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Was OWS Inevitable?

by Tony Sterle on October 25, 2011


A recent report in the Economist attempts to unearth the causes of social unrest:

In a separate study of fiscal consolidation in Latin America between 1937 and 1995, Mr. Voth pinpoints a tight link between fiscal consolidation and instability, across democracies and autocracies alike.

Protests induced by austerity also attract far more participants than demonstrations sparked by other causes…Tax increases do not have a significant effect on the likelihood of unrest, however which suggests that distributional issues play a role in inciting public ire…

Anger at austerity is likely to be just one component of public dissatisfaction.  High debt levels across the rich world owe much to the impact of weak growth on tax revenues…Weak growth and high unemployment rates are an obvious recipe for discontent…

Inequality is also an engine of protest.  A classic 1994 paper by Alberto Alesina of Harvard University studied 71 countries between 1960 and 1985 and found that higher levels of income inequality were associated with increased social instability.


So to sum up, low growth, inequality, and austerity measures all lead to societal unrest (tax increases on the rich, however, do not).  Assuming the Economist got its facts right, our country has been primed for a movement like ‘Occupy Wall Street’ for quite some time.   Obviously, economic growth these past 4 years has been dismal (we’re just now getting back to the level of GDP we had in 2007):

What’s more, we’ve seen a rather stunning increase in inequality over the past 30 years:

To top matters off, the fading out of the stimulus, mandatory spending caps imposed by the August debt ceiling bill, and decreases in aid to state and local government have led to rapid fiscal consolidation:

It should come as no surprise, then, that the folks who are hurt the most by inequality and austerity measures (the poor and middle class) have taken to the streets in an effort to change the way we do business in this country.  The fact of the matter is that our system has failed the vast majority of Americans.   Frankly, the only thing about ‘Occupy Wall Street’ that actually is puzzling is why it didn’t come about sooner.  For a long time, America has had higher levels of inequality, less progressivity in its tax code, and less social spending compared to the rest of the developed Western world:

People are angry, and they have a right to be.  OWS isn’t about communism; it isn’t about dividing the nation.  It’s about restoring some semblance of justice and fairness to a broken game.

March on.

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