In the New York Metro section of Friday's New York Times, Cara Buckley portrays the Wall Street occupiers as an unruly band of outsiders who've come to terrorize the locals. They rudely befoul restaurant bathrooms without buying anything. They crowd moms and baby strollers off the sidewalks. They flash their tits in broad daylight. The image that comes to mind is that of the bridge-and-tunnel crowd gone wild, or college tourists on spring break at the Jersey Shore.
Even if there's some truth to this, I can confidently say that Buckley and many other reporters are missing something: Occupy Wall Street was bound to happen at some point even if the Manhattan police sealed off every one of the island's bridges and tunnels. The same vast economic disparities that have outraged so many middle class Americans are only magnified here. A little-known fact about Manhattan, otherwise known as New York County, is that it has the highest level of income inequality of any urban county in the nation. The only US county with a wider gap between rich and poor is Willacy County in South Texas, a ranching community packed with unemployed farm workers where one wealthy individual owns a third of the land.
Of course, New Yorkers make much more money on average than people in South Texas, thanks in part to the trickle down from Wall Street. That's one reason many observers at first wrote off Occupy Wall Street as a flash in the pan. But as it stretches into its fourth week, it has struck a chord with many people in the city. Many New Yorkers are working harder for the same pay, and Wall Street's über-wealthy have driven up prices, pushing the merely upper middle class into smaller apartments and farther-flung neighborhoods.
In the Financial District, the average studio apartment rents for (PDF) more than $2,200 a month (and that excludes apartments with doormen, which cost more). According to a 2006 story in the Gotham Gazette, the district that includes the Financial District and Greenwich Village had the highest median rent of any part of Manhattan. While I couldn't find more recent stats on the area's median housing cost last night, it's safe to assume that most New Yorkers who are hurting from the recession don't live there.
Clearly, many people who make their homes near the New York Stock Exchange feel under siege. What's less clear is how much people in the rest of the city feel sorry for them. While trashing bathrooms or intimidating stroller moms is never OK, those things seem positively tame compared to what New York has inflicted upon itself in class struggles of yore.
Going forward, the mainstream media could do a better job reporting how New Yorkers feel about Occupy Wall Street. And Occupiers from out of town would do well to consider how to bring in more locals, who could help give the movement staying power. It's one of the many things I hope to explore when I set up Mother Jones' outpost in Zuccotti Park later today.
A topless model the Tea Party should see, grandmas who dig rap music, and Ron Paul supporters everywhere: As of Saturday, MoJo's Josh Harkinson is camping out in Zuccotti Park, and we're collecting his dispatches and other #OWS must reads below, using Storify. Read on for much more.
For years, China has artificially deflated the value of its currency by some 40 percent, a huge export subsidy that cripples American manufacturers. "Chinese currency manipulation is the single biggest reason why so many Americans are still jobless," says Peter Morici, a University of Maryland business professor and former chief economist with the US International Trade Commission. Eliminating the practice, economists estimate, would boost American exports by $125 billion a year and create 900,000 US jobs. "The Chinese have figured out that this advantages them even though it's unfair," Morici says. "And they are not going to change it until we take action."
Congress seems to agree. A bipartisan majority in the Senate has agreed to vote as early as today on the Currency Exchange Rate Oversight Act of 2011, a bill that would require the Treasury Department to do more to address foreign currency manipulation. Similar legislation in the House, the Currency Reform for Fair Trade Act, has an unprecedented 225 cosponsors, including 61 Republicans. But despite bipartisan will to tackle the problem, House Speaker John Boehner has shown no sign that he'll let the bill come up for a vote. "I think it's pretty dangerous for us to move legislation in the United States Congress forcing someone to deal with the value of their currency," Boehner said on Tuesday. "This is well beyond what I think Congress ought to be doing."
