The Accidental Capitalists

Occupy Wall Street's threat of class war could be good for everyone -- rich and poor alike.

BY CHARLES KENNY | NOVEMBER 14, 2011

As the Occupy Wall Street protests drag on into their ninth week, the movement has spawned global "occupations" from Rome to London, Toronto to Santiago, Hong Kong to Taipei. Meanwhile, the protesters continue their calls for "democracy not corporatocracy" -- revolutionary language, even if it falls just a bit short of "eat the rich." So perhaps it is no surprise that some of those more at home with the traditional occupants of Wall Street have been quick to complain that this is just one more sign of growing class warfare.

But is the threat of conflict between the rich and the rest a good thing once in a while? Talk of class warfare rears its head when more people start thinking that the rich are rich not because of their hard work or talent but because they are lucky or because the system is stacked in their favor. That view is becoming increasingly widespread -- 75 percent of Americans back a millionaires' tax, for example. And to an extent, it's right -- not just as a matter of fairness, but as a matter of economics. A bit of redistribution might actually help make everyone -- including the rich -- better off in the long term.

Behind the protests is a growing level of frustration over the yawning income gap. The top fifth of households in the United States earn 10 times what the poorest fifth makes and more than the rest of the country combined. The incomes of the richest 1 percent are 67 times those of the poorest 20 percent of households. And over time, that gap has widened. According to the Congressional Budget Office, between 1979 and 2007, the richest 1 percent saw their after-tax incomes climb 275 percent compared with an 18 percent rise for the poorest fifth. The story is similar, if less dramatic, in other rich economies.

In the United States, a number of prominent Republicans, including House Budget Committee Chairman Paul Ryan and House Majority Leader Eric Cantor, have responded to disquiet over this income gap by emphasizing the need for equality of opportunity for all Americans. That is surely the right focus: We want to reward both hard work and talent to ensure continued prosperity for everyone. But the evidence suggests we are a very long way from equality of opportunity in most countries, and in particular the United States. According to an analysis by economists Samuel Bowles and Herbert Gintis at the Santa Fe Institute, of children born to the poorest 10 percent of parents in the United States, more than half remain in the bottom fifth of incomes as adults.

Spencer Platt/Getty Images

 

Charles Kenny is a senior fellow at the Center for Global Development, a Schwartz fellow at the New America Foundation, and author, most recently, of Getting Better: Why Global Development Is Succeeding and How We Can Improve the World Even More. "The Optimist," his column for ForeignPolicy.com, runs weekly.

WALTSWRONGWITHTHISPICTURE

8:46 PM ET

November 14, 2011

bending statistics from different eras and cultures

the article doesn't hold water...its michael moorish slight of hand.

The top 1% pays 40% of all taxes. The top 10% pays 70%.

the bottom 50% pay nothing. NOTHING! That has to change.

Relative to other countries poor people, american poor people are in fact rich! Stop whining....go help your president and get a job if you really love him so much. I mean, really what's the occupiers plan? just have rich people give them money? barack obama and herman cain are 2 fine examples of what anyone can achieve if they really work for it and want it.

this occupy crap is pure nonsense, started by democratic supporters like soros, and acorn, and other hypocrites like michael moore and susan sarandon...all intended to help stoke the populist fire for obama 's reelection needs. Its actually DISGRACEFUL that obama has not urged the people to leave the protests and go help him by trying to find jobs. The fact that he hasn't said that tells you all you need to know about how fake this occupy thing is. Its not a movement..its ugly politics pitting american vesus american. Way to go obama....This is EXACTLY the opposite of why people elected him. I think dems need to really do some soul searching. Hillary would be a much better president.

 

KJ1

9:19 PM ET

November 14, 2011

anti-corruption

The Occupy is starting to adopt an anti-corruption platform that will garner much more respect. An Occupy member's page http://owwc.gu.ma , supporting a business owner who lost millions of dollars to a corrupt officials seems to illustrate this adaption.

 

DC403

4:24 AM ET

November 15, 2011

OK,

OK, "WaltsWrongWithThisPicture" I don't really know why I'm engaging with you, as you seem to be so firmly camped so far out to right field that I doubt anyone's mind is going to be changed, but a few of your arguments have been so commonly and easily tossed around public debates recently, that I think they bear scrutiny.

Speaking of statistical 'sleight of hand', let's look at the "top 1% paying 40% of taxes and the bottom 50% paying nothing". Boy, that sure sounds like the bottom 50 are getting off easy, while the "top 1" are bearing everyone's burden. But let's first acknowledge that (a) we have a tax code, and (b) is progressive, and therefore defines the % of income any one person pays - decreasing % as income drops, until income is low enough that the tax% is zero.

