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California State University, San BernardinoCSUSB ScholarWorksCoyote Economist CSUSB ArchivesFall 2011CE Fall 2011Coyote EconomistFollow this and additional works at: http://scholarworks.lib.csusb.edu/coyote-economistPart of the Economics CommonsThis Book is brought to you for free and open access by the CSUSB Archives at CSUSB ScholarWorks. It has been accepted for inclusion in CoyoteEconomist by an authorized administrator of CSUSB ScholarWorks. For more information, please contact scholarworks@csusb.edu.Recommended CitationCoyote Economist, "CE Fall 2011" (2011). Coyote Economist. Book 12.http://scholarworks.lib.csusb.edu/coyote-economist/121¢ȱThe Political Economy of the Occupy MovementInside this Issue:Staying Informed ....................2We’re on Facebook  .................5Tentative Schedule ..................6News from the Department of Economics, CSUSBVolume 18, Issue 1  Fall 2011Department of EconomicsCSUSB 909-537-5511http://economics.csusb.eduFacebook: CSUSB Department of Economicscontinued on page 2!e spectacular growth of the Occupy Movement re"ects a deep-seated political sentiment. !e movement has grown, in just a little over two months, from an occupation of about 200 people in Zuccotti Park in New York City to a movement that is now represented in over 2,400 cities (according to Occupy Together) and in other formats such as Occupy Colleges and Occupy the Media. Many local communities— Riverside, San Bernardino, and Redlands among them—have been the sites of Occupy encampments and/or events. What’s more, in polls taken by Public Policy Polling, the fraction of voters who support the movement stands at about 33% (http://www.publicpolicypolling.com/main/2011/11/voters-moving-against-occupy-movement.html). Given the traditionally conservative nature of the U.S. electorate, this is a strong sentiment. !e Civil Rights movement, for example, did not have this level of support in the late 1950s and early 1960s, and it took years before the Anti-War Movement of the 1960s reached the level of approval currently given to the Occupiers (http://www.publicpolicypolling.com/main/2011/11/voters-moving-against-occupy-movement.html). Clearly, something is happening here.To political economists, what makes this phenomenon interesting is that it represents Photo: David Shankbone, used under a Creative Commons licence2 3Continued from page 1Staying Informed about CSUSB Department of Economics Events and NewsIf you’re receiving the Coyote Economist, then you’re on our mailing list and everything is as it should be. But, if you know of an Economics Major, or an Econ Fellow Traveler, who is not receiving the Coyote Economist through email, then please have him/her inform our Administrative Support Coordinator, Ms. Jacqueline Carrillo, or the Chair of the Economics Department, Professor Mayo Toruño. Our phone number is 909-537-5511.  You can stay informed by consulting: Our Website - http://economics.csusb.edu/ Our Facebook Page- http://www.facebook.com/pages/CSUSB-Department-of-Economics/109500729082841 Chair of the Economics Department – mtoruno@csusb.educontinued on page 3an attitude that runs against what many claim are the dominant mainstream values in this county. Unlike the Tea Party, which gives voice to these dominant values, the Occupy Movement is giving voice to a contrarian set of norms. While the Tea Party emphasizes private property, individualism, free markets, and a deep suspicion of government and “socialist” solutions, the Occupy Movement questions the power of corporations and is comfortable with socializing health care and education, redistributing income, and regulating markets—speci#cally #nancial markets. However, while their encampments emphasize horizontalism, consensus decision-making, and an anarcho-socialist perspective, the Occupy movement is not seeking the overthrow of capitalism. Instead, it appears to seek a more fair form of capitalism. One gets the sense that they would prefer the kind of social democracies found in the Nordic countries (Denmark, Iceland, Norway, Sweden and Finland), where the underlying institutions of private ...the elite have managed to change the legal, economic, and social rules of the game..property and markets are regulated to bring about greater equity and a broader access to public services than is common in the United States.!e Occupy Movement’s simple but powerful slogan, “We are the 99%,” has captured the imagination of a portion of the public that perceives that public policy in this country is being driven by a wealthy elite that ignores or shuts out the voice of the vast majority of citizens. !e government, many in the Occupy Movement claim, has been captured by corporations and wealthy elites, making it less of a democracy and more of a “corporatocracy”: rule by large corporations and by those who bene#t from the ownership and control of these corporations. One consequence of this capture of the government has been that the elite have managed to change the legal, economic, and social rules of the game so that they, the elite, bene#t even more than before. !is, in turn, has further enhanced the economic and political power of the elite and these elites have used this enhanced power to further tilt the rules of the game even more in their favor. A growing inequality in the distribution of wealth and income is one manifestation of this.Political economists have long drawn attention to the way elites and Photo: David Shankbone, used under a Creative Commons licence3Continued from page 2“!ere would not have been a tea party