Chrystia Freeland of the Atlantic has a very important article.
The Rise of the New Global Class, a Prelude to Fascism?
Christia Freeland’s piece in the Atlantic is a brilliant and frightening vision not of the future, but of a present that is likely summed up best by one word “fascism.”
I use that word not as a synonym for the horrors of Hitler, but for the enthusiasm a large part of the democratic leadership had for the industrial reforms made in Italy under Mussolini. Few remember that Gandhi and Roosevelt praised Mussolini well before il Duce was forced into alliance with der Fuehrer.
In our current crisis we also forget that Mussolini DID make the trains run on time. He achieved this by fusing the interests of Italy’s plutocrats with the interests of his imperialist state. What was good for il Duce, after all, was good for Fiat and, at least temporarily ,for the workers in his nationalized unions. The similarity to today’s China should be obvious.
What may protect us from such a fate is one thing .. the gift of Jeffersonian democracy.
Disgust with the excesses of the rich is nothing new. “As with the aristocracies of bygone days, such vast wealth has created a gulf between the plutocrats and other people, one reinforced by their withdrawal into gated estates, exclusive academies, and private planes. We are mesmerized by such extravagances as Microsoft co-founder Paul Allen’s 414-foot yacht, the Octopus, which is home to two helicopters, a submarine, and a swimming pool.” That sort of disgust was a major factor in out own revolution and led to much of the antagonism between radicals like Sam Adams and America’s nouveau riche, including the showy smuggler, John Hancock. A good deal of the early years of America, from Jefferson to Jackson, were fought by Democrats offended by the excesses of Federalists like the bankers on New York. It might be good for our Tea Party to read more about Shays’ Rebellion and especially the roles of the wealthy Governor John Hancock and the much poorer Sam Adams in the aftermath of that failure of the American system.
Freeland’s insight is that the new plutocracy has now escaped national borders. “Unsurprisingly, Russian oligarchs have been among the most fearless in expressing this attitude. A little more than a decade ago, for instance, I spoke to Mikhail Khodorkovsky, at that moment the richest man in Russia. “If a man is not an oligarch, something is not right with him,” Khodorkovsky told me. “Everyone had the same starting conditions, everyone could have done it.” (Khodorkovsky’s subsequent political travails—his oil company was appropriated by the state in 2004 and he is currently in prison—have tempered this Darwinian outlook: in a jail-cell correspondence last year, he admitted that he had “treated business exclusively as a game” and “did not care much about social responsibility.”)
It is all too easy to see this as long standing problem in other societies, but we too are part of this global change. Christia Freeland relates how one senior US hedge fund executive told her, ” (my) firm’s investments lift poor people in China and India out of poverty and into the middle class, .. (which) .. means one American drops out of the middle class, that’s not such a bad trade.” She relates a similar comment “from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”
When Freeland asked a CEO if he felt guilty for his firm’s role in creating the financial crisis, he responded that the real culprit was ” his feckless cousin, who owned three cars and a home he could not afford. ” Another “private-equity baron who divides his time between New York and Palm Beach pinned blame for the collapse on a favorite golf caddy in Arizona, who had bought three condos as investment properties at the height of the bubble.”
Perhaps we need to list to one of the few moral leaders willing to address this issue. Desmond Tutu, speaking at a global meeting of wealthy executives: “I do have a very real concern about capitalism…. I read that one of the directors general (of Goldman Sachs ) took away one year as his salary $64 million. Sixty-four million dollars.” He sputtered to a stop, momentarily stunned by this sum (though, by the standards of Wall Street and Silicon Valley compensation, it’s not actually that much money). In an op-ed in TheWall Street Journal last year, even the economist Klaus Schwab—founder of the World Economic Forum and its iconic Davos meeting—warned that “the entrepreneurial system is being perverted,” and businesses that “fall back into old habits and excesses” could “undermin[e] social peace.”"
The critical point made in the Atlantic piece is that here in America this new class is neither Democrat nor Republican. Freeland tells us of a an exchange between a former Obama supporter and a Democratic leader in Congress . “Screw you,” he told the lawmaker. “Even if you change the legislation, the government won’t get a single penny more from me in taxes. I’ll put my money into my foundation and spend it on good causes. My money isn’t going to be wasted in your deficit sinkhole.” “Last summer, …Blackstone’s Schwarzman caused an uproar when he said an Obama proposal to raise taxes on private-equity-firm compensation—by treating “carried interest” as ordinary income—was “like when Hitler invaded Poland in 1939.”
