on October 15, 2012
"Plutocrats" is a very interesting and well-written look at soaring income inequality in the U.S. and world wide. The book focuses especially on the people at the extreme top: the .01 (or even .001) percent and delves into the staggering differences between the lives of these people and average members of the population.
The book is full of interesting facts and insights. Bill Gates and Warren Buffet together control as much wealth as the 120 MILLION Americans at the bottom of the distribution. Most people have no idea how unequal our society has become. In one survey, Americans where shown unlabeled graphs of the income distribution in Sweden (the top 20% has 36% of the wealth) and the U.S.(the top 20% has 84%), and nearly everyone (92%) chose Sweden as the place they would prefer to live.
The book takes a balanced, pro-capitalism approach. It does not preach, nor does it conduct class warfare; it simply seeks to analyze the reasons for inequality and also its implications. The book looks at factors including political influence (a feedback loop where wealth begets influence which in turn begets even more wealth), as well as advancing technology and globalization
Perhaps the most interesting aspect of the book is its coverage of the lives, culture and attitudes of the super rich. This is important because it has implications for society. In many cases the plutocrats withdraw into gated communities. They do not need public schools or libraries and do not have to worry about paying for college. In many cases, they rely very little on the public services and infrastructure that are vital to the rest of us, and that may partly explain their reluctance to support higher taxes to pay for these things.
The book also looks at how technology has hollowed out the middle class and polarized the job market by destroying many jobs that used to offer income security to average people. That is a trend that is almost certain to continue and even accelerate.
"Plutocrats" is an important book that takes on an issue that will be central to the future of American prosperity.
Real per-capita GDP has tripled in America since 1950, and 23X in China. Inequality, however, is becoming a major issue in both nations. From the mid-1920s til 1940, the share of income going to the top 10% was 45%, then falling to 33% until the late 1970s; by 2006 it had reached 50%. However, the greatest income gap is not between the 1% and the 99%, but within the wealthiest 1% of Americans. The 70 richest members of China's National People's Congress have more wealth than all of America's members of Congress, the Supreme Court, and our president and vice-president - combined. Explanations for this relatively recent phenomena tend to either emphasize the impact of new technology and globalization, or to politics. Author Freeland presents a case that both have contributed.
Freeland reports that last August Alan Greenspan, lifelong Ayn Rand devotee, made a forceful case on 'Meet the Press' that America's economy has become 'very distorted.' High-income individuals, large banks, and major corporations have experience 'significant recovery,' the rest - including small businesses and most of the labor force have been left stuck and struggling. Greenspan concluded that were now seeing 'two separate types of economy.' Greenspan, of course, if not the first to draw this conclusion. The idea of 'two Americas' was a central theme of John Edwards, and three analysts at Citgroup reported in 2005 that 'the World is dividing into two blocs - the Plutonomy and the rest.' And Larry Summers, not known for criticizing free markets has said 'for the first time . . . focusing on redistribution makes more sense than focusing on growth.'
The financial crisis and its long, dismal aftermath (a multi-billion-dollar bailout and Wall Street's swift reinstatement of hug bonuses to bankers who helped cause the crisis) now supports fears that these elites display inordinate political influence which they're using for their own self-interests. Freeland sees this occurring around the world, with today's super-rich creating a nation unto themselves. There is also a growing sense that American businesses that don't internationalize aggressively risk being left behind. French bankers in Hong Kong, Russian moguls in London, and American entrepreneurs in Silicon Valley have more in common with each other than their countrymen.
And they're not sympathetic towards supporting today's high-paid American middle class. Closing factories in America's Rust Belt while opening new ones in China's Guangzhou - maybe we're moving closer to global egalitarianism idealized by Karl Marx. In any case, today's innovators in America turn out to be more effective job creators outside the U.S. than at home. Apple's 2006 iPod employed 13,920 in the U.S. and 27,250 abroad (less than half in China). Further, more than half the American iPod jobs were relatively poorly paid and low skilled. Instead of people moving to higher-wage countries, jobs are increasingly moving to them.
