'Occupy' movement ideals confuse the uninformed

Occupy movement will go on as long as the people are feeling aggrieved

Mike Steketee The Australian October 22, 2011

Their grievances are diverse and not always articulate and they lack leadership. But that doesn't mean the Occupy Wall Street movement that has spread across the world can be airily dismissed.

It's not really that hard to work out what they are protesting about: they feel they are being screwed. That is not surprising when American banks that were bailed out by the government a few years ago, partially at taxpayers' expense, are back merrily paying out fat bonuses to their executives. Meanwhile, unemployment in the US is at 9.1 per cent and people are selling their homes for less than they paid.

The "We are the 99 per cent" website that posts the comments of thousands of angry people sprang from a statistic that has become well-known in the US: 1 per cent of Americans hold 40 per cent of the nation's wealth. It gained impetus from a sharp increase in inequality, in terms of income and wealth.

Economists Emmanuel Saez and Thomas Piketty estimate that the top 10 per cent of Americans increased their share of total income from about 34 per cent to 50 per cent in the three decades to 2007, with that of the top 1 per cent going from 10 to 24 per cent.

Financial deregulation had a lot to do with it and the Bush administration's large tax cuts for the wealthy gave the trend a further boost. In the meantime, average incomes in the US have fallen by 7 per cent after inflation in the past 10 years. Americans normally are the last to begrudge people getting rich, but there are limits.

Thank heavens we don't have these problems in Australia. Well, not to the same degree. Unemployment is much lower and, although we are paying increasing amounts out of our own pockets for healthcare, we don't face the crippling medical expenses of many Americans, a frequent complaint on the 99 per cent website.

But in other respects we are heading in the same direction.

Incomes are distributed more equally in Australia than in the US, but not compared to many other western countries. And not if you are unemployed and trying to survive on a Newstart allowance of $35 a day that the OECD, former Treasury secretary Ken Henry and just about everyone else who has looked at the issue, other than the government, agrees is not enough to live on.

Australian Bureau of Statistics figures released last week show that the top 20 per cent of households earned on average 11 times more income than those in the bottom 20 per cent in 2009-10 -- $3943 a week compared to $360. The 11-times multiple is an increase from 8.5 in 2003-04.

After taking into account taxes and benefits and adjusting for family size, the gap still widens, but by much less, from a multiple of 4.8 to 5.4. Moreover, some of those on low incomes are relatively wealthy, notably retired people owning their own homes.

But the distribution of wealth as distinct from income is a whole different story. The ABS figures show that the top 20 per cent of households had 70 times as much net wealth as those in the bottom 20 per cent in 2009-10, on average $2.2 million compared to $31,829. One reason is that wealth typically builds up over a lifetime. But that does not explain why the gap is widening dramatically: for the bottom 20 per cent, net household worth rose by 10 per cent in the six years to 2009-10, compared to 36 per cent for those in the top 20 per cent. In dollars, the increase at the bottom was $2966, compared to $586,240 at the top. The ageing of the population is one factor, but it cannot account for such a large difference.

The most spectacular growth in wealth was at the tip of the top:

2.9 per cent of households had a net worth of $3m or more, almost double the proportion of six years earlier. Those with $7m or more comprised 0.6 per cent of households -- close to a tripling over six years -- and almost half of those were worth more than $10m.

Compulsory super was the way Paul Keating envisaged spreading the wealth. So far it hasn't worked. As the ABS says in its summary of the wealth figures, 75 per cent of households had some super assets in 2009-10, but its distribution was "very asymmetrical". While the average value of superannuation was $154,000, half of Australian households had less than $60,000. The average was dragged up by the top 20 per cent, whose average super was $370,000.

The uneven distribution makes all the more compelling the case for fairer taxation of superannuation. The flat tax of 15 per cent on contributions means a person in the highest income tax bracket gets a 31.5 per cent deduction, while the tax break for those in the lowest bracket is 1.5 per cent.

The Henry report estimated that the top 5 per cent of income earners in 2005-06 received 37 per cent of the total value of tax concessions. From next year, a new government payment directly into superannuation accounts will go some way towards evening the scales for lower-income earners, but still leave the tax system helping high-income superannuation balances to grow much faster.

Wealth is future income, whether for this or future generations. Not taxing it, as most other countries do through wealth or inheritance taxes, or taxing its accumulation more lightly, as we do for capital gains and superannuation and through negative gearing, means we are encouraging yet greater inequality.

According to New York University professor Nouriel Roubini, "any economic model that doesn't properly address inequality will eventually face a crisis of legitimacy". Roubini was one of the very few economists to predict the global financial crisis, so perhaps we should start listening to him.

If those at the top display the arrogance of former company chairman Don Argus, who has dismissed complaints about huge salary increases for chief executives by saying people could sell their shares if they didn't like it, they should not be surprised if the Occupy Wall Street movement grows into something that forces politicians to take notice.

pdf Fitzroy Legal Service - Media Release 24th October, 2011 pdf file
Occupy Melbourne - Media Release – 3.30 pm Friday October 21st 2011

Koby James, 21, a young indigenous resident of Melbourne was the last person in the Occupy Melbourne movement to be violently evicted from the city square.

He had the Aboriginal flag draped around his shoulders as the police viciously and indiscriminately evicted the Occupy Melbourne movement. Koby James is currently in care with the Victorian Aboriginal health service.

Koby was quoted as saying earlier in the week “Forty percent of Australia’s wealth is in the hands of one percent of the nation’s population, this wealth is used to out-voice the other 99% and buy the destruction of our land.”

Koby also said “The Government has unapologetically lied to Australia to give the nation a feel that what they are doing is right.”

The Aboriginal contingent of the Occupy Melbourne movement came with the blessings of the Wurrunjerri nation elders.