. It has provided a framework for translating national and international data into local action.  

No Sharing of Risk  

As a result, in hundreds of cities and towns people have been motivated to decry how changes in the economy have taken a measurable toll. The consequence of productivity being de-linked from rising wages indicates a marked increase in economic insecurity. A Rockefeller Foundation team led by Yale University Professor Jacob Hacker confirms this concern about economic security as one that “has only grown amid the deepest downturn in decades." Hacker's team defines economic insecurity as "1) Experiencing a major loss in income, 2) Incurring large out-of-pocket medical expenses, or 3) Lacking adequate financial wealth to buffer the first two risks." Economic insecurity is an issue that has not only worsened over the last couple of decades; it is a phenomenon that has dramatically intensified over the last few years. Hacker’s study reveals that in 1985, 12.2 percent of Americans could be classified as insecure. In the early 2000s, this number had increased to 17 percent in conjunction with the recession. In 2007, before the downturn we currently face, the group of insecure Americans had improved to 13.7 percent, but measured insecurity still remained higher than in the 1980s. After the economic crash of 2008, all indications are that it has shot up again.  

In times of relative security and stability in America, private businesses, the public sector, and individual workers all bore some part of the insecurity inherent in our economic system. Yet in recent decades, we have had a dismantling of the institutions that allowed a sharing of the risk associated with the undulations of the capitalist business cycle. Since the 1980s, our social safety net has been unraveled. Moreover, union density has sharply declined, leaving workers without the ability to collectively negotiate the terms of their employment with management. Hence, individuals have been left to carry the vast bulk of the risk burden. This widespread insecurity in our citizenry is what has fueled the Occupy movement.  

The political protests have provided an important reminder that the economic situation we find ourselves in was not inevitable. Past periods of relative economic security resulted from a different set of policy choices than those our elected officials have pursued since the 1980s. It was not pre-ordained in prior eras that we would have a social safety net that would catch people when volatility took place. The safety net that allowed workers who were disconnected from a job not to hit rock bottom and able to reenter the workforce was something that was won in large part thanks to social movements of the past, specifically the activism that led up to the New Deal. Nor was it pre-ordained that jobs in auto, steel, textile, and apparel sectors would create middle-class jobs in America. The institution of collective bargaining allowed for these.  

To remedy today's economic imbalances, some liberals have advocated increasing revenue to government through a measure of more progressive taxation, such as the Buffett Tax – a tax on the wealthy named after billionaire financier and tax advocate Warren Buffett. Sadly, serious discussion of such a measure is difficult to find in Washington. But even if this proposal were on the table, it is not adequate to address the core economic issues in question. In order to return to a situation in which the risks of the business cycle are shared by all major actors in our economy, we must rebuild the institutions that gave working people a voice. In particular, we must revive collective bargaining. In a new economy, resurrected institutions of collective bargaining may not look like the unions of old. Especially in situations where work is part-time, contingent, or performed by independent contractors, we will need new ways to restore balanced risk. But until we endeavor to find these new forms, we cannot be surprised to see public protests spread.

Radicalism and Reform  

The lack of voice that most Americans experience in the economic sphere—exacerbated by the decline of institutions such as trade unions – is also present in our political life. Unions provided one of the major institutional vehicles for working and middle class people to express their interests in the public sphere. While unions have been under continual attack, few new forces have emerged that can challenge the unchecked political influence of corporate America. The resulting sense of political disenfranchisement is another factor that has fueled Occupy Wall Street.  

The protests have highlighted the fact that formal channels of democratic influence appear accessible only to those who can afford lush campaign donations and well-paid Washington lobbyists. Changes in the American economy have taken place at a far greater pace than often-gridlocked decision-making in the nation's capital has been able to respond. This has created a gap between perennial hopes that elected officials might pursue the type of reform agenda that might rebuild the institutions of risk sharing in the economy and a reality of persistent disappointment.  

