For a More Progressively Evolving Society

Monday, October 31, 2011

The Occupy Wall Street Movement and the Coming Demise of Crony Capitalism

Tuesday 11 October 2011

by: Ravi Batra, Truthout | News Analysis

In 1978, to the laughter of many and the derision of a few, I wrote a book called, "The Downfall of Capitalism and Communism," which predicted that Soviet communism would vanish around the end of the century, whereas crony or monopoly capitalism would create the worst-ever concentration of wealth in its history, so much so that a social revolution would start its demise around 2010.  My forecasts derived from the law of social cycles, which was pioneered by my late teacher and mentor, P. R. Sarkar.  Lo and behold, Soviet communism disappeared right before your eyes during the 1990s, and now, just a year after 2010, middle-class America, spearheaded by a movement increasingly known as "Occupy Wall Street (OWS)," is beginning to revolt against Wall Street greed and crony capitalism.  Will the revolt succeed?  It surely will, because the pre-conditions for its success are all there.

The first question is this: Why does rising wealth disparity create poverty?  My answer is that it causes overproduction and hence unemployment and destitution.  It is all a matter of supply and demand.  Inequality goes up when official economic policy does not allow wages to catch up with the ever-growing labor productivity, so that profits soar and rising productivity increasingly raises the incomes and bonuses of business executives.  I have detailed this process in an earlier article.  Then money sits idly in the vaults of bankers and big-business CEOs and restrains consumer demand, leading to overproduction and hence layoffs.  The toxic combination of mounting layoffs and absent job creation raises poverty, which, according to official figures, is now the highest in 50 years.

The next question is:  how has the government either restrained wages relative to productivity or made the rich richer and the poor poorer?  It is easy to see that almost all official economic measures adopted since 1981 and contained in the following list have devastated the middle class.  The list includes: 

1. The Reagan income tax cut of 1981 that benefited the rich, but made it necessary to sharply raise all other federal taxes, paid mostly by the poor and the middle class, to finance that tax cut.

2. Unenforced antitrust laws, leading to mergers among large and profitable firms, but killing high-paying jobs in numerous industries.

3. Permitting the oil industry mergers in the 1990s that are now preventing oil prices from falling in the middle of the worst slump since the 1930s.

4. Permitting relentless mergers among pharmaceuticals and health insurance companies, so that America, far more than any other nation, now spends almost 15 percent of its gross domestic product (GDP) on health care that is mediocre by European and Japanese standards.

5. Unchecked use of outsourcing that kills high-paying jobs in manufacturing and services.

6. Ignoring the growth of the trade deficit that has destroyed our manufacturing base.

7. The 1999 repeal of the Glass-Steagall Act under President Clinton that led to reckless lending by banks and an unprecedented housing bubble, which collapsed in 2007 to trigger the ongoing slump.

8. The Bush tax cuts and bailouts that further benefited the rich while nearly doubling the government debt.

9. And finally, the decimation of the real minimum wage by President Reagan and other Republicans.  (In 1981 the hourly minimum wage bought $8 worth of goods compared to $6 by the end of Reagan' presidency in 1988,  and to mere $5.15 in 2006 under Bush.)

Looking at this nine-point list, is there any government program that a big business CEO would hate?  Stated another way, is there any measure that has helped the middle class?  I can't think of any.  Thus, over the past three decades whatever the government did, ostensibly to help the people, actually ended up hurting them.  Mergers, outsourcing and free trade raise productivity, but also lower wages, whereas the other provisions of the above list directly enrich the wealthy.  The nine-point list is really a list of exploitation.

Let us now look at President Obama's record since January 2009 when he took office.  The president's first act was to engineer another bailout, à la George W. Bush.  The idea was that the $800 billion package of assisting banks and faltering industries would save or create some four million jobs.  Did the measure succeed in its avowed purpose? 

According to the latest estimate from the Congressional Budget office, the bailout created nearly 1.5 million jobs.  Even if we accept the administration's claim of four million, the bailout was extremely wasteful and enormously enriched the rich.  Dividing 800 billion by four million yields 200,000.  In other words, the government spent $200,000 to create one job.  When the average wage is less than $50,000 per year, where did the other $150,000 go?  This suggests that companies that hired those four million people received $150,000 for each job they created.  Thus, three-fourths of the bailout, or $600 billion, went to businesses, and a mere one-fourth benefited the unemployed.  This is the best case for the Obama measure.  It is clear that the bailouts, Bush's and Obama's, were extremely wasteful and hugely enriched the opulent.