Between 1820 and 1950, per capita income in China and India was basically flat. Between 1950 and 1973, it increased 68%. Then another 245% between 1973 and 2002. But these improvements have likewise been shared unevenly. Executive pay has skyrocketed, partly because of increasing scale, but mostly due to the prevalence of overly cozy boards. The biggest winners, have been individuals , not institutions - eg. hedge-fund manger John Paulson profited almost as much from the 2008 crisis as much as Goldman Sachs.
In 1916, the richest 1% of Americans received only 20% of their income from paid work; in 2004 that had risen to 60%, per economist Emmanual Saez. Of the top ten figures on the 2010 Forbes list of wealthiest Americans, four are self-made, two (Charles and David Koch) expanded a medium-sized family oil business into a billion-dollar conglomerate, and the remaining four are heirs of Sam Walton. Similarly, of the top 10 foreign billionaires, six are self-made and the four others manage and grow their inheritances. Thus a majority (though a slim one) are self-made. Forbes classifies 840 of the 1,226 on its 2012 list of billionaires as self-made - they, of course, use this to justify their enormous wealth.
A new class ('Alpha Geeks') has seized power - intellectuals such as engineers, economists, computer programmers, not workers such as envisioned by Karl Marx. Many have taken advantage of government connections - eg. Russia's oligarchs, China's top political leaders, American financiers. Besides well-known Americans such as Microsoft's Bill Gates and Paul Allen, Facebook's Mark Zuckerberg, Sean Parker, and Jack Dorsey, Google's Larry Page and Sergei Brin, Yahoo's Jerry Yang, Linked-In's Reid Hoffman, Oracle's Larry Ellison, and Apple's Steve Jobs (Laureen Powell Jobs), a number of others are hedge-fund managers (eg. John Paulson) or market investors (eg. Warren Buffett). Of the seven Russian oligarch, six have technology backgrounds, engineers dominate China's CCP leadership, and Carlos Slim - well-known Mexican investor was trained in engineering and mathematical programming. Some even suggest that statistical skill in distilling useful information from masses of data is the future path to riches.
The super-wealthy have long recognized that philanthropy, in addition to providing moral rewards, can provide a pathway to social and political acceptance. Many use their wealth to test new ways to solve big problems (Philanthrocapitalism'). And it adds to their incredulity that anyone could think of them as villains rather than heroes when they pursue relaxation of taxes or regulations - they're 'doing God's work.' Yet, criticisms are growing. Hedge fund managers, in response, justify their incomes sometimes exceeding $1 billion/year on the basis of financial innovation. Responding, Paul Volker, former Federal Reserve head, says he has seen no neutral evidence that financial innovation has led to economic growth.
Freeland closes by telling us that history tells us that in the long run, super-elites have survived in one of two ways - suppressing dissent, or sharing their wealth. She believes that latter course would be best for America.
on November 5, 2012
Exhaustive research, interviews and visits to the plutocrats' homes and their global lecture circuit have made Freeland exceptionally qualified to inform us on the life-styles of the super-rich and their long and deep tentacles that hold most of us--plain mortals--in their deadly embrace. Among her most stunning--and scary--revelations is the fact that the plutocrats--aided by technology and globalization--are "increasingly a nation unto themselves" (5). This is a new phenomenon requiring our most focused attention. The plutocrats have numerous passports and homes in different countries across the globe. Thus they can fold up their sophisticated wares and move to sunnier places if their own native lands become too troublesome in their demand for taxes. These plutocrats really don't need us. They have their own star lawyers and doctors, star stylists and designers, star Internet gurus, and even their own star dentists and chefs. The life-style and philosophy of the new global high rollers are coming "straight out of the pages of Ayn Rand," Freeland writes. In another chapter, she further explains: "Tired of being dragged down by the parasitic, envious, and less talented lower classes, Galt [the hero of Rand's Atlas Shrugged] and his fellow capitalists revolt, retreating to 'Galt Gulch,' a refuge in the Rocky Mountains" (249). In their absence, the world collapses. The metaphor of Galt's Gulch is important, for it brings into sharp relief the new plutocrats' isolation from the rest of us and their terrifying ability to crush us. In her last chapter, Freeland reminds us of another plutocracy--in 14th century Venice--that collapsed after they imposed La Serrata. A small elite then controlled the city and extracted as much wealth as they could from the rest of society "to maintain their hold on power" (279). Freeland's references to Ayn Rand (whom Paul Ryan still loves) and to the Venetian La Serrata (Closure) are her only warning shots to the present plutocrats.
