#OccupyDemocracy

On November 3rd occupiers amassed in an Oakland “general strike,” shutting down the entire port of Oakland for several hours. Over 3,000 people have been arrested in association with the Occupy protests since they began in New York on September 17th. Inspired by the citizen revolutions that unfolded this past spring across the Middle East and North Africa, occupations have spread to nearly every state in the United States, and gained traction in cities across the globe from London to Athens to Madrid to Bogotá. The occupations have succeeded in galvanizing a conversation—unseen since the 1970s—about equity, inequality, opportunity, the influence of money in politics, and the outsized power of corporations and financial institutions. Protestors cannot agree on “one demand” because there is no one magic bullet to fix the mess, but there are some obvious policies that would help address the grievances of the 99 percent: a student loan bailout program, campaign finance reform, criminal liability for reckless financiers, a global financial transaction tax, higher taxes on the top 1 percent, and government investments in roads and schools to create inclusive growth and jobs. OWS has shifted the frame of the national political conversation, making possible policy positions that would have felt precariously progressive to establishment power brokers just two months ago. But sustaining this momentum will require that OWS broaden and deepen internally, and catalyze support for allies with the institutional capacity to leverage strategic and sustained pressure in pursuit of more specific agendas.

The Broken Social Contract

The Occupy movement has to be understood, in the United States, in the context of a social contract that feels fundamentally broken to those who have been left out and left behind, politically and economically, over the past three decades. And also, globally, alongside citizen uprisings that began last December when a young fruit seller set himself on fire in Sidi Bousaid, Tunisia—uprisings that overturned old regimes in Egypt and Libya, and now smolder across North Africa and the Middle East; that tore through neighborhoods in London; and that manifested as a summer-long occupation by indignados in Madrid’s central square. Now citizens hungry for opportunities and voice are occupying Wall Street and dozens of other cities across the United States.

The ideological underpinning of American-style democratic capitalism is a widespread belief that the system is fundamentally fair: hard work will be rewarded, success is mostly meritocratic, every citizen has a voice in a democratic and accountable government, and the fair rule of law guarantees a level playing field where all have an equal opportunity to succeed. This is our social contract at its most essential. But a captured and stalemated political process in Washington, alongside economic trends of the last two decades (culminating in the financial meltdown of 2008 and ensuing recession), reveal a society where this promise has been broken.

The Wall Street Occupiers drew inspiration from the citizen revolutions that unfolded this past spring across the Middle East and North Africa (MENA), and for good reason. In Egypt and Tunisia, Mubarak and Ben Ali maintained their grasps on power for so many decades through classic “authoritarian bargains”—where citizens relinquish political rights in exchange for economic security and prosperity. This social contract, which guaranteed previous generations free education and well-paid public sector jobs, finally broke under the strain of demographic pressures. Young people aged 15 to 29 now comprise the largest share of the population in MENA, but countries lack the social and economic infrastructure to utilize young talent. Youth unemployment in North Africa and the Middle East is now the highest in the world, averaging 24 percent, and exceeding 30 percent in some countries. Many of these unemployed youth, often first-time job seekers, look for a position for years,  in Egypt nearly 2½ years on average. In the face of the overwhelming economic and political grievances of a growing young population, the authoritarian bargain that long sustained the status quo in the region began to crumble.

The Occupiers have also drawn inspiration from Spain, where the so-called indignados camped-out in Madrid’s central square this past summer—protesting unemployment rates above 20 percent, and above 40 percent for young people, and calling for electoral reform to pry open an ossified two-party system.

In the United States, when we unpack the widely cited 9.2 percent average unemployment rate, the picture for some groups is even bleaker: for young people aged 20-24 years old, unemployment is stuck at 14.7 percent, and for African Americans it’s 15.9 percent. The average time spent unemployed (41 weeks) is the longest since the Great Depression.

Social mobility—the American “pull yourself up by the bootstraps” promise—has become elusive: extensive social science research shows that the most important determinant of a child’s economic success is the wealth and education of her parents, factors beyond her control; and intergenerational mobility has fallen sharply for the young generation. A low-income family’s probability of achieving upward mobility has decreased almost 15 percent since 1967.