The fact is that government deficits are not working and have always benefited the wealthy.  Not surprisingly, the fastest and the sharpest rise in income and wealth inequality has occurred since 1981, when the culture of mega-deficits first began.  Lasting prosperity occurs only when wages rise in proportion to productivity, as was the case through much of American history, especially from 1940 to 1980.  Whenever wages trail productivity, debt and profits soar, only to be followed by overproduction and soaring poverty and misery for the middle class.  Such was the case in the 1920s and the 1930s and such again has been the case since 1981.

If President Obama really wants to create millions of jobs, then all the economic measures adopted since Reagan's presidency must be abandoned.  Of course, the Republicans would oppose him tooth and nail in this resolve; they would scream about the president hurting job creators, who in fact are job destroyers.  Big business has decimated American jobs through mega-mergers, outsourcing, oil speculation and by shifting factories to Mexico and China.  The nation can only prosper if the destructive ability of job destroyers is restrained through increased taxes or the creation of free markets.

When the government bails out mega banks and Wall Street firms, it amounts to shooting the economy in the foot.  Our president seeks to bring about change, which was his campaign slogan.  But once elected, he got sidetracked by thinking that change is possible through compromise.  This has never happened before.  Never in history have the exploited prospered by cooperating with the exploiter.

Compromise is what produced the government's nine-point list of measures described above.  The Republicans were able to impose these measures whenever some Democrats compromised with them.  When Reagan raised the gasoline tax and excise taxes in 1982, it was through the cooperation of the Democrats, who cooperated again in 1983 when Social Security and self-employment taxes went up sharply to pay for the massive income tax cut of 1981.  The repeal of the Glass-Stiegel Act, the Bush tax cuts and bailout were all the handiwork of Republican lawmakers and right-wing Democrats.

America does not need another dose of increased government spending, but a rational economic policy that generates free-market capitalism to take the place of the current monopoly capitalism.  In 1776, the nation declared independence; coincidentally, the same year Adam Smith, the father of modern economics, demonstrated how small businesses generate lasting prosperity for all, not just a privileged few.  That is what we need again.  It is well known that small firms have created the bulk of American jobs in recent years.  This is then the best argument for breaking up business conglomerates not only to create jobs, but also to lower the oil price and the cost of health care.

The government should also adopt strong, not toothless, measures to eliminate the trade deficit, which is now running at $500 billion per year.  This alone will create five million manufacturing jobs.  Eliminating the trade deficit will raise US GDP by the same amount, and to produce that much output, new workers will be needed.  Suppose it costs a business $100,000 to hire a worker, including salary, benefits and profit.  Dividing 500 billion by 100,000 yields five million.  In other words, eliminating the trade shortfall will generate five million new jobs, paying the average wage and benefits.

The trade deficit can be eliminated by setting up a low export-exchange rate, the way China and other Asian nations have done.  But first, the government must see the value of balancing our trade and then proper economic policy can be devised to reach the goal.

Outsourcing is now the biggest job destroyer.  The government should impose a hefty tax on this practice.  This way, if a company has to outsource some work, it will compensate the nation for creating joblessness in the economy.  Finally, we need to eliminate the federal budget deficit.  This can be done by repealing the Bush tax cuts for the wealthy and by enacting a small tax on financial transactions, while preserving crucial programs for the retirees.  There is no reason to cut Social Security and Medicare, because President Reagan raised taxes sharply to guarantee the benefits to retiring baby boomers.  In short, President Obama should do away with the nine-point list of exploitation mentioned above.  He will then be able to bring about the change that he promised during the election campaign in 2008.

Einstein once defined insanity as doing the same thing over and over again and expecting different results.  By now, we should know that excessive government spending is one such insanity.  It creates very few jobs and primarily benefits the rich.  In fact, I have shown mathematically to some audiences that, under reasonable assumptions, increased government debt goes completely into the pockets of the opulent.  As the latest piece of evidence, from September 2010 to September 2011, the deficit rose $600 billion, but only 400,000 jobs were added.

