The Fading American Dream: The Occupy Movement as a Response to Economic Inequality in the American Society

Bachelor Thesis, 2012

45 Pages, Grade: 1,0


Table of Contents

1. Introduction

2. The American society and its challenges today
2.1 Class and power structure in the United States
2.2 Social immobility: the fading American Dream
2.3 The financial crisis of the late 2000s and its effects on American society

3. The Occupy movement
3.1 Origin and development
3.2 Goals and demands of the Occupy movement

4. The Occupy movement and its implications
4.1 The response of American society
4.2 The political response
4.3 The Occupy movement - What happened to it?

5. Conclusion

6. Bibliography

1. Introduction

“Go get a job, right after you take a bath.”

-- Newt Gingrich, 19 Nov 2011

Much like this reaction to the gathering of people in Zuccotti Park near New York Wall Street suggests, the Occupy movement has not been taken very seriously by large segments of the American population. Especially in its beginnings, it was ridiculed and downplayed in the media and in the political realm, first and foremost within the conservative political spectrum. The above comment by Newt Gingrich, former U.S. House Speaker and presidential candidate of the Republican Party, shows misunderstanding and ignorance towards the people affiliated with the movement and their goals. From his perspective, those occupying Wall Street were dirty and unemployed people trying to press for benefits and social welfare, thus taking away money from him and other hardworking people. In reality, the Occupy movement consisted of all kinds of people holding a variety of positions and a broad spectrum of different political views. His reaction also mirrors one of the core values of the American society since its foundation: Work hard and you will be rewarded. This idea of social upward mobility is the backbone and centerpiece of the “American Dream.” Gingrich dismisses the fact that individual success and failure is increasingly connected to the social background of a person. At the ‘Thanksgiving Table Forum’ in Des Moines in November, he further stated that the protesters represented a “collapse of the moral system in this country” (Clayworth 2011). This also resonates in a later commentary, on Nov. 29 at a campaigning event in South Carolina, when Gingrich called the movement “un-American” and “an example of class warfare” (Garofalo 2011). Gingrich’s views are part of a widespread opposition to wealth redistribution and the idea of individual freedom over social responsibility in the American society. Freedom in the United States is identified with little government, low taxation, and individual advancement. It does not necessarily correspond to social equality. Proverbially, in the country of unlimited opportunity, man is the architect of his own fortune. However, one of the core complaints of the Occupy movement is that today’s society does not allow for equal access to education or equal opportunities with regard to certain careers and professions. In fact, social class boundaries have resulted in an unequal distribution of the nation’s wealth with an ever growing wealth gap. As such, the Occupy movement coined the political slogan, “We are the 99%”, referring to the concentration of wealth among the top 1%. Research has shown that social inequality is very apparent in today’s US class structure and has even worsened within the last several decades.

The researcher will argue that the Occupy movement was a response to the status quo of class inequality and growing wealth disparity. Along with the dissatisfaction caused by the entrenchment of social and economic inequality, the Occupy movement was further fueled by the breakdown of the United States’ housing market, the bailout of financial institutions with tax money, and the global economic crisis from 2008 onward. These events directly affected countless families throughout the U.S. in the form of foreclosures, unemployment, and cuts in social programs. Ultimately, these economic failures even challenged the American majority’s nearly limitless faith in the ‘American-style capitalism,’ i.e., a system based on laissez-faire economics.

In order to present the Occupy movement as it relates to current economic and social conditions in the United States, the researcher will begin by analyzing the reality of American class structure and economic inequality, followed by a brief discussion of the financial crisis from 2008 to the present. The researcher will show that the crisis and pervasive influence of moneyed interests in the American political system has led to increasing social and economic disparities between the elite class and the middle and lower classes. The purpose of this Bachelor’s thesis is ultimately to contrast the concept and the promise of the American Dream with the American reality of increasing social inequality and social immobility and thus explain the emergence of the Occupy movement. Finally, the researcher will discuss the implications of the Anti-Wall Street protests for American politics and society and show that the Occupy movement has significantly altered political discourse in America.