At the same time, the top 1 percent’s share of total US income rose from 9 percent in 1976 to 23.5 percent in 2007, with the top 1 percent capturing 58 percent of real economic growth during the last 30 years. Meanwhile, the median income of American families has stagnated. When adjusted for inflation, middle-income Americans earned only 11 percent more in 2010 than they did in 1976, while the incomes of the richest 5 percent grew by 42 percent. The United States now ranks 39th globally in terms of household inequality—countries like Nigeria, Ghana, Egypt, and Yemen all do better than we do. And all this occurs in a context where corporate profits hit an all-time high of $1.47 trillion last year and where CEO pay is 350 times the average workers,’ up from 50 times three decades ago.

The sense of basic injustice in Zuccotti Park—the sinking feeling that the rules of the game are rigged to benefit well-connected elites and the wealthy few—is pervasive.

Crucially, it’s not just absolute wealth that matters for well-being. A significant body of social science research indicates that relative wealth matters, especially in high-income countries. Many of the things we desire are “positional”: their value depends on how favorably they compare with their run-of-the-mill counterparts, rather than anything absolute. Christian Louboutin shoes, a Fifth Avenue apartment overlooking Central Park, a Lamborghini Reventon, and an Ivy League education are all examples of positional goods. Rising inequality reduces the well-being of those who are left behind, because it changes our frame of reference as to what constitutes the good life, even if a person’s absolute wealth stays constant. Economists call this a “negative externality” imposed by the increasingly rich on everyone else, since we all desire what we see our neighbors acquire. The cost imposed by positional goods is particularly high when jobs are scarce and employers use school reputation to decide who to hire, because only a limited number of people can attend the “best” schools.

At the same time, the role of money in shaping political outcomes, through both lobbying and campaign donations, fosters a government that is most responsive to interest groups with access and resources—corrupting the basic democratic principle of equal citizen representation. Instead of accountable governance that guarantees a level playing field, our political system favors insiders and incumbents. In the 2004 Congressional elections, US House incumbents running for re-election on average raised $1.1 million in contributions, in comparison to challengers, who on average raised $260,000. Higher contribution limits are associated with larger incumbent vote shares, less competitive elections, and fewer candidates running for office. A recent article by IMF researchers found a clear association between the money financial firms spent on lobbying from 2000-2006 and the way legislators voted on 51 key bills related to financial regulation. The more intense the lobbying, the more likely legislators were to vote for deregulation.

And the complexity of the issues exacerbates the likelihood of elite capture. The recently enacted Dodd-Frank bill is 2,319 pages, and will require 533 new regulations, 67 studies, and 13 new regulators to implement. How well the new rules really reign in excessive risk taking and conflicts of interest is largely a devil’s-in-the-details proposition, and the most consistent and informed voices shaping complex legislation and rule-making are the law firms hired by corporate clients to represent their interests. The proposed regulations to implement the Volcker Rule—a law intended to reduce risk by limiting bank size and prohibiting FDIC insured banks from trading for their own profit—emerged for public comment in October at 298 pages, accompanied by more than 1,300 questions.

What Do the Occupiers Want?

The Occupy Wall Street protesters have been widely criticized for “not having demands,” as if the lack of a clearly articulated policy platform undermines the legitimacy of those crying foul at a system that seems rigged—politically and economically—in favor of the well-connected and wealthy few.

But as Dodd-Frank demonstrates, creating rules and incentives to effectively safeguard fairness, equity, and opportunity in the global economy is complicated. Fixing what’s broken cannot be achieved with a single, simple demand, or even a five-point plan. The protestors know this, so understandably cannot agree on their “one demand.”

Despite the difficulty of identifying a single, unified policy platform, some issues are clear.  For example, the following policy prescriptions would help address the Occupiers’ grievances, even if these have not all been specifically articulated as unified political positions the protesters.

There is widespread sentiment among many of the occupiers that reducing the extraordinary influence of money in politics is imperative. This strong commitment to direct democracy is exemplified in the way Occupation working groups operate by consensus, in a transparent, non-hierarchical structure, with a sort of ‘Robert’s Rules of the Occupation’ designed to ensure that all voices get heard. Dismay with the Supreme Court’s decision in Citizens United is widespread, which suggests the possible salience of a populist movement for a constitutional amendment to prohibit corporate campaign donations, strengthen public financing of elections, and curb the impact of special interests on campaigns. This could be accompanied by parallel pressure to reduce the disproportionate influence exercised by wealthy and connected elites and corporations through lobbying. Deep and significant reform to reduce the sway money exerts through campaign contributions and lobbying would help restore faith in the basic functioning of American democracy.