Now regarding your statistic, two facts can be seen here: (1) there are so many Americans making incomes small enough to fall into the lowest possible tax bracket, that this group now makes up 50% of the entire country, (in other words, the group of lowest-income-earning citizens is gigantic and growing, which should concern everyone), and; (2) if the "top 1%" apparently "pays 40% of taxes", it is clear that they earn SO much money, that even with their tax rates far lower than they've been in the past, and with all of the loopholes so commonly decried, the absolute size of the tax revenue garnered is still enough to nearly equal all of the taxes gathered from all income earners outside of their extremely tiny club of very wealthy individuals.

How, again, was this statistic supposed to counter arguments for less inequality in wealth and capital? Wouldn't we all prefer that we could somehow return to a situation in which a greater percentage of the people were in a stable middle class, who therefore accounted for a greater share of the total tax revenue?

But then there's reflexive rant about Michael Moore and George Soros and how people with no jobs don't have them because of laziness and people who are rich are that way because of hard word and "wanting it"... ...whiiiiiiiiiiiich just isn't worth responding to.

 

A11242408

4:59 AM ET

November 15, 2011

To want more even

To want more even distribution of wealth throughout society, is not to desire that all skills and talents (such as those utilized in banking, accounting, management, marketing, etc.) should also be "equalized". We may still have CEOs, even if they're not paid 500 times more than anyone else in the company. SWF Converter Mac

 

WALTSWRONGWITHTHISPICTURE

8:49 AM ET

November 15, 2011

then fix your dang tax code

I dont care if someone makes 10k, they MUST and should pay some taxes. As for those ceo's whose pay will become 500 times less, wrong- they will just go to another country who WILL pay them a lot more....the dropoff intalent and brain drain will kill whats left of your economy.

as as for the revenues gained from increasing taxes on those who are already taxed to the hilt? The amount you raise wont even begin to put a dent in your debt that president obama has run up like a drunken sailor. If you want to look at faults for this mess, you can of course blame the republicans and those before them to going back decades, but you MUST also include obama who is said to have taken more money from wall street than any other politician in the last 20 yrs. at the end of the day, I see you didnt even address my message above whereby if he was to show real leadership, he would tell his constituents to go home from these fake protests and help him revive the economy by getting jobs rather than camping out at a giant frat party, costing cities and the country for every day those losers are there.

the rich already pay way more than their fare share, more than most other countries, and most have worked hard for it too. They pay a helluva lot more than the bottom 50% who whine whine whine but pay NOTHING.

BY THE WAY, did you see michael moores mansion???? you think he and sarandon and penn and garofalo and naomi wolfe and hanks and spielberg have any tax shelters????????

 

IDIOTPRAYER84

8:59 PM ET

November 15, 2011

Don't let the facts get in the way of your rant

The statement that 50% don't pay any taxes is just flat out lie. 50% of the population don't pay income taxes, but they pay plenty of other taxes. Secondly, who do you think rigged the tax code in the first place? Of course it was Wall Street. Why do you think they "donate" so much money to political campaigns? Its not out of civic duty or patriotism. Why do you think companies spend so much money on lobbyists? Its an investment to make more money by distorting the free market in their favor. Its crony capitalism, success not because of working hard or coming up with a good idea, but through buying politicians and accounting gimmicks. What the banks did to investors by selling them crap mortgages and paying rating agencies to rate them as AAA then turning around and bet against those same mortgages would be a crime if anyone else did it. Thirdly, of coarse 10% pay 70% of taxes, they control 93% of the country's wealth. The bottom 80% control hold 7% of the wealth and pay 11% of all taxes. Its rich that the same people who take guns to a political rally are now complaining that Occupy Wall Street is being divisive. Occupy Wall Street is doing the same thing the Tea Party is doing except without the stupid.

 

A11328338

1:13 AM ET

November 16, 2011

So in laymen lingo, if few

So in laymen lingo, if few hundred politicians sit on top of political power in a country, most of us a pragmatic view and have no problems with accepting such a reality of political power structure. But at the same times most of us are relentlessly taught to just abhor the same reality making it pragmatic when businesses are concerned.SWF Converter Mac

 

A11328338

1:21 AM ET

November 16, 2011

We may still have CEOs, even

We may still have CEOs, even if they're not paid 500 times more than anyone else in the company. So that argument is a total non-sequitur.YouTube To MP4 Converter

 

FORREST JOHNSON

6:34 PM ET

November 17, 2011

The Real Deal

I'm one of those millionaires they're mad at. I get most of my income from investment: Dividends, royalties, capital gains, rents and capital gains all figure on my tax return, which is quite thick. But my federal taxes only amount to 19% of my total income, even though I'm in the top tax bracket. Warren Buffet pays even less. And it's all legal.