2 The American society and its challenges today

2.1 Class and power structure in the United States

“In a democracy the poor will have more power than the rich, because there are more of them, and the will of the majority is supreme.”1

-- Aristotle, 384 - 322 BC

This quote by Greek philosopher and polymath Aristotle illustrates an idealized form of democracy. Aristotle does not deny that there are different classes which hold different privileges, but from his perspective, in a real democracy, what the poor lack in material wealth, they redeem in the power of the majority. Today’s reality in Western democracies looks somewhat different, particularly in the United States. Power and wealth are intertwined. According to Perrucci and Wysong (2003), there is a “privileged but organized minority of Americans [that] is able to amass a disproportionate share of our national wealth and to transmit that privilege across generations to create a permanent economic, political, and social elite class” (4). In other words, the idealized form of democracy that was envisioned by Aristotle, and many other thinkers throughout history, is today being undermined by the growing power of a distinctive economic and social elite. Interestingly enough, more and more Americans seem to recognize and reproach this authority the wealthy exerts. Based on a poll conducted by the New York Times in 2005, more than 60% of all Americans believe that those who are very rich have too much power. Unsurprisingly, the highest agreement comes from those making the least, i.e., 77% of those who earn less than $30,000 per year. However, almost self-critically, 64% of those making $150,000 or more also assent (Leonhardt et al 2005). According to Dennis Gilbert, professor and chair of sociology at Hamilton College in Clinton, NY, the American society depends on large institutions, and those who hold top institutional positions, in effect, rule society. In recent decades, those positions have been increasingly allocated to members of the elite class (2011: 162). They include leadership functions in key areas of American society, such as the industrial and financial sector, political offices, the television networks, newspapers, and media empires (Dye 2002: 139). Altogether, these leaders have an ability to “direct the activities of the executive, legislative, and judicial branches of the […] government” (139). The claim that the upper class exerts substantial influence on the policy-making process, and thus has the power to direct governmental decisions, can be supported through an examination of direct and indirect influence. The most important direct influences on government policy include the recruitment of the wealthy to decision- making positions, lobbying, and campaign financing (Gilbert 2011: 183).

With regard to recruiting, conventionally, American presidents have chosen cabinet officers from the top of the class structure, in particular from the capitalist class - the top class composed of people whose income is largely derived from return on assets they hold (Gilbert 2011: 174). In other words, the majority of cabinet members held positions as CEOs, investment bankers, or corporate lawyers before they were asked to join the president’s cabinet. Once appointed, this group takes on the important function of mediating between business and government. This tradition of relying on high- ranking representatives from the commerce and banking sector does not come as a surprise. From the Kennedy administration of 1961 until the Bush Jr. administration of 2001, roughly 65% of the cabinet officers came from major corporations, financial institutions or corporate law firms (175). To an extent, this trend continues in the Obama administration. For example, the current Secretary of the Treasury, Timothy Geithner, has a significant connection to major Wall Street financial institutions thanks to his former position as president of the Federal Reserve Bank of New York (175). His role in the late-2000s financial crisis has generated controversy.2 Not only the cabinet, but Congress in general is recruited principally from the upper classes. In 2005, two- thirds of senators and 40% of House members were part of the top few percent worth a million dollars or more (175). What do these statistics mean for the policy-making process? One possible consequence might be that these officials are more inclined to listen to the concerns of the electorate at the top of the class structure, rather than to those on the bottom. This claim is certainly not easy to prove. One could argue, however, that the failure of the United States to develop a national health care system may be related to the recruiting practices of the Congress. Generally, universal health care is more of a concern for the working-class than for higher-ranking classes, since those at the upper end are usually able to afford comprehensive private health care.

Lobbyism is another powerful and successful tool to influence decisions made by officials in the US government. The failure of health care reform for decades is a useful example to illustrate successful business lobbying. In 1993, President Clinton’s attempt to implement a national health care insurance system was defeated, even though the majority of Americans felt that the system had to change. According to national polls in the early 1990s, 70% of adults agreed that “health insurance should be guaranteed to all” (Gilbert 2011: 180). Despite this broad popular consent, the bill never passed Congress. The coalition of opponents spent more than $100 million on lobbying, public opinion polling, and major TV advertising campaigns to stop the enactment of the bill. Supporters of the plan simply did not have the same resources available to them (180).