Likewise, financial industry insiders who recklessly sell low-grade assets to unsuspecting investors on the basis of misleading information, turning a blind-eye when they should have known better, should face civil and criminal liability. In April, the bipartisan Senate Permanent Subcommittee on Investigations released the findings of a two-year investigation into the causes of the financial crisis.  Among other revelations, according to sub-committee Chairman Carl Levin, the report concluded that “WaMu selected and securitized loans that it had identified as likely to go delinquent, without disclosing its analysis to investors who bought the securities, and also securitized loans tainted by fraudulent information, without notifying purchasers of the fraud that was discovered.” In the so-called Abacus Transaction, “Goldman Sachs structured, underwrote, and sold a synthetic CDO called Abacus 2007-AC1, did not disclose to the Moody’s analyst overseeing the rating of the CDO that a hedge fund client taking a short position in the CDO had helped to select the referenced assets, and also did not disclose that fact to other investors.”  In other words, Goldman Sachs marketed deals to its clients as good investment opportunities while simultaneously betting that these very same deals would fail. Although under existing law it might be difficult to pin legal culpability for these deals gone awry on those responsible, legal reforms are needed to make it easier to hold bankers directly accountable for reckless behavior.

And there are other measures—none particularly radical—that can and should be taken to reduce risks and volatility and increase transparency and accountability in financial markets. Strengthening regulation, supervision, and transparency in the banking sector, including through higher bank capital and margin requirements, would significantly improve risk management and governance. This is already in the works with Basel III.

A multilateral Financial Transaction Tax (FTT)—which would impose a low-rate (e.g., 0.5-1 basis point) tax on currency exchanges and trades of global stocks, bonds, and derivatives—could raise 0.45% of world GDP, according to an IMF research paper issued this spring. That amounts to over $250 billion to fight poverty and foster equity and opportunity worldwide. France and Germany, along with Joe Stiglitz and Bill Gates, are pushing the G20 to embrace a global FTT. Despite financial industry complaints, an FTT applied broadly to all securities and derivatives transactions, on a multilateral basis, would not distort financial markets as it would be very difficult for banks and traders to dodge, and at a low-rate would have little impact on the availability of capital for growth-creating, long-term investments.

Many of the Occupiers agree that corporations, and the top 1 or 2 or 10%, should be paying a higher share of taxes, since those groups have reaped a hugely disproportionate share of the benefits of economic growth over the past three decades. Increasing taxes on capital gains and closing corporate tax loopholes would allow renewed investments in critical public goods like roads and railways and schools, and strengthen the social safety net for those displaced by rapid shifts in the global economy. The President’s Jobs Bill already calls for $100 billion in investments in infrastructure, including $10 billion for a National Infrastructure Bank, $30 billion to modernize and green public schools and community colleges, and $50 billion to upgrade transport networks. If these infrastructure investments are made in green industries, they could generate employment in the short-term and spur the innovation needed to create jobs, growth, and opportunities in the long-term, all while retooling our economy for a more sustainable future.

Unsurprisingly, there is also a hunger among the Occupiers for more innovative ideas. For example, a serious student loan bailout program would, like TARP, allow young people now drowning in student debt to clear their own balance sheets and invest instead in innovation and entrepreneurship. When students graduate with tens and hundreds of thousands of dollars of debt, it’s impossible for them to take the kinds of creative risks that are the engine of growth in an economy, like that of the United States, where new businesses account for the majority of new jobs. A student loan bailout program, which could wipe clean the slates of young people who are pursuing innovative entrepreneurship to build their own futures, would restore basic principles of equity while sparking small business creation and innovation.

From Protest to Social Transformation

The question of whether OWS will “succeed” or “fail” is fundamentally misdirected. In a very important sense the occupations have succeeded already, far beyond the anticipation of the initial small group of dissidents who decided that they had simply had enough. The purpose of bold, symbolic dissent is to catalyze debate, to challenge the inertia of the status quo with the moral clarity of a refusal to acquiesce in the face of clear injustice. In 1930, when Gandhi led a long people’s march to the sea to collect salt, in defiance of the British colony’s Salt Act, which gave the crown a monopoly on salt and forbade citizens from collecting or selling the vital nutrient, his dramatic act of non-violent civil disobedience mobilized Indians to pursue independence, which they finally achieved in 1947.

