Wall Street protesters challenge Reagan Revolution
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 US 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 US 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 IMF 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.