In 1961, Allen Rosenstein used a $500 loan from his father to found Pioneer Magnetics, an electronics company that grew from a small NASA contractor in Southern California to a major manufacturer of computer components. By 2000, he employed 500 workers and grossed $27 million a year. But that was before competition from low-cost Asian manufacturers inspired much of the American high-tech industry to relocate overseas. "They have persuaded my biggest competitors to move over there," says Rosenstein, who's had to lay off 80 percent of his US workforce to stay competitive. "The net effect is it beggars this country, and we don't seem to be able to recognize it."
On Monday, the Obama administration sent Congress its latest version of the Korea-US Free Trade Agreement (KORUS FTA)—a bilateral pact that would be the largest of its kind since the North American Free Trade Agreement. (The package included free trade deals with Panama and Colombia, but those are small potatoes compared with Korea, the world's 15th-largest economy—and a tech and manufacturing powerhouse.) The US Chamber of Commerce, which launched a national pro-ratification campaign in January, was juiced. "America is finally getting back in the game," Thomas J. Donohue, the group's president, declared in a statement. "The chamber will pull out all of the stops to get the votes in Congress, where the agreements already enjoy bipartisan support."
A sizable number of domestic manufacturers, however, have sided against the chamber over Korea. For one, the US Business and Industry Council, an association of small and midsize firms founded in 1933, is strongly opposed to the deal. "We can't imagine that KORUS would serve current US economic interests," says Alan Tonelson, a research fellow with the council.
Corporate chieftains often claim that fixing the US economy requires signing new free trade deals, lowering government debt, and attracting lots of foreign investment. But a major new study has found that those things matter less than an economic driver that CEOs hate talking about: equality.
"Countries where income was more equally distributed tended to have longer growth spells," says economist Andrew Berg, whose study appears in the current issue of Finance & Development, the quarterly magazine of the International Monetary Fund. Comparing six major economic variables across the world's economies, Berg found that equality of incomes was the most important factor in preventing a major downturn. (See top chart.)
Andrew Berg & Jonathan Ostry
In their study, Berg and coauthor Jonathan Ostry were less interested in looking at how to spark economic growth than how to sustain it. "Getting growth going is not that difficult; it's keeping it going that is hard," Berg explains. For example, the bailouts and stimulus pulled the US economy out of recession but haven't been enough to fuel a steady recovery. Berg's research suggests that sky-high income inequality in the United States could be partly to blame.
So how important is equality? According to the study, making an economy's income distribution 10 percent more equitable prolongs its typical growth spell by 50 percent. In one case study, Berg looked at Latin America, which is historically much more economically stratified than emerging Asia and also has shorter periods of growth. He found that closing half of the inequality gap between Latin America and Asia would more than double the expected length of Latin America's growth spells. Increasing income inequality has the opposite effect: "We find that more inequality lowers growth," Berg says. (See bottom chart.)
Berg and Ostry aren't the first economists to suggest that income inequality can torpedo the economy. Marriner Eccles, the Depression-era chairman of the Federal Reserve (and an architect of the New Deal), blamed the Great Crash on the nation's wealth gap. "A giant suction pump had by 1929-1930 drawn into a few hands an increasing portion of currently produced wealth," Eccles recalled in his memoirs. "In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped."
Many economists believe a similar process has unfolded over the past decade. Median wages grew too little over the past 30 years to drive the kind of spending necessary to sustain the consumer economy. Instead, increasingly exotic forms of credit filled the gap, as the wealthy offered the middle class alluring credit card deals and variable-interest subprime loans. This allowed rich investors to keep making money and everyone else to feel like they were keeping up—until the whole system imploded.
Income inequality has other economic downsides. Research suggests that unequal societies have a harder time getting their citizens to support government spending because they believe that it will only benefit elites. A population where many lack access to health care, education, and bank loans can't contribute as much to the economy. And, of course, income inequality goes hand-in-hand with crippling political instability, as we've seen during the Arab Spring in Tunisia, Egypt, and Libya.
History shows that "sustainable reforms are only possible when the benefits are widely shared," Berg says. "We hope that we don't have to relearn that the hard way."