The “Occupy Wall Street” protests are gaining momentum, having spread from a small park in New York to marches to other cities across the country.So far, the protests seem fuelled by a collective sense that things in our economy are not fair or right. But the protesters have not done a good job of focusing their complaints—and thus have been skewered as malcontents who don’t know what they stand for or want.
(An early list of “grievances” included some legitimate beefs, but was otherwise just a vague attack on “corporations.” Given that these are the same corporations that employ more than 100 million Americans and make the products we all use every day, this broadside did not resonate with most Americans).
So, what are the protesters so upset about, really?
Do they have legitimate gripes?
To answer the latter question first, yes, they have very legitimate gripes.
And if America cannot figure out a way to address these gripes, the country will likely become increasingly “de-stabilised,” as sociologists might say. And in that scenario, the current protests will likely be only the beginning.
The problem in a nutshell is this: Inequality in this country has hit a level that has been seen only once in the nation’s history, and unemployment has reached a level that has been seen only once since the Great Depression. And, at the same time, corporate profits are at a record high.
In other words, in the never-ending tug-of-war between “labour” and “capital,” there has rarely—if ever—been a time when “capital” was so clearly winning.
Let's start with the obvious: Unemployment. Three years after the financial crisis, the unemployment rate is still at the highest level since the Great Depression (except for a brief blip in the early 1980s)
And it's not like unemployment these days is a quick, painful jolt: A record percentage of unemployed people have been unemployed for longer than 6 months.
And it's not just construction workers who can't find jobs. The median duration of all unemployment is also near an all-time high.
That 9% rate, by the way, equates to 14 million Americans—people who want to work but can't find a job.
Put differently, this is the lowest percentage of Americans with jobs since the early 1980s (And the boom prior to that, by the way, was from women entering the workforce).
And now we turn to the other side of this issue... the Americans for whom life has never been better. The OWNERS.
Corporate profits as a per cent of the economy are near a record all-time high. With the exception of a brief happy period in 2007 (just before the crash), profits are higher than they've been since the 1950s. And they are VASTLY higher than they've been for most of the intervening half-century.
In short... while CEOs and shareholders have been cashing in, wages as a per cent of the economy have dropped to an all-time low.
Of course, life is great if you're in the top 1% of American wage earners. You're hauling in a bigger percentage of the country's total pre-tax income than you have at any time since the late 1920s. Your share of the national income, in fact, is almost 2X the long-term average!
And, by the way, few people would have a problem with inequality if the American Dream were still fully intact—if it were easy to work your way into that top 1%. But, unfortunately, social mobility in this country is also near an all-time low.
So what does all this mean in terms of net worth? Well, for starters, it means that the top 1% of Americans own 42% of the financial wealth in this country. The top 5%, meanwhile, own nearly 70%.
And remember that huge debt problem we have—with hundreds of millions of Americans indebted up to their eyeballs? Well, the top 1% doesn't have that problem. They only own 5% of the country's debt.
And then there are taxes... It's a great time to make a boatload of money in America, because taxes on the nation's highest-earners are close to the lowest they've ever been.
The aggregate tax rate for the top 1% is lower than for the next 9%—and not much higher than it is for pretty much everyone else.
As the nation's richest people often point out, they do pay the lion's share of taxes in the country: The richest 20% pay 64% of the total taxes. (Lower bar). Of course, that's because they also make most of the money. (Top bar).
Remember when we bailed out the banks? Yes, and remember the REASON we were told we had to bail out the banks? We had to bail out the banks, we were told, so that the banks could keep lending to American businesses. Without that lending, we were told, society would collapse...
So, what have banks been doing since 2007 if not lending money to American companies? Lending money to America's government! By buying risk-free Treasury bonds and other government-guaranteed securities.
Meanwhile, of course, the banks are able to borrow money FOR FREE. Because the Fed has slashed rates to basically zero. And the banks have slashed the rates they pay on deposits to basically zero. So they can have all the money they want—for nearly free!
And it has helped generate near-record financial sector profits—while the rest of the country struggles with its 9% unemployment rate.
And those profits, of course, are AFTER the banks have paid their bankers. And it's still great to be a banker. The average banker in New York City made $361,330 in 2010. Not bad!
This average Wall Street salary was 6X the average private-sector salary (which, in turn, is actually lower than the average government salary, but that's a different issue).
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