The rise of the super-rich. Is the economy just going through a bad patch?
Traders work the floor of the Cyprus Stock Exchange in Nicosia, in August 2000. Stock riches piled up until the divided island nation's boom went bust. (AP Photo/Christos Theodorides).
So the rich are different. What’s it to you?
Quite a lot, if you see some of the recent analysis of the growing gap between the 1 per cent and the rest of us whose chins are barely bobbing above the financial waves.
Chrystia Freeland’s new book Plutocrats: the Rise of the New Global Super-Rich and the Fall of Everyone Else throws a hand grenade into the (hopeful) belief that the economic system is just going through a bad patch.
This week Plutocrats won the Lionel Gelber Prize for best English language non-fiction book on foreign affairs. Freeland will speak at U of T’s Munk School of Global Affairs on April 15.
Her message is both ground-breaking and chilling. Hyper-rich plutocrats are not only living on an ideological Pluto, but their power, influence and vast wealth are creating a global gated community that bodes ill for the majority here on Earth.
Freeland, now digital editor at Thomson Reuters, shared her thoughts from her office in New York:
Q: Are we seeing a whole new order of capitalism?
A: We are. Business has really gone global. Capital flows have gone global. It’s partly the result of globalization and technology and those trends are related. They have a broader reach. It means if you have a brilliant idea, like the 17-year-old kid who invented the algorithm, Yahoo will spot it and buy it for $30 million.
What that means is you have this winner-take-all phenomenon becoming much more powerful. It results in a thin slice at the top of the economy getting the lion’s share.
Q: And its first loyalty is to acquiring and expanding wealth.
A: It’s not necessarily about personal choice, it’s about a flawed way of thinking. By the nature of their business and their lives today they are inevitably pulled into a globalized world. They have much less connection and fewer ties to their national community. And their rewards are in the global world.
Q: Like Cyprus, where international money goes to hide from the national tax man.
A: Business has slipped the traces of national government. One way to think about it is the collective realization that you are no longer a captive of a nation state.
Q: You’ve focused on the richest 0.1 per cent. What did you discover about them?
A: One of my favourite anecdotes was from a private equity guy who said that Beijing and New York look a lot alike: same restaurants, same people. He said it with genuine sentiment. If you put an ordinary person on the street for five minutes they won’t be confused.
But for people in this space, those cities really are similar. It’s a disconnect that shapes their world view and their politics. Not just in subtle ways.
There’s also a disconnect of economic interests – Henry Ford said that you need to pay workers enough to buy your cars. That was the deal of post war America. The core idea was that the middle class needed to prosper because they were the consumers your business depended on. Now there are other markets.
Q: If the middle class – let alone the poor – don’t count to the power brokers, is the welfare state becoming extinct?
A: It’s both more necessary and harder to get political support for it. The middle class is hollowed out. Equality of opportunity is also eroded. Social mobility is getting worse. My favorite metaphor is that the distance between the rungs on the ladder is getting bigger.
The middle class needs more support. But the state’s ability to tax individual companies and the wealthy – and their view that it even matters – is less.
Q: And the effect on democracy?
A: These things are connected. One danger is that as you gain greater economic power, inevitably you use it to exert political influence. In the U.S. the most obvious sign is the “super PAC” (which can raise unlimited funds for political causes). But even more important is the tremendous money spent on lobbying.
It’s a human instinct to slant the rules of the game in your favour. As the gap (between very rich and the rest) gets greater their political influence also grows. When the middle class is hollowed, it’s harder to be engaged in the political process.
Q: Any lights at the end of this tunnel?
A: I think the process (of growing inequality) is inevitable. Economic forces pushing it are really powerful, and if anything, are getting stronger. The forces widening the gap will increase rather than weaken.
But it’s good to be optimistic. And it’s important to remember we have been there before. The strains imposed by the industrial revolution were in some ways worse. The poor were poorer and the system more closed – yet we got to a better place.
I don’t think it will happen in a day and it won’t be easy. I see it as our generation’s work of citizenship.
This interview was condensed.
Olivia Ward has covered conflicts, politics and human rights from the former Soviet Union to the Balkans, Northern Ireland, the Middle East and South Asia, winning both national and international awards. She has collaborated on two Emmy-winning films based on her work.