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An Occupy Wall Street protester holds up a banner during activities organized by the movement ‘OWS’ New York City on Sunday, Sept. 16, 2012. (EDUARDO MUNOZ/REUTERS)
An Occupy Wall Street protester holds up a banner during activities organized by the movement ‘OWS’ New York City on Sunday, Sept. 16, 2012. (EDUARDO MUNOZ/REUTERS)

How ‘Occupy’ gave a voice to inequality Add to ...

Occupy Wall Street began one year ago today (Sept. 17), and the Twitter hash tag #S17 will connect you to all those preparing to mark the first anniversary.

You will find tweets encouraging your participation: “If you feel that the world is on the right track, stay home. If you know things are bad, Join your local #OWS.”

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Others will guide you on how to prepare, be it “Escaping from Zip Ties” or “ How to pick your way out of handcuffs “ (actually just the Smith and Weston model 100s).

But whatever your level of engagement, there is a message that this anniversary has for us all, a reminder of the real price of inequality.

The real price of inequality is in the first instance political, and only secondly economic.

Face it, the Occupy movement really does not have much to say in terms of concrete policy proposals, and many were quick to point this out from the very beginning. Asked by the Wall Street Journal last October about his views on OWS, Martin Feldstein, the prominent Harvard economist, could only say “I can’t figure out what that’s all about…I haven’t seen what they’re asking for.”

But the vagueness OWS projects in terms of policy is hardly a basis for dismissing its significance.

For one thing it gave voice to some basic facts about how labour markets function.

The sharp and growing division between the 1 per cent and the 99 per cent is something that has been known and documented by labour economists for at least a decade. I remember an academic conference at Carleton University in 2003 where we discussed a research paper by Mike Veall of McMaster entitled “The Evolution of High Incomes in Canada, 1990-2000.”

Many similar studies of other countries , most notably the United States, were also available and published well before Sept. 17, 2011.

This research has profound implications for how we should think about inequality, and the underlying causes like technical change and globalization. The stories economists traditionally told, and the implications for policy drawn from them, were just too simple: that the demand for skills has gone up, outpacing supply, leading the educated to make more, and that we should encourage others to get their degrees.

But research speaks with its own voice only to a small crowd. It always needs a policy entrepreneur to be made relevant, and in this case it was not the think-tanks, not the public service, not the media that offered a trumpet to make the message clear.

Indeed, just the opposite. In 2008 Statistics Canada released information from the 2006 Census on the incomes and earnings of Canadians, dryly noting that:

“Median earnings of Canadians employed on a full-time basis for a full year changed little during the past quarter century, edging up from $41,348 in 1980 to $41,401 in 2005 (in 2005 constant dollars). … Earnings of full-time full-year earners rose for those at the top of the earnings distribution, stagnated for those in the middle and declined for those at the bottom.”

The report was widely pummeled by the pundits, and then dismissed. Occupy Wall Street got its facts right, and it made those facts clear to everyone in a way that can no longer be ignored.

But it also articulated why those facts really matter.

The market is a particular kind of democracy, wonderfully suited for the efficient allocation of scarce goods. And in the buying and selling of goods we are not all equal, and shouldn’t be. In a well-functioning market our interests should not be measured by inherent rights, but rather by the number of dollars we are able to put on the table. So what if 15 or more per cent of all earnings goes to just 1 per cent of the population?

There is certainly an economic case to be made that this kind of inequality is a problem, most notably that the concentration of the gains from 25 years of economic growth among a small minority set the pre-conditions for a financial crisis and the deepest recession since the 1930s, as Joesph Stiglitz has argued.

Yes, the market is a particular kind of democracy, but it is not wonderfully suited for the conduct of politics. In a well-functioning democracy our interests should be measured by inherent rights, rather than the number of dollars we are able to put on the table.

The problem is that markets and politics have never been separate spheres, and a gross divergence in economic status changes political discourse, and the rules of the game – both the subtle rules of how industries and interests are regulated, but also broader rules governing the design of taxes and social policy – in a way that threatens to be of relatively more advantage to the relatively advantaged. This is something clear to the academic crowd, but because of OWS is also now clear to everyone else.

The longer-term significance of the movement that is celebrating its first birthday will be not how it articulates its economic demands, but how it changes the political terrain. It is not clear how occupying city parks will lead to sustainable changes in the conduct of politics. There is certainly potential for that, as the results of the recent Quebec election may well suggest.

The video of the birthday party a longstanding captain of Canadian industry threw for his wife attracted a good many viewers in Quebec earlier this spring. It may have given some the impression that tax rates on the wealthy are not high enough, but what must have surely hit a nerve was that the line of invitees leaving their limousines, and walking down a red carpet into the opulence and grandeur of what appears to be North America’s answer to Chateau de Versailles, included the leading politicians of Quebec society, active and former, who were clearly part of the cozy club. Why even George Bush the elder was there, but most notably so was Jean Charest, when he could still be referred to as an active politician.

The clips of OWS’s birthday bash will certainly be of a different kind, but if the movement is to have many more birthdays it will need to continue offering lessons on escaping from hand-cuffs of the metaphorical kind: to use and form the tools of democracy to escape from old-school politics, vested interests, and less-than-transparent government.

Miles Corak is a professor of economics with the Graduate School of Public and International Affairs at the University of Ottawa. You can follow him @MilesCorak, or read his blog at milescorak.com.

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