What Happened to the Great Wealth Debate?

Photograph by Victor J. Blue/Bloomberg

Union Square in New York on May 1, 2012, a last hurrah for Occupy Wall Street.

May Day came and went last week, and despite the occasional signs on New York lamp-posts promising a return for Occupy Wall Street, downtown wasn’t exactly gripped by the kind of International Workers’ Day rage that gripped some other world cities. In the months leading up to the presidential election last year, the protests filled the airwaves and the 99 percent chants seemed to define and crystallize the national debate. So what happened?

For one thing, there was the response of authorities. At its home in Zuccotti Park in New York Occupy faced an ever-tightening net of aggressive policing. In other places, like Oakland, Calif., the response made protests a dangerous place to be–and probably succeeded in sending the message that attending the protests would put you in direct confrontation with cops. You can watch the video here if you’ve forgotten that part.

Nonetheless, the basic 99 percent vs. 1 percent theme of the Occupy protests remained a significant factor through the election. The modest recovery after the financial crisis actually made things worse for the 99 percent: If you look at the latest numbers from Emmanuel Saez and Thomas Piketty, the economists most associated with the inequality discussion, you’ll see in the years 2009 to 2011 their real income actually shrank. That’s why Mitt Romney’s crack about the “47 percent” of unproductive Americans struck such a chord, and proved to be one of the pivotal moments of the election.

Then the meme atrophied. The language of Manichean battle between rich and poor mobilized protesters in the street and energized the latent resentments of those watching them at home — on both ends of the political spectrum. It didn’t do anything to define what should happen next. It turned out that being angry at the rich or the institutions that fund their wealth is not the same as agreeing on what to change or how to change it.

The Atlantic’s Derek Thompson discusses a new study (Saez is one of four authors) that helps demonstrate that difference. The study is genuinely surprising, and it’s worth looking at Thompson’s post. The short version  is that as people are given more information on the history of the income gap — some of it with a frankly propagandistic pro-tax, pro-redistribution slant — they become more likely to agree that inequality is a problem. Persuading people that inequality is a problem, however, will not persuade them to raise taxes on the rich. In fact, in some cases it actually made poorer respondents less willing to support redistribution.

Leave aside the psychological explanations of the study (Thompson doesn’t find them convincing and neither do I) and focus on the result: anger at the rich does not necessarily lead folks to conventionally left-wing or right-wing viewpoints.

That matches what we’ve seen in the actual debate around inequality. In politics, the rhetoric of rage at the 1% can be–and indeed, has been–marshaled with equal fervor by both the left and the right. The moneyed elites attacked by the left morph easily into liberal elites scorned by the right. One man’s “Wall Street fat cat” is likely to be another man’s “New York limousine liberal.” Movements like the Tea Party are as anti-1% as Occupy Wall Street. They just see taxes and income redistribution as hobby horses of the elite.

This may be the crux of the issue: Occupy Wall Street found its focus not in changing things for the 99 percent (or the bottom 47 percent, or 20 percent; it doesn’t matter where you draw the percentile line) but in sticking it to the one percent.

To some degree, when it came to making cuts at the top, the income gap crusade, which preceded the Occupy movement,  succeeded. That’s especially evident in Europe, where the “rip-off initiative” passed in a landslide in Switzerland and Eurozone bonus caps are close to reality. These measures have advanced with the support of (largely conservative) shareholders who have seen high CEO pay as an investor protection issue.

The bad news for those who focus on inequality is that the somewhat awkward alliance with shareholders will not take them any further. Look at the chart at the right. It comes from a study by University of Chicago professor Steven Kaplan.  The chart shows chief executive pay as a share of big companies’ stock market value. That has stayed stable for decades; outsize as CEO pay has become, it’s still a small part of the total value of the typical company. There are good arguments for why running a company with a market value that’s ten times bigger doesn’t mean you should get paid ten times as much. They don’t matter because ultimately shareholders don’t have enough skin in this game to care all that much.

That’s why the CEO pay fight won’t yield more than symbolic changes in the broader income gap. What the Occupy movement, as well as vigorous critics of inequality like Saez and Piketty, wanted was not just a few cuts at the top, but a major transfer of wealth to those lower down. The experiment that Thompson cites demonstrates how hard it is to get from riling people up about inequality to persuading them to back that kind of change.

The general approach of Occupy and its sympathizers mirrors that of Franklin D. Roosevelt’s famous first inaugural address. Roosevelt attacked the banks and those who ran them with a religious fervor: “The money changers have fled from their high seats,” said Roosevelt, “in the temple of our civilization.” You can see the similarities with the anti-bank jeremiads of Occupy. For the Occupy movement, the lingering memories of the 1930s, down to the Hoovertowns, were clearly one of the key inspirations.

That rhetoric doesn’t resonate in the same way now. The attack on the rich struck a chord both with the right and the left; in the “Obamacare” debate both sides claimed to represent the real America opposed to Wall Street and Washington. For Occupy, the “Wall Street” half of that equation matters more; for the Tea Party, the “Washington” half. Neither has found it easy to turn the principle of opposing the establishment into policy.

Saez and Piketty have often pointed out that the share of income going to the top 1% is greater now than at any time since the 1930s. That theme had a powerful resonance for the Occupy movement, who believed that the class-war tinged rhetoric could be deployed again today to garner support for a new war on poverty. So far, a year and a half after the Occupy protests, the evidence is that it can’t.

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