I call upon the OWS movement to demand that the above nine-point list of exploitation be repealed, so that a free-market capitalism of small firms is reborn.  This will strengthen the president's hand and enable him to face Republican lies and tactics that are only meant to further weaken the economy and force the president out of power.  We need to make sure that Mr. Obama is re-elected, provided he accepts the repeal agenda, because the Republicans always do the same thing over and over, namely make the rich richer and the poor poorer.  Additionally, we should also work to defeat Republican incumbents and rightist Democrats who will compromise to maintain the status quo and possibly cut Medicare.

Our efforts are bound to succeed.  I am an economist and historian and made many forecasts in the past about the economy and social change.  While 5 percent of my economic forecasts have been wrong, to my knowledge I have never made an error about forecasting a revolution.  My latest estimate is that monopoly capitalism will go the way of Soviet communism by 2016.

O' brave protesters of the OWS movement, your effort will not only shape the 2012 elections, they will also end, once and for all, the brutality of the rich and powerful, who are responsible for the sorry state you are in.  The change that you are about to bring will be glorified as what Abraham Lincoln did for black Americans.  I hope that, with your support, Mr. Obama will be the harbinger of that change.

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License. 

Ravi Batra is a professor of economics at Southern Methodist University, Dallas. This article is based on his two books, "The New Golden Age" and "Greenspan's Fraud." His web site is  

Political Democracy can and will be fortuitous
when Economic Democracy is established.  

Explore this and other articles covering alternative economics, ethical leadership, economic democracy, and a society without the weal and woe of social and economic vicissitudes HERE  
How does PROUT compare or contrast with capitalism or communism?  Explore the answers HERE
What are essential ingredients assuring progressive sustainability bereft of the vicissitudes of economic or political predation, privation or disparity?  Learn more HERE 

Saturday, October 29, 2011

The Future of the #Occupy Movement: Solidarity and Escalation

Mark Engler - October 21, 2011

A month after it began with a few hundred people marching on Wall Street, the #Occupy movement has grown to include tens of thousands of participants throughout the country and has captured headlines around the world. If it has not yet succeeded beyond its wildest dreams, that’s only because its participants have dreamed big: imagining a sustained popular uprising that could force fundamental changes in our political and economic system—ones that could end corporate dominance and promote real democracy. 

The movement can, in fact, propel significant changes. But #OccupyWallStreet and its allied occupations still have a ways to go before realizing their potential. The two issues most pressing as they chart their next steps: solidarity and escalation. 

 “Co-optation” or Flattery? 

Despite great success in capturing the public eye, the actual number of people camped out at the various occupations around the country remains relatively small. While there are several hundred people camping in hubs such as New York City and Los Angeles, overnight participants in smaller cities number in the dozens. What bolsters the power of these encampments is that they are representative of a much wider discontent. Far greater numbers of sympathizers turn out for mass meetings, marches, and online shows of support. And, importantly, more established political bodies—unions, advocacy organizations, and community groups representing large constituencies—have offered endorsements of the growing #Occupy effort. 

As more have signed on, some activists have been wary of outside expressions of support. Particularly as Democratic Party officials (including President Obama and Vice President Biden) have said positive things about the movement, some have voiced concerns about “cooptation.” They have argued that outside liberals, “while pretending to advance the goals of the Occupy Movement,” could instead “undermine it from within.” 

