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Kass: On Occupy Wall Street

This commentary originally appeared on Real Money Pro on Oct. 17 at 9:10 a.m. EDT.

Not long ago, someone suggested that I read Since Yesterday , a book by Frederick Lewis Allen, a popular historian of the 1930s and 1940s. Published in 1940, it turned out to be a shrewd, concise, wonderfully written account of America in the '30s.

It also turned out to be something else: a reminder of why history matters....

Since Yesterday , bankers are vilified; homes are foreclosed on; people desperately search for work -- just like today. Businessmen speak of the need for "confidence," a word that "enters the vocabulary only when confidence is lacking." Elsewhere Allen writes, "No longer were vital economic decisions made at international conferences of bankers; now they were made only by the political leaders of states...."

Toward the end of his book, Allen sums up the mood of the country. By 1939, people were weary of hard economic times, but they were also weary of Roosevelt's endless experiments. Many modern historians believe that Roosevelt's biggest problem was not that he'd done too much, but that he'd done too little -- that the Depression required a response bigger than even Roosevelt's New Deal.

-- Joe Nocera, The New York Times (" The 1930s Sure Sound Familiar"; Oct. 14, 2011)

In four weeks, Occupy Wall Street has gone from an ad hoc aggregation of annoying protestors to a potentially important part of the national debate about the disparity between the haves and have-nots.

As I wrote in " Thrown for a Loop" over the summer, there is a broken feeling in the way many Americans view their future. The younger the person, it seems, the more the shallowness and despair that exists.

The primal screams of Zuccotti Park in New York City reflect the economic inequities that have accelerated since the Great Decession of 2007-2009, as well as the outrage associated with past bailouts and too-big-to-fail public policy that is seen as having socialized risks and privatized profits.

  • The 400 wealthiest Americans have a greater combined net worth than the bottom 150 million Americans.
  • The top 1% of Americans possess more wealth than the entire bottom 90%.
  • In the Bush expansion from 2002 to 2007, 65% of the economic gains went to the richest 1%.

Occupy Wall Street embodies the zeitgeist of populism and is a continuance of a growing economic desperation that has existed over the last 10 years and that has worsened as U.S. unemployment has failed to recover over the last three years.

Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7%, to $49,909, according to a study by two former Census Bureau officials. During the recession -- from December 2007 to June 2009 -- household income fell 3.2%.

-- Robert Pear, The New York Times, (" Recession Officially Over, U.S. Incomes Kept Falling"; Oct. 9, 2011)

Here are some vividly illustrated charts (hat tip to Barry Ritholtz of The Big Picture blog) that graphically detail the schism:

( Source for charts: Economic Policy Institute, The State of Working America; data come from this table on Emmanuel Saez's website at University of California, Berkeley.)

I wrote about this growing economic unevenness and disparity in a June 2011 editorial in the Other Voices section of Barron's " The Threat of Screwflation."

The theme of my editorial was that the average Joe has seen his wages stagnate (actually in last decade the average income has dropped by 7%) while the costs of the necessities of life have gone up measurably. Corporations, by contrast, have taken an outsized share of GDP and income -- as they relentlessly cut fixed costs (read: chopping jobs) over the last decade.

Meanwhile structural unemployment has deepened, stemming from a talent/skills mismatch, globalization (it became cheaper to manufacture abroad because salaries are far lower and burdensome and costly regulations don't exist overseas), rapid technological change (which has replaced many jobs), the increased and accepted use of temporary workers as a permanent feature of the jobs market, the loss of mobility (caused by a 35% drop in home prices) and the absence of an economic growth engine to replace the role of a booming housing market that accounted for more than one-third of the job creation of the last economic cycle.
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