February 5, 2012 3:28 am

People now see it is a system for the rich only

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The Occupy groups have been conveniently dismissed by the right as lacking an agenda. In this regard the Tea Party ironically sets a good example for the Occupiers, for deep below the Tea Party’s surface chaos is a focus: “no new taxes”. (That this means inevitably reneging on commitments to the ageing population or changing the laws of maths is not mentioned but that is another story.)

Within the Occupiers’ complaints there is also a central theme and it should be made loud and clear: “social justice and tax schedules in particular have moved against the working poor”.

The Occupiers feel that capitalism and corporate-influenced governments have, for the time being, let them down. I believe they are right. Capitalism and corporations in general, of course, have no heart (despite corporations, in the eyes of the Supreme Court, apparently being persons). In general, corporations do not often volunteer to respect the long-term well-being of their workers, their neighbourhoods or the environment except when it either pays them to – positioning ahead of consumer demands and establishing an image of good citizenship can be very good business – or when regulation requires it. And in the old days, when labour could on occasion effectively arm wrestle with them through strong unions. I say “in general” because individual capitalists within companies, particularly in Europe, can and do show concern for other stakeholders including society at large and sometimes, perish the thought, even the well-being of the planet itself. For a while such individuals can carry the whole firm with them. But, overwhelmingly, it is the corporate officers that come first. Fairly far behind them come the stockholders, and in the dim distance, all other stakeholders, again with some notable exceptions.

For the time being, in the US our corporate and governmental system backed surprisingly by the Supreme Court has become a plutocracy, designed to prolong, protect and intensify the wealth and influence of those who already have the wealth and influence. What the Occupy movement indicates is that a growing number of people have begun to recognise this in spite of the efficiency of capital’s propaganda machines. Forty years of no pay increase in the US after inflation for the average hour worked should, after all, have that effect. The propaganda is good but not that good.

Globalisation, especially the Chinese (who now scarily come equipped with higher maths scores than us but at one-fifth the cost!) flooding to city manufacturers, has tended to push down labour’s price in developed markets and, helped along by other factors, to raise the returns to corporations – at any rate corporate margins are indeed higher almost everywhere.

In the US margins are remarkably at a peak, despite very high unemployment and spare capacity.

What a new world! To mitigate this pressure on labour, developed societies could adjust the tax structure. In the US they did, but it was done perversely, doubling up on the benefits to the rich by lowering their share of taxes. And pressures on labour have not been limited to taxes. Both the global ranking of US educational excellence and the quantity and quality of training for workers have declined quite rapidly when needed most. But all complaints of justice are either ignored or dismissed as class warfare. The propaganda machinery of the right has for 20 years made the left look like amateurs, just as propaganda from the Tea Party makes the Occupiers’ efforts look diffused and feeble.

Yet the Occupiers’ case is straightforward. Wealth and income have favoured the rich, as have tax structures and even the Supreme Court. In 50 years economic mobility in the US has gone from the best to one of the worst. The benefits of the past 40 years of quite normal productivity have been abnormally divided between the very rich (and corporations) and the workers.

Indeed “divide” is not the right word, for, remarkably, the workers received no benefit at all, while the top 0.1 per cent has increased its share nearly fourfold in 35 years to a record equal to 1929 and the gilded age.

But the best propaganda of all is that the richest 400 people now have assets equal to the poorest 140m. If that doesn’t disturb you, you have a wallet for a heart. The Occupiers’ theme should be simple: “More sensible assistance for the working poor, more taxes for the rich.”

Jeremy Grantham is chief investment strategist at GMO. These are his personal views

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