The Occupy movement has emerged at a moment when that gap has been particularly severe. In a historic election, voters elected President Obama and endorsed a strong mandate of change. Yet, in Washington, the ideology of economic neoliberalism is so dominant that no substantive proposals for reining in corporate influence over politics or correcting the imbalance that has placed individuals as sole risk-bearers in the economy are part of serious discussion. The fact that Obama's jobs proposals this past fall had no chance of passing through Congress shows how far off we are. Far beyond creating jobs, we need to be talking about how to transform poor jobs into good jobs—a conversation nowhere on the current political map.  

The rise of inequality and the de-linking of productivity and wages are trends that have been emerging for decades. So why have protests emerged now?  

For one, amid a global economy in turmoil, people are feeling the effects of these economic trends in a direct and local way. Protest movements in Spain, Greece, and other countries that emerged in response to the economic crisis set the stage for protests at the heart of the global financial system. And now, demonstrations in the United States have reverberated back abroad, inspiring further anti-corporate protests from London to Rome to Melbourne.  

Yet, in the United States, the raised expectations of the 2008 elections have been at least as significant as the latest economic downturn. Seeing business continue as usual under an administration elected on a platform of change has convinced many Americans that their discontent must be expressed outside of the normal channels of electoral politics. Throughout our history, radicalism has appeared when reformism has failed. In a November 2011 New York Times article, economist Jeffrey Sachs called for a "New Progressive Movement." He argues that Ronald Reagan’s overlooking of “the rise of global competition in the information age” thirty years ago led to “a nation singularly unprepared to face the global economic, energy and environmental challenges of our time.” The cause and continuation of the problem can be blamed on “both parties…who above all else insist on keeping low tax rates on capital gains, top incomes, estates and corporate profits.” Our present political situation has created fertile ground for dissent.  

The situation that we face today does not stand unprecedented in history. Sachs remarks that twice before, in the Gilded Age of the late 1800s and again in the Roaring 1920s, "powerful corporate interests dominated Washington and brought America to a state of unacceptable inequality, instability and corruption.” Both times, society was able to successfully recover through “a social and political movement [that] arose to restore democracy and shared prosperity."  

Indeed, throughout the 20th century, radical movements in America have presaged most serious reform efforts. During President Franklin Delano Roosevelt's first years in office, the president faced growing Communist and Socialist parties, insurgent populist voices from left and right, and even armed resistance to foreclosure in the countryside. The sweeping programs of the New Deal were instituted in the face of such resistance. In the 1960s, radical movements revolutionized national conceptions of race, gender, and sexual preference, bringing marginalized groups an influence and power long denied them. The globalization protests of the 1990s set the stage for today's Occupy movement by recognizing sweeping economic transformations in our economy and fostering relationships between progressive groups (such as the famous "Teamsters and Turtles" alliance on display at the 1999 Seattle protests against the World Trade Organization) that have helped to bolster the most recent round of demonstrations.  

In each case, the pace of political reform had failed to catch up to wider economic and cultural transformation, and social unrest reflected the disjuncture.  

Recreating the American Compact

Establishing a renewed period of social stability, democratic enfranchisement, and shared economic risk in America will require a new approach to economic policy-making in Washington, or at least a return to a mentality that prevailed prior to the 1980s. In the post-war decades that witnessed the greatest growth of our country's middle class, elected officials crafted economic policy with an eye to fostering both competitiveness and public wellbeing. Since then the latter goal has been abandoned, and competitiveness has been adopted as the sole objective worthy of concern. Institutions such as collective bargaining that might have given working people a greater voice in insisting that social wellbeing remain a part of economic policy-making were dismantled.

The result is our broken economic compact. The protests that have swept the country are a reflection of it. Their significance is bigger than any of the camps that appeared this past fall. So long as Washington remains unwilling to consider a program of reform that rebuilds the institutions that allowed for stability and shared prosperity in America, growing unrest will be the only avenue open for placing these issues back on the agenda.

This article was originally published by Common Dreams and The Harvard International Review.

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