without Fox.”the business sector shape government. For instance, both !orstein Veblen and Karl Marx argued that, in capitalist societies, government largely re"ects the in"uence and power of the business class. While the system is formally democratic and allows workers, the overwhelming majority of the electorate, to participate in the choice of legislators and executives, it is nevertheless the case that elected o$cials must be keenly attentive to the needs of business. For instance, if elected o$cials ignore business interests they might provoke a “capital strike”—in which businesses reduce investment and production—which threatens the ouster of o%ending politicians as the public blames the politicians for the poor economic conditions created by the capital strike.Beyond this, huge corporations and rich elites are able to shape public discourse in this country in ways that bene#t these huge corporations and the elites. Consumers of this shaped public discourse—o&en middle-class workers—come to believe that their own (middle-class and worker) interests are aligned with the interests of corporations and the elite. Out of this we got the Tea Party, which has provided cover for some in Congress to claim that policies Congress passes (designed to bene#t large corporations and elites) are actually the product of the democratic demands of a grassroots and middle-class public movement. Yet the Tea Party’s rise to public prominence was not due to grassroots support. As a Tea Party leader Sal Russo admitted in a May 22, 2011 New York Magazine article, “!ere would not have been a tea party without Fox.”!e current political and economic structure of the United States is something new, but is also a manifestation of long-run tendencies. For instance, Paul Baran and Paul Sweezy, in their 1966 book Monopoly Capital, argued that the rise of the corporate form of business led to a structural transformation of capitalism, from the competitive capital form of the 19th century to the monopoly capital form starting in the 20th century. Monopoly capital economies are dominated by giant corporations that control a majority of the manufacturing and #nancial assets, and operate in oligopolistic and/or monopolistic markets. Baran and Sweezy argued that this form of capitalism tended to generate pro#ts that were so high that the system had di$culty #nding ways to pro#tably reinvest the pro#t. !is situation, they argued, produced both stagnation in the economy and the potential for growing income for those at the top (and a consequent greater inequality in income and wealth distribution). In a related vein, John Kenneth Galbraith argued in !e New Industrial State that the rise of the giant corporation also has important cultural and political e%ects, creating an ideological environment in which consumer and political choices largely re"ect the interests of giant corporations.In short, the Occupy Movement has correctly assessed the broad outlines of what has been taking place for quite some time: growing wealth and income inequality and growing in"uence by the corporate elite.Rising Income and Wealth Inequality!e distribution of income and wealth is more unequal now than it was in the 1970s. Consider #rst the distribution of income. A recent Congressional Budget O$ce (CBO) studied change in the distribution of household income between 1979 and 2007 (CBO, “Trends in the Distribution of Household Income Between 1979 and 2007,” October 2011). !e study looked at income (from both labor and property ownership) from two di%erent perspectives: #rst, in terms of income before taxes and transfers; and second, in terms of income a&er taxes and transfers. !e #rst measure captures the level of income distribution generated by “market forces” while the second measure captures the ...the Occupy Movement has correctly assessed the broad outlines of what has been taking place for quite some time... continued on page 44 5level of income distribution generated by the combination of market forces and particular public policies (i.e., taxes and transfers). As a result, the latter measure provides a better picture of the role of public policy (i.e. neoliberalism) in the distribution of income.!e chart below, taken from the CBO study, shows changes in the distribution of income a&er taxes and transfers for income quintiles from 1979 to 2007. Each income quartile includes 20% of households. !e lowest quintile includes the 20% of households with the lowest a&er-tax income, the second-lowest quintile includes the 20% of households who have a&er-tax income above the lowest quintile but below those in the quintiles above them, and so on. !e chart shows, for instance, that in 1979 the a&er-tax income of the lowest quintile (which includes the 20% of US households who have the lowest income) made up about 8% of the total household incomes in that year. !e next bar to the right indicates that in 2007 the lowest quintile’s share of a&er-tax income had fallen to about 6% of all a&er-tax income earned in that year. Market and political forces operating over 1979 to 2007 led to a shi& in income away from the households in the lowest quintile.!e chart also shows that between 1979 and 2007 market and political forces caused a shi& in a&er-tax  income toward the richest quintile. Between these years, the richest quintile saw their share of the nation’s income grow from 43% to 53%. All other quintiles saw their share of income fall over the same period.Yet, a closer look at the chart reveals that the gain to the upper quintile was not shared by all within that quintile. !e chart indicates an important