How big of a danger “cooptation” actually represents is a matter of dispute. In a recent interview, Chris Maisano asked veteran social movement theorist Frances Fox Piven about this issue. (Piven is author, among many other books, of the landmark Poor People’s Movements and has considered the issue of cooptation at length in her work.) I believe she struck the right tone in her response
Maisano: [As] recent comments by even the president and vice-president have showed, a lot of the more institutionalized forces on the left like the unions and MoveOn and the Van Jones American Dream Movement are trying to latch on to the protests and turn them into what some people have called a liberal version of the Tea Party. How do you think their involvement will effect the movement? How should the activists at the core of the movement relate to them?  
Piven: They should be friendly. They should ask them to do things; they should give them assignments. And not adopt the insignia of these groups as their own. In other words they should maintain considerable autonomy, but nevertheless they should treat these groups as allies, as they treated the unions as allies. But they shouldn’t ever let unions tell them what to do, they shouldn’t let Van Jones tell them what to do. Partly because they seem to know better, really. 
So I don’t think that’s their biggest problem, how to deal with their erstwhile supporters.
The danger of cooptation should be put in context. There have been some clearly opportunistic instances of Democrats trying to capitalize on the movement, such as the none-too-radical Democratic Congressional Campaign Committee attempting to build its mailing list through a “I Stand with #OccupyWallStreet” petition. But is it really possible that the Democratic Party would somehow swoop in and “take control” of the #Occupy movement? It doesn’t seem like even a remote possibility. 

 Moreover, Peter Drier has made the important point that, when it comes to social change, imitation is the sincerest form of flattery. The fact that mainstream figures attempt to co-opt and advance watered-down versions of movement demands (as they did with once-impossibly-radical calls for “a progressive income tax, the eight-hour day, the direct election of Senators, old age insurance, and voting rights for African Americans”) is not a defeat, but a sign of victory. Of course, if activists use this as an excuse to call it a day, that is a problem. But if we treat it as an occasion to push for even greater changes, it is a very positive thing. 

 Joining Forces, Gaining Power 

One problem with the rhetoric of “cooptation” is that it casts the need to expand the movement’s reach in a negative light. It leads figures such as Chris Hedges, in a more-radical-than-thou cri de coeur, to adopt right-wing talking points denouncing allies as “union bosses,” rather than to approach coalition-building in a constructive manner. This is unfortunate. For, while cooptation is something to be avoided, a much more pressing and ongoing need for the #Occupy movement is fostering solidarity. 

Before #OccupyWallStreet ever existed, there were lots of people working to fight banks, reverse foreclosures, and challenge corporate power. The problem was that their efforts were isolated and almost universally ignored by the media. The #Occupy movement has created a great opportunity for many of these campaigns to see themselves as part of a unified fight and to receive an added jolt of energy. In return, the more groups that sign on and see themselves as part of the #Occupy effort, the more that movement is able to sustain its status as a growing and dynamic force. It gains greater numbers of participants, more diversity, and heightened credibility. 

Many actions that different local occupations have embraced have grown out of solidarity with groups that were already organizing to advance the interests of the 99 percent. As just one of many examples, #OccupyLA joined up with an anti-foreclosure action against several banks and successfully compelled the reversal of at least one foreclosure decision. This action—wonderfully militant and effective—did not emerge out of the occupation itself. Instead, it had already been organized by the Alliance of Californians for Community Empowerment (ACCE), an LA community organization. But the fact that the #Occupy movement joined in solidarity was a great boon to all involved. It added a ton of energy to ACCE’s direct action. And, for the #Occupy folks, the positive media attention created by the action generated greater excitement about the City Hall encampment and helped bring a wider range of people to the occupation’s assemblies. 

 When Piven argued that cooptation is not the #Occupy movement’s biggest problem her interviewer replied, “What do you think their biggest problem is?” 

Piven gave a prescient answer: “Spreading the movement. Thinking of second, third, fourth, fifth phases. Other forms of disruptive protest that are punchier than occupying a square.” 

She is right. If the #Occupy movement is to remain in the media spotlight and continue gaining momentum, it must escalate. That could involve many steps, including occupying banks, continuing to use direct action against foreclosures, and embracing further international days of action. Solidarity will be an important part of all of these. 

Within the call of “We Are the 99 Percent” is the idea that, while no one can take over the movement—no single individual or group can declare it over or announce that its ambitions have been satisfied—the coalition of those invited to take part is vast. The movement draws power from its reach. And that is no small part of its brilliance.

Political Democracy can and will be fortuitous
when Economic Democracy is established.  

Explore this and other articles covering alternative economics, ethical leadership, economic democracy, and a society without the weal and woe of social and economic vicissitudes HERE  
How does PROUT compare or contrast with capitalism or communism?  Explore the answers HERE
What are essential ingredients assuring progressive sustainability bereft of the vicissitudes of economic or political predation, privation or disparity?  Learn more HERE