Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else
By Chrystia Freeland
The Penguin Press
Back in the quaint times of the previous economic age--the era before private jets and Manhattan socialites struggling to subsist on mere tens of millions of dollars a year--rich people generally understood that they were rich primarily by dint of lucky happenstance. Most had been born into well-endowed families, ensuring their lasting material comfort, and they tended to accept an accompanying social responsibility: They were expected to share some of the spoils with the less fortunate via public works. Those who did not abide risked the wrath of the populist mob or the tax collector.
This loose social compact endured more or less as the industrial revolution delivered a Gilded Age. It lasted into the 20th century, as the masters of industry grasped that their new mass-produced wares--from automobiles to kitchen appliances--needed no less than a mass market, and that required a prospering middle class.
But this traditional accommodation between the economic classes is today all but inoperative. An emerging global elite is increasingly intent on amassing more than ever while writing the rules to ensure they hang on to as much as they can. This is the fundamental takeaway from Chrystia Freeland's important new book, Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.
Freeland, global editor-at-large for Reuters, argues that the old order in which the rewards of capitalism were distributed progressively through taxation and lasting public works has been supplanted by a winner-takes-all marketplace, one that has driven economic inequality to alarming extremes. The ultimate haves -- not merely the 1 percent, but the .1 percent -- have grown so powerful that they threaten to capture the organs of government, wielding authority in pursuit of their own financial interests, at the expense of opportunities for us non-billionaires.
Much of the story behind this concentration of wealth is familiar. Globalization has placed the best and brightest kids in New York in direct competition with their counterparts in New Delhi, creating new opportunities and new pitfalls. Roaring economic growth in China, India and other emerging markets has produced a fresh crop of billionaires. The spread of technology has accelerated globalization while rendering many jobs vulnerable to automation, pitting the interests of cost-cutting corporate overseers against those of ordinary workers.
But the key insight in Freeland's book -- an expansion of a widely read magazine article she penned last year in The Atlantic -- is how these forces of change have become so potent that they have managed to sow angst even under the roofs of mere multi-millionaires cognizant that billionaires now rule.
Faced with new opportunity twinned with widening inequality, nearly everyone worries about their hold on their station. Even the occupants of the lower rungs of the 1 percent feel insecure, making them disinclined to split their winnings to finance government services needed only by those who have, to their minds, failed to master the game. (In an age in which $25,000-a-year preschool seems a prerequisite for Harvard and lucrative careers ever after, who wants to pay taxes to finance public school for other people's children?)
In Freeland's telling, one crucial factor distinguishes today's uber-rich from their forebears: They carry a striking sense of entitlement, seeing themselves as people who have constructed their own fortunes, as opposed to aristocrats who inherited their affluence. Freeland calls them the "working rich," and she makes clear that this is indeed how they see themselves. Given their self conceptions as rugged individualists whose wealth reflects not the accident of birth but their own pluck and savvy, they are of little mind to share their rightful winnings with anyone else -- especially not with losers who failed to erect their own fortunes, or government bureaucrats sustained by taxing other people's loot.
Freeland seems a tad infatuated with these supposedly swashbuckling capitalists. She celebrates the Russian and Chinese oligarchs whose commercial empires were hived off from the old Communist state sector in a process that looked more like looting than free enterprise. She devotes similar treatment to Carlos Slim, the Mexican magnate who manipulated the privatization of the national telecommunications infrastructure to yield his own lucrative chokehold over the market--one that has kept prices extraordinarily high, to the detriment of small business.
"Even today's rent-seeking plutocrats work for a living," she writes. "Carlos Slim or the Russian oligarchs owe their fortunes to rents they captured themselves, not to estates conquered by distant ancestors." She adds: "The bulk of their wealth is generally the fruit of hustle, intelligence, and a lot of luck. They are not aristocrats, by and large, but rather economic meritocrats, preoccupied not only with consuming wealth but also with creating it." Freeland is a bit too inclined to accept at face value the assertions of the fabulously rich, apparently confident in her ability to sort out speech served up in the service of commercial interest from genuine sentiment. In discussing the philanthropic efforts of billionaires, for example, she tells us that the Koch brothers -- famous financiers of right-wing campaigns -- "have pushed for less government regulation of industry, including state efforts to protect the environment." This, she explains, reflects their innermost convictions. "They are lifelong libertarians who are genuinely skeptical about climate change. They also happen to own a company whose assets include oil refineries, oil pipelines and lumber mills." Quelle coincidence!
But if Freeland's charitable inclinations toward the super-wealthy are the price of admission to the ball, she does indeed bring back some decent snapshots, giving us what feels like an intimate glimpse into the daily calculations of people whose annual incomes reach ten digits.
She introduces us to Holly Peterson, daughter of Pete Peterson, a founding partner of the private equity firm Blackstone, who harvested nearly $2 billion in his company's IPO. Here we get a glimpse at the home economics of Manhattan's Upper East Side:
"A lot of people under forty years old are making, like, $20 million or $30 million a year in these hedge funds, and they don't know what to do with it," Peterson says, before relating a conversation at a dinner party. "They started saying, if you're going to buy all this stuff, life starts getting really expensive... 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." When a guest mentions that $20 million a year ends up nearly halved by taxes, everyone at the table nods in agreement.
Freeland's book is full of this sort of uber-rich porn: hedge funders complaining about how hard they work, how much they fly, how they never see their children.
Yet despite the promise of the book's subtitle, she devotes scant ink to assessing the prospects for "everyone else," leaving us wondering how we might earn our way as more of the wealth slides toward people who already have so much.
This story originally appeared in the Literary Issue of Huffington, available for free in the iTunes App store now.