Wall Street protesters challenge Reagan Revolution

By Chrystia Freeland
October 14, 2011

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.

38 comments

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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.

Posted by BJDefr | Report as abusive

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.

Posted by Adam_S | Report as abusive

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.

Posted by saifikhan | Report as abusive

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.

Posted by rrodriguezmia | Report as abusive

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 ….

Posted by SanPa | Report as abusive

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.

Posted by dlinbid | Report as abusive

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.

Posted by stevedebi | Report as abusive

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!

Posted by DrJJJJ | Report as abusive

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.

Posted by gruven137 | Report as abusive

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.

Posted by xftnfnb7 | Report as abusive

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!

Posted by Reicher | Report as abusive

What do we want? Government acting to protect the interests of people against those of massive corporations, especially those in the finance business.

Posted by borisjimski | Report as abusive

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.

Posted by hariknaidu | Report as abusive

The sound bite is “liberté, équalité, fraternité”

Posted by FBreughel1 | Report as abusive

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.

Posted by Robertla | Report as abusive

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.

Change that relationship and the course of our economic ship changes.

Is it class warfare? To those whose wealth machine is threatened – YES. Is it “Bad Religion”? NO – small liberalization and smaller government can co-exist with tax reform and social responsibility.

Changing tax policy to reward positive economic outcome in the form of new business and new capital formation is in keeping with capitalism’s new martyr – “Steve Jobs” – the man who championed “Disruptive change” to build a powerhouse company, new forms of interaction and thousands of jobs both domestically and internationally.

Posted by OFA7 | Report as abusive

I will not go into the details but would just jot down my opinion on the ‘Wall Street’ movement. Observing the movement form its start until to day going Global that is sufficient to indicate that the movement though seem to be unplanned and developing impromptu is not at all so.

This movement has been well planned and behind it the strength hidden would gradually come to the surface surface in due course of time as days passes.

In short, the matter will not only touch on respective nations Political and financial issues and solutions, which of course will remain the foremost important matters but also would in all likelihood take in its fold the corruption at all levels particularly accepting huge kick backs from Lobby groups to swing the legislation of law in favor or against.

I also apprehend a long list of Corrupt politician’s names already in the possession of the Protesters of their respective countries.

However, any repressive action on the protestors by the government through any security force, means, and or policy would be fatal for the nation as the movement has taken a momentum. Therefore, Politicians to make themselves individually safe from being targeted should not dare try to use force to defuse the movement.

The movement will ultimately result in cleansing the dirt accumulated within Political parties of the respective countries in the movement and it working system for the nations development.

It may also touch upon foreign policy.

I may list many more, but to cut short I can mention there is no scope to think the movement would end up as farce.

The innocents arrested should immediately be released to avoid future complications. Therefore, all sectors must remain ready and alert to face calmly the situation as it develops. At the end of the day this movement will result in contributing the best gifts to the nation so far that no individual presented before.

However, inadvertent typing mistakes may kindly be overlooked.

Posted by KINGISKING | Report as abusive

There will never be a “Reagan of the left”?

Because…….you cannot explain or solve any of the issues facing our society (especially the financial ones) in a sound bite.

All the synthetic investment products that in large part caused the financial crisis are so complex that the typical American and even those of us with advanced business degrees are often unable to understand them.

Now, how does a politician, even if he DOES recognise the problem, possibly explain the ABX, PrimeX, CDS or any other of the synthetic investments to the average voter in a way that the voter can understand?

The longer our financial crisis goes on, the more depressed I get.

Posted by Missinginaction | Report as abusive

“We know what we do not want. But what do we want?”. What we want is what we do not want!

Posted by TruthFighter57 | Report as abusive

Could the sound bite be ‘richism’ to be developed along the lines of ‘racism’. Even the poor believe in richism–they might win the lottery–but it now divides the rich and the poor in the same way that racism divides people on a basis of prejudice. Everybody deserves a living income in our increasingly jobless society. A young woman “just out of the nest” suggested the 99% campaign will develop for income justice in the same way that the civil rights campaign developed in the 1960s.

Posted by lereilly1 | Report as abusive

There is a fundamental flaw in the populism of the Occupy Wall Street protesters.