Clinton’s failure to pass health care legislation can be contrasted to the early accomplishments of the Bush administration from 2001 and forward. Bush’s bills on income and estate tax reductions were certainly not as popular as the national health care bill; nonetheless, he managed to push them through Congress. Members of the middle and lower class were aware that those tax breaks would mainly benefit the rich; however, opponents of the tax bill did not have the resources to initiate a successful lobbying campaign (180). Generally, the conservative lobby alliance is led by business groups, as opposed to the liberal lobby alliance, which is often led by labor unions. With the decline of the power of unions since the late 1970s, the business alliance has tended to win the types of confrontations described above (180). Notably, since the 1970s, lobbying activity has grown immensely with regard to the numbers of lobbyists and the lobbying budget (184). Today, more than 30,000 lobbyists are charged with directing and influencing the policy-making process in Washington (Hrebenar and Morgan 2009: 22). Accordingly, “the United States in the 21st century appears to be awash in interest group politics” (XV).

The third important pillar of direct political influence by the capitalist class is campaign financing (Gilbert 2011: 178). Money plays a crucial role in politics, especially in the campaigns leading up to important elections. Today, millions of dollars have to be raised for an effective campaign. Therefore, it certainly does not hurt a presidential candidate if he or she is popular among the rich. Several attempts have been made to eliminate large individual contributions to parties and candidates, such as the Federal Election Campaign Act of 1974 and its 2002 amendment, the so-called McCain- Feingold Act. However, due to landmark Supreme Court ruling in Citizens United, donations are now essentially limitless, thanks to 527 organizations or “Super PACs” (Political Action Committees). Individuals are free to contribute as much money to these organizations as they wish. Super PACs are ostensibly independent from certain parties or candidates, but in fact their campaign ads usually support a candidate or attack an opponent (Gilbert 2011: 178).

Campaign money comes primarily from business sources, so parties have to be wary of offending business interests. Today, most economic experts would agree that inadequate regulation of private financial institutions was a significant contributor to the 2008 financial crisis. Nevertheless, inside Congress on both sides of the aisle, many strongly oppose the enactment of stricter regulatory measures (Gilbert 2011: 179).

In addition to direct influence on the political proceedings, the elite class also possesses indirect tools to make an impact, foremost through its control of the media. Whoever owns the media holds an important instrument to manipulate the masses. Control over the media is highly concentrated; virtually all major networks are owned by a few large media conglomerates. ABC, CBS, NBC, CNN, and Fox, as well as the two most influential daily newspapers, the New York Times and the Washington Post are examples of this trend (Gilbert 2011: 183) . Those large businesses “are closely interlocked, and have important common interests, with other major corporations, banks, and government” (Herman and Chomsky 2002: 14). According to Herman and Chomsky, the media is charged with the “societal purpose” to “defend the economic, social, and political agenda of privileged groups that dominate the domestic society and the state” (298). The media sets the agenda and directs public opinion by selecting, framing, filtering, emphasizing, or downplaying certain topics. As a result, the issue of national heath care was invisible for decades, even though it was certainly an important problem for many Americans (Gilbert 2011: 183).

To sum up the power structure of American society, the wealthy are better represented than the poor in the American political system. The wealthy have the necessary power to foster certain desirable outcomes in elections and in the political decision-making process. As Perrucci states, the elite class is able to “control important resources such as money, education, votes, or information” (Perrucci et al 2003: 4). In order “for this system to work, the majority of disadvantaged Americans must be persuaded to believe that the way things work out for people is fair” (5), and the media is a powerful tool to convey this message.