fact:  the growth in a&er-tax income for the upper quintile was due exclusively to shi&s toward the top 1% of all households. Over 1979 to 2007, then, households in the lower 99% saw their share of the nation’s income fall while households in the upper 1% saw dramatic increases in their share of the nation’s income.!e focus on the 1% by the Occupy Movement seems well-supported by this data. !e political and economic force operating within the U.S. granted great bene#ts for the upper 1%. Certainly some of the other 99% are doing okay #nancially, but many are falling behind as their incomes have failed to keep up. And the current bad economic conditions have seen many in the lower 99% face grave challenges as they have struggled in the face of layo%s and the lack of appropriate jobs for their education, skills, and abilities. !e change in the distribution of wealth follows a similar pattern as seen above for income. !e broadest measure of wealth is net worth, which is equal to: value of assets owned minus the value of debt. !is measure of net worth includes all assets: both tangible assets (e.g., land, businesses and homes) and #nancial assets (such as savings accounts, stocks and bonds) ...households in the upper 1% saw dramatic increases in their share of the nation’s income.Source: Congressional Budget O$ce, “Trends in the Distribution of Household Income Between 1979 and 2007,” October 2011, p. XIII.Continued from page 3continued on page 55as well as consumptive (such as a car or a home) or productive (such as a farm or factory) assets. Debt includes all forms of debt, such as credit card debt, mortgages, and other forms of loan liabilities.!e chart above, based on a recent study by Edward Wol%, shows the distribution net worth in two years, 1983 and 2007. Notice that between these two years, the top 5% of all households (the upper red bar) saw their share of net worth grow from 56% to 62%. Over the same period, the rest of the country (the other 95%) saw their share of net wealth decline from 44% to 38%, which represents a decline of 13% in their share of net wealth. It’s important to remember that this measure of net worth includes all assets and liabilities and does not distinguish between consumptive and productive assets. If we subtract from this measure the portion of net worth tied to the ownership of the primary residence (the overwhelming contributor to net worth for the ϱϲϲϮϬϭϬϮϬϯϬϰϬϱϬϲϬϳϬϴϬϵϬϭϬϬϭϵϴϯ ϮϬϬϳWĞƌĐĞŶƚŽĨtĞĂůƚŚKǁŶĞĚEĞƚtĞĂůƚŚŝƐƚƌŝďƵƚŝŽŶŝŶƚŚĞh^͕ϭϵϴϯĂŶĚϮϬϬϳhƉƉĞƌϱWĞƌĐĞŶƚ>ŽǁĞƌϵϱWĞƌĐĞŶƚSource: based on data taken from Edward N. Wol%, “Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze—an Update to 2007”, Working Paper No. 589. Levy Economics Institute of Bard College, March 2010, p. 44.bottom 80% of all households) then the inequity in the distribution of net worth is even more dramatic.In recent decades, the US economic and political system has generated a worsening distribution of both income and wealth. !ose at the top have managed to grab a larger portion of the income generated within the United States and, in parallel, have managed to take hold of a larger portion of wealth that exists within the United States. !ese changes have occurred slowly, and have been the consequence of a large number of small changes in the US economy and the political and social system within the country. !ese changes, however, did not become a centerpiece of protest until the #nancial system (which played a part in the worsening distribution and wealth) failed in the face of a lack of government regulation of this increasingly unrestrained #nancial We’re on Facebook !!Don’t forget to check us out on Facebook and say that you like us! You can #nd the Economics Department at !e CSUSB Department of Economics Facebook page.  Joining us on Facebook is an important way of keeping up with Departmental news and Department events as well as getting information on political economy. Look for us on Facebook...we’re easy to #nd!system. !e consequent high levels of unemployment—and the failure of the Congress and the President to pursue the obvious demand-management remedies to this problem—have created a large number of people within the US who are willing to stand up and point out the obvious: the US economic and political system has been captured by the upper 1%…and the lower 99% are paying the price....the US economic and political system seems to have been captured by the upper 1%...Continued from page 4\\\67HQWDWLYHSPRING 2012 Schedule of ClassesCourse Section Title   Time   Days Instructor  104 01 ECON SOCIAL ISSUES 1200-0110 PM MWF ROSE200 01 PRIN MICROECON 0920-1030 AM MWF STAFF200 02 PRIN MICROECON 1200-0150 PM MW STAFF200 03 PRIN MICROECON 0400-0550 PM MW ASHEGHIAN200 04 PRIN MICROECON 1000-1150 AM TR STAFF200 05 PRIN MICROECON 0200-0350 PM TR STAFF200 06 PRIN MICROECON 0600-0750 PM TR STAFF202 01 PRIN MACROECON 1040-1150 AM MWF STAFF202 02 PRIN MACROECON 0600-0750 PM MW KONYAR202 03 PRIN MACROECON 1000-1150 AM TR STAFF202 04 PRIN MACROECON 0200-0350 PM TR STAFF202 05 PRIN MACROECON 0600-07:50 PM TR NILSSON311 01 ECON K-8  1200-0150 PM TR CHARKINS333 01 PE OF WOMEN 1040-1150 AM MWF ROSE335 01 TOOLS EC ANALYSIS 0240-0350 PM MWF HARRIS357 01 PE OF LGBT  0120-02:30 PM MWF ROSE372 01 BUSINESS CYCLES 0200-0350 PM TR HARRIS410 01 MONEY & BANKING 0600-0750 PM TR STAFF445 01 POL ECONOMY 0400-0550 PM TR NILSSON450 01 GLOBAL ECONOMY 0600-0750 PM MW ASHEGHIAN490 01 ECONOMETRICS 0400-0550 PM MW KONYAR500 01 HIST ECON IDEAS 1200-0110 PM MWF TORUNO630 01 INT ECON ISSUES 0600-0950 PM W DULGEROFF

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