This is due to the convenient fact that the tax code is written by millionaires, and the majority of Congress is eager to protect their interests. How much income does the average guy receive in the form of capital gains? Very bloody little, he relies mainly on his salary, and pays the full rate on it. In addition, we benefit from tax loopholes like the oil depletion allowance, which the average person has probably never even heard of, and is certainly unable to take advantage of.

If rich people pay more taxes, it is because we have been able to absorb almost all of the growth in total income. http://blogs.cfr.org/lindsay/files/2011/11/Income-inequality.gif

Yes, we pay more taxes, but our income growth is much, much greater. Overall, Americans pay about 26.9% of GDP in taxes. Among nations, we rank 55th in tax burden, just behind Jamaica and Tonga. http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP

At the same time, we have income inequality between the richest and the poorest citizens which is worse than in any other industrialized country. http://en.wikipedia.org/wiki/List_of_countries_by_income_equality

 

DANGOLDTHRITE

7:09 PM ET

November 17, 2011

Occupy Protesters

Dear Whats Wrong with this picture...

Can't stand being second class huh? Give it a rest we are fully aware how some
people use statistics to confuse and manipulate the 90 %.

The poor are poor pure and simple. Ever try raising five kids on less than $1200
a month? And before you even think of criticizing you have no idea and no right
to assume your any smarter than anyone else.

I get sick and tired of the well off complaining about their problems while dismissing
the rest of America's population as "worthless or worse" and oh, I'm so smart I
got me this boat load of cash by my own effort. BS!

You were handed your wealth by the sweat and blood of hardworking economic slaves. You can't even give them a living wage. They die earlier, suffer longer, and are victims of crime at a higher rate than your sliver spooned slug brothers.

I support equal justice and the literal interpretation of the US Constitution. Stop being
a fascist and do what's right for a change.

Oh and by the way I served in the Gulf back in the late 70's probably before you were born... your welcome.

 

JOSSEFPERL

3:27 PM ET

November 18, 2011

Fed Up with Repubpliacan Talking Points

There is no need to read more than 3 lines in this response to know that WALTSWRONGWITHTHISPICTURE is just repeating to us the old and tired Repubplican talking points. This Republican line that the top 10% pays 70% is old, moronic and pure diversion from the facts pointed out in the article that show how the growing income disparity is bad for both rich and poor. A large proportion of the rich in the US are not enterpreneurs who innovate, build companies and creat jobs, but financial corporate executives who have enriched themselves through large salaries bonuses for taking risks, not with their money but with other people money, causing near meltdown of the financial system and were then bailed out by tax payers. Even in view of the obvious failure of the current system, some people like WALTSWRONGWITHTHISPICTURE cannot admit that there ideology has run its course in the 20th century and are incapable to adjust their views to the 21st .

 

VISIONTUNNEL

9:38 PM ET

November 14, 2011

Twisted Tales of One Rich Demon and 99 Poor Angels

What is the percentage of top politicians in any democratic or even autocratic country having ultimate power to make and break destinies of the people?

Similarly what the percentage of top notch doctors, engineers, lawyers, artists and others who are considered to be the leaders in their professions due to education, skills, experiences, individual contributions and influence in their field of work?

It looks like we have no problems and have reconciled with the realities of only few sitting on top of political power, knowledge, education, science & technology and media pyramid but have totally opposite construct about how many must sit on top of business, trade and industry.

So in laymen lingo, if few hundred politicians sit on top of political power in a country, most of us a pragmatic view and have no problems with accepting such a reality of political power structure. But at the same times most of us are relentlessly taught to just abhor the same reality making it pragmatic when businesses are concerned.

It is understandable and possible that many of the present rich people have acquired wealth by dubious means. But the same holds true about the stalwarts of education, professions, media, arts, literature and other fields as well.

 

DC403

3:44 AM ET

November 15, 2011

VisionTunnel; this starts out

VisionTunnel; this starts out as what looks like a credible argument, but breaks down rather quickly. Yes, there is a such thing as experts, and an 'elite' is often acceptable in many different communities, circles, sectors of society. Possession of wealth and capital is simply one area in which a massive concentration into an increasingly minute group of people is deleterious, not just to the masses left out, but in fact to everyone.