As indicated in the introduction of this paper, the Occupy movement used the expression “99%” to draw a line between the privileged and the middle and working classes. Even though it is unclear where the slogan originated, it seems to correspond well with Gilbert and Kahl’s model of the American class structure based on economic distinctions. In their model the upper one percent - the so-called capitalist class - is contrasted with five classes of different status’ that in sum add up to 99%. As noted previously, members of the capitalist class make most of their money through investments. They own lucrative businesses, commercial real estate, and securities (Gilbert 2011: 13). The upper-middle class is located one level below the capitalist class. These people are well-paid, university-educated managers and professionals, lawyers, doctors, accountants and other specialists. Even though these people are generally well off, they are not the main focus of the criticism of the Occupiers because their income, in contrast to that of the one percent, is not associated with predatory capitalism. Below the upper-middle class, we find the two largest classes, the middle class and the working class . For example, middle-class members are lower-level managers, teachers, nurses and electricians. The working class mainly consists of unskilled factory workers and office workers without specialized training. At the very bottom of the Gilbert-Kahl model are the working poor and the underclass . Members of the working poor hold low-skill, often insecure jobs for minimum pay. Some examples of the working-poor class include fast-food workers, maids, and janitors. Financial instability for these people is the norm rather than the exception. People who belong to the underclass usually depend on income from government programs, such as Social Security or public assistance (Gilbert 2011: 14).

illustration not visible in this excerpt

Figure 1.1 Gilbert-Kahl Model of the Class Structure (Gilbert 2011: 14)

Gilbert and other critics argue that inequality in the US society has increased most significantly within the last two or three decades; the “United States is becoming a more rigidly stratified society” (15). Indicators that class background is increasingly important are: a shrinking middle class, a decline of social mobility, and a higher concentration of wealth. Figures provided by the U.S. Census Bureau show that class inequality has risen since the mid 1970s, while it fell during the 1950s and 1960s (17).

For this reason, Gilbert has adopted the expression Age of Shared Prosperity to refer to the time period roughly between 1946 and 1973 and the phrase Age of Growing Inequality for the years since 1973 (Gilbert 2011: 16). Several statistics justify these labels. While in the mid-1970s the richest 1% of households held 19.9% of the national wealth, in 2009 it amounted to 33.8%. It cannot be disputed that wealth has indeed become more concentrated. According to a 2011 study by the nonpartisan Congressional Budget Office that was released on Oct. 25, between 1979 and 2007, the income of the top 1% of households grew by 275%, in contrast to 18% for the bottom 20%. This study suggests that the income gap between the wealthiest and the poorest Americans is historically large (CBO 2011). A further reason for the growing wealth gap is a regressive tax code, which benefits the top earning American tax filers. The Congressional Research Service found that between 1996 and 2006, the top 0.1% of filers experienced an almost two-fold increase in income. In contrast, the poorest 20% of tax filers saw their incomes fall by 6% (Hungerford 2011). Another discouraging figure is the growing proportion of men who, despite their full-time employment, earn poverty-level wages - increasing from 7.4% in the mid-1970s to 13.9% in 1990 (Gilbert 2011: 17). In 2007, one in five working men and one in three working women were earning poverty-level hourly wages (62). In 1999, an average CEO earned 475 times the wage of an average blue-collar worker, compared to 42 times the average wage in 1980 (62). A case in point: within two weeks, a Wal-Mart CEO makes the same amount of money an average Wal-Mart employee does in a lifetime (Reich 2008: 113). Social inequality is not limited to United States society. Other industrialized countries are also confronted with the growing influence and power of a privileged class. However, there are indicators that show that the situation in the United States is more serious than in almost all other similarly developed economies. The Gini coefficient, for instance, is commonly used to compare social inequality between countries. In 2010, the United States had a Gini coefficient of 0.378 (OECD iLibrary). It ranks 27 out of 34 OECD member countries with similar Gini coefficients such as Poland and Portugal. A pressing question that keeps appearing is, what has caused this development of growing inequality since the 1970s? Among others, three phenomena are believed to have played crucial roles in this development: globalization, technological change, and deregulation. In general, globalization, exposed domestic industries to fierce competition from abroad, pushing corporate executives to adopt downsizing measures and other strategies to cut (labor) costs. Furthermore, due to technological advances, the demand for low-skilled workers sank significantly. Lastly, since the 1970s, influential economists and CEOs promoted the concept of the “invisible hand of the market,” reflected in a shift in government policy to deregulation and other neoliberal measures (Gilbert 2011: 64). Along with a decline of regulative institutive actions, unions lost their influence. Today, the United States stands out as having an exceptionally weak labor movement. Comparing the OECD member states, in 2000 the United States had almost the lowest union density with 13% as opposed to 25% in Germany and up to 79% in Sweden (Pontusson 2005: 24, table 2.2). Accordingly, employment protection in 2003 was very low for the United States (0.7) compared to 2.5 in Germany and 2.9 in France (24, table 2.2). Employment protection is concerned with certain rights of employees in the hiring and firing process, for example the right to prenotification and severance pay at the end of a working relationship.