They decry, rightly, the corruption typified by Washington’s Bail Out of Wall Street Banks (not to mention the crony capitalism on both sides of the political aisle).

But the solutions they advance, insofar as they advance any, are to increase the power of one corrupt institution (Washington) in order to rein in the other (Wall Street). Just how does MORE power lead to LESS corruption?

A more appropriate, but much less left-wing, solution might be to break up both centers of corrupt power — dismantle the “too-big-to-fail” banks (just like we did AT&T years ago) AND break up the massive power of the “failed and too big” federal government, distributing that power to the states or (horrors) the people.

A smaller Wall Street AND a smaller Washington might serve to unite the goals of the Occupiers and the Tea Party. And then, the corrupt institutions of power might actually face an existential threat.

Posted by wmcmyers | Report as abusive

The Reagan Revolution has something that the socialist-liberal movement does not:: proven success.

My view is that Bill Clinton has some blame here, he signed off on the repeal of the Glass-Stegall act.

the credit raters have some blame, and Barney Frank and Chris Dodd also,

Posted by grhutch | Report as abusive

Looking upon the Reagan Revolution, we see that was a short lived revolution…
And since it was idealised by the elite, increase in inequality had to be expected…
But the Reagan revolution changed partialy at least the view of the american people…
More people now (in the fallout of some bubbles) percieve greed and growth of inequality, corruption, etc…
If you compare for example before Reagan, people were in the apice of consumption culture, cult of capitalism itself, and in Reagan they saw a way to keep things that way… even if was just a few minutes of an extension of the game…

I only recently saw the “Jimmy Carter Crisis of Confidence speech” on YouTube…

That guy was fantastic for his time… i was not even born…
His speech was for the americans of today… the problems are the same problems of today… in his time he alerted about greed and the powerful, and today we add the finantial and corporative problems to the list…
I wonder how would be the world today if his energy policy had been adopted… maybe gulf war, global warming, finantial crisis, would not exist… that one would had been The Revolution.
But i understand that the sacrifice he asked to build his view of the future was to big for the americans of that time… and he was not a very popular figure because of that…

Posted by VonHell | Report as abusive

It is better if the perspective and the analysis is not only based on social inequality problem, but also based on ethical / moral problem in today’s capitalism practice.

Posted by Cohens | Report as abusive

Chrystia, I am watching you on Zakaria today. Next time ask the question … “What would a Canadian do?”

1. Before and after the crash how did the Canadian banks do?

2. Canadian banks were forbidden by REGULATION for copying American banks in their excesses (even though they lobbied for deregulation)… what were those regulations?

Posted by davidedenden | Report as abusive

Chrystia’s analysis here is spot on, giving both the ‘macro’ picture of what’s been happening in America for the last 30-40 years and the ‘micro’ picture of what’s happening with the Occupy movement.

It is certainly easier for the Tea Party to come up with a solution/panacea, i.e. eliminate government. But that also means the Tea Party’s influence will probably be temporary, because obviously their solution is no solution at all, but simply more of the same Reaganite approach to government.

The Occupy movement can’t do that, because any real solution that would go back to a pre-Reagan mixed economy is by its nature more complicated. But at least it’s the start of an independent movement that can put pressure on both political parties to redress the injustices of the past 30 years. Only time will tell whether it will be effective in doing that.

Posted by rudeawakener | Report as abusive

@missinginaction; If you can’t understand the business issues you mention (and you have an advanced business degree) and the politicians may not understand them and certainly not most of the voters, than who does understand them? It suggests that those in charge may be good at bluff and swagger but can barely cope themselves.

@some other comments – The trouble with distributing powers typically held by the federal government, especially highway funding, welfare, education, business regulation, civil rights etc. is that they will most likely not be done or they will be done very unevenly. The break up of central power will sooner or later mean the break up of the country. It will not be a fine and cozy new order but the substitution of a lot of petty “corrupt officials” for the bigger kind. You can bet on it.

In fact OWS complaint about “corrupt” or greedy business and government is just the tip of the iceberg.

Anyone ever read Edgar Lee Master’s Spoon River Anthology? Small town, city and state government hasn’t changed that much. Reuters just doesn’t have the manpower to sweat the small stuff. Not as many look at the dirty local deals and the petty influence peddling. And it’s generally cheaper and easier to do at the local level. I couldn’t tell you how it’s done but I’ve heard stories for 20 years. If the local level played with big money without federal oversight the “gaming” would soon be much closer to home.

