Columnists

Ellen Russell
Occupy Wall Street asks the big economic questions

| October 6, 2011

"We Are The 99 per cent that will no longer tolerate the greed and corruption of the 1 per cent," say the Occupy Wall Street protesters. This grassroots protest started on Wall Street, but is now spreading far and wide among folks who just can't take it anymore.

The realization that something is deeply wrong in the economy is palpable: inequality, constant crisis management, poverty. It's a very long list of everything we never wanted in an economic system.

As protesters mobilize, there is an outpouring of relief and even glee that folks are daring to ask tough questions of our economy. It's exciting to think outside of the box. And if you can't go down yourself to a local "occupy together" protest, you can still support those on the frontlines. You can buy them an "occu-pie" pizza on the Internet.

Of course, the media have dismissed this movement as lacking an articulated vision. "Good for ya," I say. Movements don't get started because a committee has crafted a slick press release.

But as an economist I got to wondering: How might people in this movement understand why we are in this mess, and what it is that needs to change to get out of it?

There are many visions coming together among the "Occupiers." As there should be.

I caught up with one keen observer of this growing social movement. Rick Wolff is an economics professor who gave a teach-in on Oct. 4th sponsored by Occupy Wall Street. I've been meaning to get his take on the economic crisis for a while now -- Wolff is a rising media celeb in the lefty alternative media (plus I studied economics with him way back when). We had a fascinating conversation about the situation in the U.S., but Canadians will find the story hauntingly familiar.

Wolff pulls no punches. "This is the worst economic crisis of our lifetime," he says matter-of-factly. "No policy options that our economic and political leaders have put on the table has the slightest chance of coping with this." Ok, so that got my attention.

Wolff and others like him have given up on tinkering with the economy because the underlying problems are so deep. As we talked gloomy U.S. economic statistics, it is clear that the vast majority of Americans have failed to see any recovery from the recent financial crises and recession. And now we are staring at even more precarious economic times. It's no wonder folks are angry and frustrated.

Wolff argues that tinkering with economic policies won't work because the whole economic model is broken. This has been clear for a while now: starting in the 1970s, real wages (i.e. wages adjusted for inflation) stopped growing as the economy grew.

To an economist, stagnant real wages during economic growth is a jaw-dropper. The whole point of economic growth is supposedly that the rising tide lifts all boats. Since the 1970s, it has become painfully obvious that a whole lot of boats were anchored to the seabed while the tide was pouring in. The water that was supposed to float everyone's boat increasingly went to a few lucky yachts.

As the rewards of economic progress became more unequally distributed, most families were in a bind. Their costs were going up, but the real value of their paycheques didn't keep pace. They sent more of their family members out to work. But at some point granny and junior can't do anymore shifts at the burger joint, and the parents need to actually go home occasionally to do the sort of things parents are supposed to do, like raise their children.

At the same time that real wages were stuck, other really nasty aspects of neo-liberalism put more pressure on the family budget. Jobs left for abroad. And as good jobs left, this tended to depress wages for the workers who kept their jobs.

Employers were in a great position to get concessions from workers. Benefits were scaled back. You had to pay for your uniform at the burger joint. Pensions were being squeezed for those who still have them.

Then the American financial sector produced the solution -- or rather pseudo solution -- to this problem: debt. The illusion of the American dream has been sustained on a mountain of student debt, mortgage debt, and credit card debt. It was open season for any way that Wall Street could figure out how to max families out further.

But this crazy level of debt only postponed the crisis. There is just no way to borrow yourself out of a structural budget shortfall afflicting most families. Today, families are tapped out. And when that money needs to be repaid, look out. Families go from barely managing to free-fall.

Now that families are self-destructing with the stress of this economic catch-22, we face further challenges. Governments worldwide seem to be opting to make a bad situation worse -- by imposing austerity measures on the same families that were in bad shape even before the tumultuous events of the last few years. And as governments squeeze people, this will further contract economic activity.

If you think it was hard making ends meet in the tepid recovery of the last few years, just wait until global austerity tightens the screws further. As governments cut back spending this only amplifies the problems in the world economy. Indebted consumers can't buy stuff, governments won't buy stuff, and businesses are scared to invest because they see that consumers and governments are cutting back. With no one purchasing, the economy goes from really bad to catastrophic.

So what should be done about this mess? Wolff has a piece in the Guardian offering his viewpoint.

He focuses on what would make an economic system that responds to human needs rather than corporate agendas. He wants to change the way the economy works, not just tinker with policies to keep an unjust economic system on life support.

Wolff wants to bring democracy to the way economies work. After all, if political democracy is such a good thing, why not bring it to the economy too?

Starting right in our workplaces, Wolff wants us to get together to plan how work is organized, what gets produced, and what we should do with the fruits of our labours. Instead of the profits of corporations coming at the expense of most of us, our workplaces could be using these profits do make the kind of world we want to live in.

Of course, Wolff is just one among many who are daring to ask big question of our economy. You can ask your own questions. As "occupy together" spreads to Canada and beyond, we can all get in on the conversation.

Economist Ellen Russell is a research associate with the Canadian Centre of Policy Alternatives. Her column comes out monthly in rabble.ca.

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