More Excerpts:
Holly Peterson and I spoke several times about how the super-affluence of recent years has changed the meaning of wealth. “There’s so much money on the Upper East Side right now,” she said. “If you look at the original movie Wall Street, it was a phenomenon where there were men in their 30s and 40s making $2 and $3 million a year, and that was disgusting. But then you had the Internet age, and then globalization, and you had people in their 30s, through hedge funds and Goldman Sachs partner jobs, who were making $20, $30, $40 million a year. And there were a lot of them doing it. I think people making $5 million to $10 million definitely don’t think they are making enough money.”
As an example, she described a conversation with a couple at a Manhattan dinner party: “They started saying, ‘If you’re going to buy all this stuff, life starts getting really expensive. If you’re going to do the NetJet thing’”—this is a service offering “fractional aircraft ownership” for those who do not wish to buy outright—“‘and if you’re going to have four houses, and you’re going to run the four houses, it’s like you start spending some money.’”
The clincher, Peterson says, came from the wife: “She turns to me and she goes, ‘You know, the thing about 20’”—by this, she meant $20 million a year—“‘is 20 is only 10 after taxes.’ And everyone at the table is nodding.”
…
She says that most of this new class are not from the old aristocracy or from the old rich.
Fat cats who owe it to their grandfathers are not getting all of the gains,” Peter Lindert told me. “A lot of it is going to innovators this time around. There is more meritocracy in Bill Gates being at the top than the Duke of Bedford.” Even Emmanuel Saez, who is deeply worried about the social and political consequences of rising income inequality, concurs that a defining quality of the current crop of plutocrats is that they are the “working rich.” He has found that in 1916, the richest 1 percent of Americans received only one-fifth of their income from paid work; in 2004, that figure had risen threefold, to 60 percent.
But, like their predecessors, the new class uses philanthropy to gain social status:
A measure of the importance of public engagement for today’s super-rich is the zeal with which even emerging-market plutocrats are developing their own foundations and think tanks. When the oligarchs of the former Soviet Union first burst out beyond their own borders, they were Marxist caricatures of the nouveau riche, purchasing yachts and sports teams, and surrounding themselves with couture-clad supermodels. Fifteen years later, they are exploring how to buy their way into the world of ideas.
One of the most determined is the Ukrainian entrepreneur Victor Pinchuk, whose business empire ranges from pipe manufacturing to TV stations. With a net worth of $3 billion, Pinchuk is no longer content merely to acquire modern art: in 2009, he began a global competition for young artists, run by his art center in Kiev and conceived as a way of bringing Ukraine into the international cultural mainstream. Pinchuk hosts a regular lunch on the fringes of Davos and has launched his own annual “ideas forum,” a gathering devoted to geopolitics that is held, with suitable modesty, in the same Crimean villa where Stalin, Roosevelt, and Churchill attended the Yalta Conference. Last September’s meeting, where I served as a moderator, included Bill Clinton, International Monetary Fund head Dominique Strauss-Kahn, Polish President Bronislaw Komorowski, and Russian Deputy Prime Minister Alexei Kudrin.
The new class is, after all, nationless … they represent the first true global aristocracy.
Mohamed ElErian, the CEO of Pimco, the world’s largest bond manager, is typical of the internationalists gradually rising to the top echelons of U.S. business. The son of an Egyptian father and a French mother, ElErian had a peripatetic childhood, shuttling between Egypt, France, the United States, the United Kingdom, and Switzerland. He was educated at Cambridge and Oxford and now leads a U.S.-based company that is owned by the German financial conglomerate Allianz SE.
Though ElErian lives in Laguna Beach, California, near where Pimco is headquartered, he says that he can’t name a single country as his own. “I have had the privilege of living in many countries,” ElErian told me on a recent visit to New York. “One consequence is that I am a sort of global nomad, open to many perspectives.” As he talked, we walked through Midtown, which ElErian remembered fondly from his childhood, when he’d take the crosstown bus each day to the United Nations International School. That evening, ElErian was catching a flight to London. Later in the week, he was due in St. Petersburg.
A take home message.
The lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth. It is obvious which of these would be the better outcome for America, and the world. Let us hope the plutocrats aren’t already too isolated to recognize this. Because, in the end, there can never be a place like Galt’s Gulch.