Posted by paintcan | Report as abusive

Here is a sound bite since no one seems to understand the difference between “Reagonomics” “Trickle Down” “Laffer economics” How about, “the only legal corporate deduction is a salary”

Posted by educationfan | Report as abusive

Chystia, I also saw you on CNN this morning and you could have quoted the jobs created statistics by republican presidents compared to democratic presidents over the past 50 years and maybe the wall street journal columnist would have lost some of his bluster! No contest, particularly since the last president Bush created zero over his two terms! So much for his job creating friends.

Posted by Anonymous | Report as abusive

They took too much and kept it all for themselves. They gained too much influence over the economy, and they recklessly crashed it. Then they expected us to pick up the tab while they continued to pay themselves 8-figure salaries.

That wasn’t economic liberalism. It was a crime.

Posted by Fishrl | Report as abusive

Just as demand side Keynsian policy was over used, so too was Stein-Laffer supply side policy impactful in an opposite direction. Supply side theory has been the driver of modern policies from relying on imports to importing workers to relaxing regulations … all to add resources into an economy straining with ever increasing coindicent deficits.

The supply side cycle is well past its prime, yet conservatives via the Tea Party movement cling to a notion that more supply must be good. While a reversion to some demand side policy must occur, policy makers need awareness of past mistakes to avoid the same.

Posted by SanPa | Report as abusive

Reagan’s “revolution” has persisted for the simplest of reasons–IT WORKS. Free markets have improved the well-being of literally billions worldwide, including China and India. Read “The Commanding Heights” by Yergin to see why freedom has triumphed.

By the way, the USA was founded on the core principle of limited government, with carefully enumerated powers given to the state and all other power resting with the people. It’s not the Reagan revolution—it’s the American Revolution, which changed world history immeasurably for the better.

Posted by ossefogva | Report as abusive

SOUND BYTE: Arab SPRING vs Wall Street FALL.
1.Social engineering does not work.
2.Goverment has no capacity or skills to create
3.I have never seen an intellectual movement which ended in anything good or useful.
Intelectuals can be tolerated as long as you keep them out of the kitchen. When I want to eat I don’t need a nutrition professor, I need a cook. Start working and stop talking.

Posted by joe_jag | Report as abusive

The article, like the protesters, misses completely what caused the recent downturn. It wasn’t anything inherent in Reaganism, repeal of Glass Steagal, or capitalism. It was the Fed under Greenspan and Bernanke, forever holding interest rates at artificially low levels by flooding the debt markets with dollars. The growth in money supply during the nineties was breathtaking. Too many dollars always leads to either inflation, asset bubbles or both. Everything else is a sideshow…until Bernanke starts raising interest rates and stops ‘printing’ dollars (which would finally force de-leveraging and loan work-outs), the longer this will drag out.

Posted by David867 | Report as abusive

Here’s is sound bite for you:

‘Corporations are not people, they are not persons, they are not citizens and they are not human beings. They are only legal entities and they only have the rights that We, the People, allow them to have’.

Posted by injuntrouble | Report as abusive

This historical reference is good — figuring roots of neoliberal revolution. One might also think about various roots and historical frames of OWS, moving from 1989 to 1968. See http://www.jadaliyya.com/pages/index/285 3/arab-spring-occupy-wall-street-and-his torical-fram

Posted by Prof_Kennedy | Report as abusive

What this article ignores is the fact that without government, money is the ONLY power that remains. Those who rail against government tend to forget one thing–WE are the government, and reducing our power merely increases the power of wealth.

Posted by Saje3D | Report as abusive

Conservatism isn’t about conservation, preservation, hope, mom, or apple pie. In the end, conservatism is about the GOP returning to the party’s platform of core values. And those core values were most clearly implemented during in the Reconstruction Era … an era of Carpetbaggers, Barons, Tycoons, lawlessness, exploitation, ignorance, and poverty. Looking beyond the sound bites and clever slogans and slurs impugning of the progressive GOP movement that molded a modern global power, it is certain that the citizenry will be less prosperous in a conservative America.

Posted by SanPa | Report as abusive