As has been shown above, social inequality in the United States has grown significantly since the 1970s. Economic progress no longer benefits everyone; instead, it is primarily those holding top positions who profit from economic growth (Reich 2008: 103). Since the “capitalist class” exerts disproportionate influence in politics, this “system of unequal rewards that provides enormous advantages to a small percentage of people […] at the expense of the overwhelming majority” has become self-propagating (Perrucci et al 2003: 4). Class does matter, and “upon closer examination [it] holds some Americans down while giving others a boost” (Scott et al 2005).

2.2 Social immobility: the fading American Dream

“We hold these truths to be self evident, that all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are Life, Liberty, and the pursuit of happiness.”

-- Thomas Jefferson, Declaration of Independence, 4 Jul 1776

In 1776, Thomas Jefferson, the third American president, inscribed in the Declaration of Independence the fundamental idea of the American Dream; that all men are created equal, and all men have the right to life, liberty, and the pursuit of happiness. Today, the American Dream is understood mainly as the promise that everyone can move up the social ladder regardless of his or her economic background. The American Dream, then, is not a concept for a classless society, where people live in total economic and political equality. Rather, it is the concept of equality of opportunity which allows one to overcome existing class barriers. However, for people to accept inequality of income and wealth, social mobility has to be a reality. As long as there is in fact social mobility, inequality in income can be justified and is not necessarily something to protest. Reading about increasing disparities within the American society, one is inclined to ask whether the American Dream as an important part of American identity is alive and well. Interestingly enough, most Americans believe that their chances of moving up the social ladder remain high. According to a poll by the New York Times in 2005, 40% of Americans felt that their chances to move up from one class to another has risen over the last 30 years (Leonhardt et al 2005). Moreover, ‘hard work’ is considered to be more important for getting ahead in life than ‘knowing the right people,’ ‘coming from wealth,’ or even ‘education.’ Regardless of income level, the perspective of most Americans is that an individual’s effort is the key to success. Interestingly enough, more Americans believe in the idea of rags-to-riches today than 40 years ago . In the 1960s, less than 60% of Americans thought it possible to rise from poverty to wealth; in 2005 it was almost 80% (Leonhardt et al 2005). Americans have generally more faith than people in other countries that they will receive economic rewards for individual effort, intelligence, and skills. According to an international study conducted between 1998 and 2001 in 27 countries about perceptions of mobility and inequality, about two-thirds of Americans (69%) agreed with the statement that “people are rewarded for intelligence and skills” (Isaacs 2010: 37). This percentage was the highest number from all 27 countries; most of which are members of the OECD. Only about one-fifth (19%) of Americans stated that coming from a wealthy family is essential to getting ahead; the median response among all 27 countries was 28%. Indeed, Americans agreed that income differences in the United States were too large; however, the figure of 62% in agreement with this statement was a comparatively low number, 85% being the median response across the 26 other countries (37). The vast majority of Americans did not believe that the government should reduce income disparities. Only 33% of Americans said that government was in fact responsible to lower inequality in income, compared to a median response of 70% agreement in the other OECD countries (38). Americans seem to accept economic inequality because they believe in their ability to get ahead regardless of their economic background.


1 As quoted in Aristotle, Aristotle: Politics (Charleston, SC: Forgotten Books, 2007) 141.

2 Geithner’s responsibility in the wake of the crisis was to announce and decide the application of the second tranche of the banking bailout ($350 billion) from a bill passed by Congress in October 2008 (Andrews and Labaton 2009).

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The Fading American Dream: The Occupy Movement as a Response to Economic Inequality in the American Society
University of Mannheim
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Tilman Strutz (Author), 2012, The Fading American Dream: The Occupy Movement as a Response to Economic Inequality in the American Society, Munich, GRIN Verlag,


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