Whether the renewed national dialogue ignited this fall by the Occupy movement will result in substantive changes that have a meaningful impact on peoples’ lives depends on three factors.

First, the most immediate salience of the occupations will be on how public officials, especially Democrats, engage with the issues at the heart of the protests. OWS has fundamentally shifted the frame of the national political conversation, making possible policy positions that would have felt untenable, and precariously progressive, to establishment power brokers just two months ago. By shifting the political-ideological landscape, and redefining the terms of debate, OWS could play a crucial role in determining the key issues at stake in the Presidential campaign and other electoral contests next fall. And in the shorter term, the movement could impact the policy stances that the President and members of Congress take in the lead-up to 2012, stances that will be public evidence of their accountability (or lack thereof) to the “99 percent”.

Second, the energy of the movement will ultimately need to be channeled to support organizations and campaigns with the institutional capacity to develop strategic and sustained pressure—at multiple levels—to force decision-makers to implement specific policies. The Civil Rights movement of the 1950s and 1960s developed momentum through a set of specific, strategic direct-action campaigns that won a series of socially transformative victories—building from the Montgomery bus boycott to the Greensboro lunch counter desegregation sit-ins to the Freedom Rides to the March on Washington to the passage of the Civil Rights Act of 1964. It is an age-old adage that power only responds to power. Change will only come if the broad-based frustration given voice by OWS can be directed at specific targets, and leveraged to win concrete victories.

Strategic and sustained direction could manifest in a number of ways. It could mean an upsurge of participation in and support for unions, the only civil society actor whose interests are naturally aligned with those of the protesters that also has the institutional capacity to sustain long-term mobilizations. Working America, the affiliate of the AFL-CIO that organizes non-union workers, signed up approximately 25,000 new recruits in the second half of October, partially thanks to the visibility and momentum of the occupations. It could take the form of political and electoral organizing to support specific congressional candidates in vulnerable districts—this is the route pursued, with success in the last election cycle, by the Tea Party. Or this energy could turn toward non-electoral campaigns in support of specific issues, such as a jobs bill, serious financial market regulation, or a constitutional amendment to reign in the influence of money in politics through campaign finance reform.

Critically, channeling the momentum of the occupations does not mean that the Occupy movement itself should endorse specific goals or demands, run electoral candidates, or develop the internal institutional capacity to wage targeted, specific campaigns. Much of the strength and vitality of the Occupy movement derives from its open and inclusive structure and process—and the corresponding lack of demands—which allow organic leadership, and encourage participation, democracy, and diversity. The political-ideological influence of OWS arises from its success in defining the terms of the public debate and shifting public expectations about accountability, equity, and democracy with memes like “We are the 99 percent”, not in pursuing narrow programmatic agendas. The challenge will be for the Occupy movement to work synergistically and organically to support campaigns led by other entities, not to itself develop a unified policy platform.

Third, in order to sustain itself for the many years required to manifest real social change, the OWS movement will need to both broaden and deepen. This will require significant shifts, which are to some degree in tension with each other.

Broaden, by creating the space and possibility for people to actively participate in the movement without attending three hour long General Assemblies, or sleeping outside in the rain and snow. Given that the most recent Pew Research Poll indicates that almost 40 percent of Americans support OWS, there appears to be significant opportunity to expand the movement. However, the intensely participatory process, alongside a diffuse structure, makes it difficult for sympathizers that have jobs and other commitments to become active participants and leaders. Mechanisms need to be developed to allow people to help lead this movement and still hold down a job.

The movement will also need to deepen, by strengthening internal cohesion, building skills, and developing a more coherent analysis among members and participants. Although many of the core OWS participants in DC, New York, San Francisco/Oakland, and a few other cities are longtime organizers, they are very much in the minority. Organizing skills are the linchpin of successful movements. For example, the Highlander School, formed in 1932, has long served as a critical catalyst for grassroots organizing and movement-building by nurturing leadership, skills, and analysis among organizers and impacted communities.

All of this is a tall order for this nascent movement, certainly. But in the context of a social contract that feels fundamentally broken to those who have been left out and left behind, politically and economically, over the past three decades, and alongside the success of citizen uprisings across the Middle East and North Africa last spring, this may be the moment of possibility.

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