Point 1 - we do indeed have no (or almost no) problem with a few sitting "on top" of knowledge, education or "science and technology" (even if that's a little vague). But we absolutely DO have serious problems with too few people controlling political power; precisely why our modern liberal democracies have checks and balances, and we tend to "dislike" totalitarianism and tyranny in general! (Unless you are in fact in favor of individuals holding "ultimate power to make and break destinies of the people".)

Point 2 - We also cannot equate, as you do, those who "sit on top of business, trade and industry", with those who "sit on top" of simple possession of wealth and capital. To want more even distribution of wealth throughout society, is not to desire that all skills and talents (such as those utilized in banking, accounting, management, marketing, etc.) should also be "equalized". We may still have CEOs, even if they're not paid 500 times more than anyone else in the company. So that argument is a total non-sequitur.

Point 3 - There is mountains of data confirming that greater inequality in wealth among citizens (of virtually any modern state), correlates with a whole host of negative indicators in health, happiness, even safety,... even when average level of wealth is higher! It's the inequality itself that actually makes very significant differences. So yes, in this case, we do have a problem with the inequality; many of them in fact.

 

ALEKSANDARIII

3:41 AM ET

November 15, 2011

Heloo !? Is any one out there ?

Socialism is damn wrong, it produces a lot of evils. They should Occupy the library, and then talk ... this is dangerous !

 

DANGOLDTHRITE

7:18 PM ET

November 17, 2011

socialism

What?

Are you serious? Care to call Thomas Jefferson, Ben Franklin, or the other founders
Socialists? It's all about the "Freedom of Speech" Alex.

Lay off the pot your projecting paranoia. Social discussion has been a vital part of
The American Experience since Columbus ruined the neighborhood. We tolerate the bad and with some sigh of relief embrace the good hoping for a better future for all.

Lets work with what we have and make improvements as we go ok?

This too shall pass as has all the other generational controversies making America
a dynamic and noteworthy place to live.

Change is good without it life could not exist.

 

INKA987

6:31 AM ET

November 15, 2011

no more apathy

As a labor lawyer handling human rights I am so happy that the protest arrived to Wall street as well.
It is time that we, the young people, will leave our apathy which has sneaked into our lives.

 

WMCCOMNINEL

9:03 AM ET

November 15, 2011

I HEART iroNY

On the day that the police clear Zuccotti Park of the Occupy Wall Street protesters we are offered this apologoptimist’s ‘feint praise’ [sic] of their value to society.

 

A11328338

1:19 AM ET

November 16, 2011

I don't agree with every

I don't agree with every facet of the Occupy movement but action is necessary when people who have worked so hard just to have their retirement wiped out or laid off just to find out that they have to take a minimum wage job because canny banksters have devised a system of schemes to harm the entire economy.Even though the Occupy movement means wells, it has no clear message or an askPdf Converter for Mac

 

BISSTALIN11

12:50 PM ET

November 15, 2011

Current Situation in Latin America

Its a pretty poorly researched article using historical examples, where the current example of Latin America could better be used to support the argument that greater equality actually improves economy growth. Ironically, a recent Wall Street article has done a much better job of giving real live example

http://online.wsj.com/article/SB10001424052970204422404576595211776435404.html

Across Latin America, the share of the top 10% has fallen, relative to the rest of the population. Its the first time in its history that there has been a decrease in inequality throughout much of the region.

 

JøRGEN STæRMOSE

3:54 PM ET

November 15, 2011

Equality

More equal societies are better off - comparing across the devoloped societies. Consider the case of the Nordics. Considered 'socialist' by many americans. But if you want to live the american dream - the possibility of upward mobility, and just rewards for hard work. Go to Denmark.

Check out the presentation for the hard data on this.

http://www.ted.com/speakers/richard_wilkinson.html

 

VANBUREN99

7:55 PM ET

November 15, 2011

Stuck

The major problem with the current situation is that with such a wide disparity of wealth, upward mobility requires extraordinary determination. I'm not suggesting that the poor should get handouts or be coddled, but consider how people who make it from one class to the other are considered "success" stories. You shouldn't have to be the subject of a movie of week or inspirational triumph to be able to go from having very little financially to making a decent living for your family.

But the way it's set up, the people with few resources have the deck completely stacked against them while the super wealthy have more than they know what to do with. Paris Hilton could probably buy a small country with her lunch money.

But at the same time, the general public doesn't seem to have an interest in building quality businesses; that' reserved for the "10%" or the "exceptional", people who want to go above and beyond. While the masses seem content to fret over how to get abs or what makeup to wear or how to get a mate, it's those that are driven that end up making more money. Should they be punished with taxes for their hard work? Should those who don't apply themselves as hard get as much because they say it isn't fair?