But are these enough?
Whenever Freeland enters to magical environs of the plutocrats and listens to their outrageous defense of their life-style, she becomes almost mute. She seems to be walking on egg-shells, hardly ever challenging their vacuous chatter and at times slightly nodding in support of it. The following examples struck me forcefully:
In the chapter "Culture of the Plutocrats," Freeland shows odd sympathy for the plutocrats. She points out that "they are...chronically exhausted men, terrified that their latest trade will turn out to be a multimillion dollar mistake that costs them their job" (54). Pity the plutocrat. The same "terrified" plutocrats created the crisis that brought the world to its knees. How many of them are languishing in jail for their callous misdeeds? Freeland doesn't talk about that. On the next page, Freeland is once more feeling bad for the plutocrats. Indeed, she says that it's much better to be a plutocrat than "a minimum-wage cleaner," but she adds that "to understand the mind-set of the super-elite, your starting point should be the reality...that they, too, lead anxious, overworked and uncertain lives" (55). Why should this be my starting point? No, this will not be my starting point. In her last chapter, Freeland admits that studies show that plutocrats are marked by "a lack of sympathy, shading sometimes into disdain, for everyone else" (238). Their inflated self-regard "can lead to obliviousness and indifference to the suffering of others" (238). (This is the only criticism Freeland levels at the plutocrats, and it's not even hers.) This plutocratic indifference is my starting point. I cannot feel too sorry for greedy and vain men who intend to rob me and my family. How could I? They are my powerful enemies. But Freeland is not yet done. Once more she defends the plutocrats. When she says that they "genuinely are convinced that the policies that happen to serve their own interests....are also right for everyone else" (273), she is engaged in special pleading. The plutocrats' denials and self-deceptions do not justify what they are doing, which is, as she says in her reference to La Serrata, robbing the rest of society to maintain their power.
My second example concerns Freeland's trifling attitude toward the humanities. On page 181, she tells us the story of Hoffman who, at first, happily committed himself to the study of philosophy at Oxford. Today, however, he is one of Silicon Valley's most successful entrepreneurs who regrets the risk he took by studying at Oxford. Indeed, what is the worth of the life of the mind compared to a Silicon Valley success? What is the value of "Oxford's dreamy spires" (182) vis-a-vis mountains of money? And what, in the world, could be more important than money? In her last chapter, Freeland notes that "getting a doctorate in the humanities, once a ticket to the top tier of the New Class, is today such a wretched business one disappointed academic has created a popular web site called 100 reasons Not to Go to Graduate School" (267). Freeland does not comment on this deeply disturbing development nor explains its far-reaching consequences. Without the humanities, we'll surely forget how to think; how to read; how to understand our feelings and those of others; how to speak with precision and eloquence; and how to learn from our history. But for Christia Freeland, all the humanities offer can be summarized in the few words "ticket to the top tier." That's all that matters.
My third example is the worst. Freeland quotes Prof. Ariely as saying, "'it turns out that if I pay you lots of money to see reality in a certain way, you will'" (273). In other words, everybody is for sale. Freeland doesn't argue with this nefarious view; she just presents it. Well, history proves that many people had refused to see "reality in a certain way." Thousands of gentiles, during the Holocaust, hid Jews at the risk of their lives; hundreds fought Soviet tyranny and spent years in Siberia; Chinese dissidents raised their voices and were jailed or killed; Nelson Mandela spent most of his life in prison but never sold out to the white authorities; Churchill bravely fought the Nazis and inspired his people to fight Hitler. The examples go on and on. Not all people would "change their deeply held beliefs" for money (274).
