Obama and the 99 percent
All the doubting Thomases who wondered whether Occupy Wall Street would have lasting political impact got their answer this week in Osawatomie, Kansas. Thatâ€™s where President Barack Obama traveled to deliver a speech that is being billed as the mission statement for his 2012 re-election campaign.
The president chose that town of fewer than 5,000 people, 50 miles, or 80 kilometers, southwest of Kansas City, for its historical resonance â€” it is where Theodore Roosevelt journeyed just over a century earlier to give his seminal â€śNew Nationalismâ€ť address.
But Zuccotti Park in New York, the informal epicenter of the leaderless Occupy Wall Street movement, served as an equally important, albeit less explicit, inspiration. The movementâ€™s accomplishment is to have legitimized discussion of rising income inequality in the United States â€” Obama described it as â€śthe defining issue of our time.â€ť That is a landmark declaration.
For one thing, in recent decades the participants in the national political discourse have been queasy about addressing issues of class and distribution directly. One of the intellectual victories of the Reagan Revolution was to make it feel practically un-American to talk about how the pie was divided. The culturally acceptable, win-win question to ask was how to make that pie grow.
Obamaâ€™s speech represents an important shift for another reason, too. As recently as this summer, when the headline battle was over the debt ceiling, the issue driving the political debate was government spending and how to cut it.
But today, thanks in great part to Occupy Wall Street (to which the president alluded directly just once), talking explicitly about the 1 percent and the 99 percent is not just O.K., it seems to be a way a man presiding over an economy with 8.6 percent unemployment thinks he can be re-elected.
The speech was written for the campaign trail, in direct and sometimes emotive language, but one of its most impressive qualities was its honesty and sophistication. The surge in income inequality, particularly between those at the very top and everyone else, is driven by a complicated and connected set of causes that are being fiercely dissected and debated in the growing academic literature.
On the left, the preferred culprit is political â€” the argument that the 1 percent have amassed their fortunes by capturing the political process and thereby securing lower taxes and more favorable, generally weaker, regulation.
Obama did not shy away from those factors, but his core explanation was politically less convenient and intellectually more persuasive. As the president sees it, the big drivers are the twin revolutions reshaping the world economy â€” globalization and new technology: â€śOver the last few decades, huge advances in technology have allowed businesses to do more with less, and made it easier for them to set up shop and hire workers anywhere in the world.â€ť
He compared the creative destruction of todayâ€™s economic transformation with the Industrial Revolution. The â€śmassive inequality and exploitationâ€ť of that transformation spurred Roosevelt to action, just as income inequality today should be at the top of the national agenda.
Framing the woes of the 99 percent as the consequence of a massive â€” and broadly positive â€” economic transformation was a brave political choice. Pinning it all on the banksters, as they were called by the left during the Great Depression, would make for more powerful rhetoric and delight the Democratic base. Moreover, the potential downside of alienating Wall Street is something this White House has done already.
But Obamaâ€™s speech understated two facts that follow from his chosen explanation, and unless the president is able to confront them, his administrationâ€™s response to the problem he so accurately defined will fall short.
The first is the grim economic reality that the hollowing out of the U.S. middle class will be very hard to reverse. One reason the bankster explanation is so appealing (unless, of course, you are one of them) is that it has a simple remedy â€” raise taxes and tighten regulation. But if you believe, as Obama does, that a larger and largely welcome economic transition is also at work, figuring out how to rescue its victims becomes a more daunting challenge.
To understand the scale of the problems the Western middle class faces, consider how it looked to a few Indian business leaders I recently spoke to in Mumbai.
â€śYou know, historically, economic activities tend to migrate because people who donâ€™t have it have a lot more urge to have it, theyâ€™re willing to work harder for less money, and thatâ€™s part of life, O.K.?â€ť B.N. Kalyani, the chairman of Bharat Forge, Indiaâ€™s largest exporter of motor parts, told me. â€śYou had your golden period, now, hopefully, weâ€™ll have ours.â€ť
S. Gopalakrishnan, the co-chairman of Infosys, the pioneering Indian outsourcing company, told me bluntly that the per capita consumption of the Western middle class would have to decline as the developed and developing worlds â€śmeet somewhere in the middle.â€ť
Even if you had the lion heart of a Roosevelt, that is not a political platform you would want to run on.
The second consequence of the presidentâ€™s chosen explanation is political. As is his wont, Obama took great pains to unite rather than divide: â€śThose arenâ€™t Democratic or Republican values; 1 percent values or 99 percent values. Theyâ€™re American values, and we have to reclaim them.â€ť
But it might not be quite that easy. As Obama explained, some people are benefiting greatly from the transformation of the world economy â€” he shared the jaw-dropping facts that the average annual income of the top one-hundredth of the 1 percent is $27 million, and that the typical C.E.O. makes 110 times more than his typical worker. The president wants to believe that â€śall will benefitâ€ť from the vision of America he articulated. But if the problem you are trying to fix is a winner-take-all society, it may take more than rousing rhetoric to persuade the winners to back your plan.