I think an educational system that encouraged more entrepreneurship and financial responsibility from day one would be a good start, so it isn't just those with super drive that become successful and then feel entitled to keep most of the pie.

 

A11328338

1:16 AM ET

November 16, 2011

Across Latin America, the

Across Latin America, the share of the top 10% has fallen, relative to the rest of the population. Its the first time in its history that there has been a decrease in inequality throughout much of the region.YouTube Converter Mac

 

SCREWED AND TATTOOED

2:56 PM ET

November 16, 2011

Well put

Education, with all the money spent on it in the last decades, is incredibly inadequate. Teachers in public schools and colleges are more interested in pushing ideology than teaching even the basics. Entrepreneurship, self reliance, hard work etc are lost on the younger generations. I remember when I was in about the 1st grade, approx 1969, my teacher writing this on the board. "THERE IS NO FREE LUNCH". Much could be learned by simply discussing what this means in schools nowadays.

 

SNICKIES5

10:43 PM ET

November 15, 2011

statistics don't show the whole picture

I agree that a movement like "Occupy" has been long overdue. I don't agree with every facet of the Occupy movement but action is necessary when people who have worked so hard just to have their retirement wiped out or laid off just to find out that they have to take a minimum wage job because canny banksters have devised a system of schemes to harm the entire economy.Even though the Occupy movement means wells, it has no clear message or an ask, no strategy for actions or policy influence, and they need to regroup or re-evaluate their next steps before they become less and less influential.

Also, when I pay alot more in taxes than GE and other large corporations, our tax code needs amended!

 

ANGELIE

11:14 PM ET

November 15, 2011

Stir Up The Pot

Sometimes you need something to stir up things and try to make wrongs right or just put it out there so that real issues can be addressed. Occupy movement has shown what can be accomplished with a domino type of effect and with a little more tweaking great things can be accomplished that's for sure. Best Web Hosting

 

ELIZABETH FITZGERALD

2:38 AM ET

November 16, 2011

Nice analysis !

Yes, nobody except the terminally stupid minds a person getting rich through hard work and creativity, or even through inheritance, but when they get rich as a by product of a bent regulatory system then it rankles.

 

VISIONTUNNEL

10:31 AM ET

November 16, 2011

The Pareto Principle, 80–20 Rule, the Law of Vital Few

DC403,

Occupy Wall Street Agitation about Demonic One Rich and Ninety Nine Poor Angels is highly dramatized take- far away from the hard realities.

In reality the word has been organized on 20/80 basis rather than on highly twisted 1/99 basis.

There is no doubt that the Occupy Wall Street might lead to better system and perception of realities.

Has any one attended a class with all the students performing equally good, bad or average?

Italian economist Vilfredo Pareto, in 1906, created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth.

The 80/20 Rule means that in anything a few (20 percent) are vital and many(80 percent) are trivial. In Pareto's case it meant 20 percent of the people owned 80 percent of the wealth. In Juran's initial work he identified 20 percent of the defects causing 80 percent of the problems. Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world.

 

MATTHEW_W

10:52 AM ET

November 16, 2011

Tax for sports stars

Initially why isnt there a tax for sports stars, the amount of money they are on and for what they do I believe they should recieve a tax then move down to a larger tax rate for high end businessmen but who deserves the larger tax rate more sports stars or CEO's who have spent their life working to get to that position. I hope this comment another light to the argument as sometimes I feel sports stars are forgotten just because they are many peoples idols and hero's.

 

CHANGS

4:41 PM ET

December 4, 2011

Jobs are the key

Jobs are the key to most of the problems of the world, all nations. If the people have a way to earnmoney to support their families they are satisfied.

Most of the world's unrest would disappear overnight if people could find jobs where they could work and earn the money to care of their families.

The trouble in the US right now is that most of the low paying jobs were shipped overseas to third countries so the corporations could make more profit by paying those workers next to nothing for their work. Then they started doing the same job to middle class jobs the last decade, making it extremely difficult for people to find work to earn the money to take care of their families.

So Europe and the US now see the same type of street demonstrations that were mainly found in third world countries in the past, for the same reasons. No jobs are available for too many of their citizens, creating unrest.

ChangS

 

WILLRIVERA

11:14 PM ET

December 10, 2011

democracy not corporatocracy

This really is because of the convenient proven fact that the tax code is compiled by millionaires, and quite a few of Congress is wanting to protect their interests. Just how much income does the typical guy receive as capital gains? Very bloody little, he relies mainly on his salary, and pays the entire rate onto it. Additionally, we take advantage ofmake your dick biggerloopholes such as the oil depletion allowance, that the person with average skills has probably never even heard about, and it is certainly not able to make the most of.