Although the book provides us with an important "inside" view of the plutocrats, its absence of deep thought on the fundamental issues it presents and its myopic and weak moral compass make me shudder. This book is a cold place to be in.
on January 15, 2013
Aristotle sees three types of government: government by one, by few and by many. He calls a benevolent government by few an Aristocracy, which means government by The Best. Aristocracy has a corruption, called Oligarchy, which is simply government by few but not by the best. Plutocracy is a special case of Oligarchy, and it means government by the Wealthy few. Implicit in the definition of Plutocracy is a) it is NOT government by The Best, as the Wealthy are not The Best, and b) Pluto is the god not only of worldly wealth but more importantly the god of the underworld and of the dead.
So it is surprising that a book entitled Plutocracy should spend more than its first two-thirds sounding like Lifestyles of the Rich and Famous. But that is part of the book's charm: Page Six prose. We don't begin to hear criticism of the Plutocrats until the last few chapters and that criticism is so muted as to be nearly inaudible unless you are seriously listening for it. Don't look to this book if you want a scholarly indictment of Plutocratic wealth and power.
In the end, in her Acknowledgments, the author writes: "Many Plutocrats have helped me to understand their world and some have become friends (though that does not mean we always agree)." In those few words, the author bares her soul as to why she pulled punches for 291 pages: it is good to be accepted by the Rich and Famous, and maybe our children will attend the same universities someday. So I want you to like me.
There is much in this book that can serve as evidence in the case against the Plutocrats. But you have to be extra alert and have pen handy; otherwise you will miss it.
For my part, I give the book high marks for readability and low marks for a real lack of courage.
on March 14, 2014
It’s difficult to know what to make of this book. It won a batch of prizes, so it must be important. She had access to the plutocrats she writes about, and she seems to admire them. In an NPR interview, she says her superrich people “did it themselves.” For example, she refers to George Soros (her guru, it seems) as “the most successful investor of the postwar era” (p.70). Yet, she writes extensively about oligarchs, monopolists (e.g., Carlos Slim of Mexico), lobbying, legal corruption, deregulation and rent-seeking. Her plutocrats have a hand in many of these practices, but she doesn’t make the connections clear between these practices and her plutocrats.
Furthermore, there is a significant difference between real entrepreneurs like Bill Gates, Steve Jobs and Ingvar Kamprad (IKEA) and bankers, hedge-fund managers and currency traders (e.g., Soros). The former make market capitalism work. Their wealth is earned. They truly did it themselves. The latter play money games and use government connections to their own enormous profit, and when they lose money they get bailed out by the taxpayer. She makes only a passing reference to this very important distinction.
In addition, she mentions “The vampire squid theory. . . “ (p. 271) without giving credit to the source of the theory. Well, it’s Matt Taibbi, who first published it in an article in ROLLING STONE, entitled “The Great Bubble Machine,” July 9, 2009. Why does she avoid citing him? Is it because she believes nothing of value in financial reporting could possibly come from so lowly a source as ROLLING STONE? I have news for her: he just published another article in ROLLING STONE. “The Vampire Squid Strikes Again,” (2/27/14), about the big banks and rent-seeking, the subject of her Chapter Five. Taibbi gives far more detail about rent-seeking in the US than she does.
She discusses the controversies regarding regulation of the financial markets: pages quoting many people about whether there was too much or too little regulation prior to the debacle of 2008, but no mention of Madoff. Wall Street was so poorly regulated that he got away with his huge Ponzi scheme for years, in spite of all kinds of alerts sent to the SEC, most notably by Harry Markopolos as early as 2000. He was outed only when his son turned him in. Why not mention Madoff?
If you want to know how American plutocrats get rich, read Peter Schweizer’s THROW THEM ALL OUT. He gives details about how her plutocrats use government to get rich. Nothing vague here: he mentions names.
on December 23, 2012
A more appropriate title for this book would have been "Celebrating the Rise of Plutocrats, The Hell With Everyone Else"
Having extensive knowledge of the 08 crash, 30 years of deregulation, Crony Capitalism and the cause and effect of these policies, I am awestruck by what is omitted in this book. It's overwhelming. I really don't know where to begin. The Glass Steagall act was touched on as a historical piece of legislation and it received a gracious single line in this book. One never would have guessed the repealing of this law was a major contributor to the crash of 08.The repealing of the Commodities Futures Exchange Act was touched on with a light breeze and there was no mention of the GATT treaty. No mention of corporate monopolies over our food supply. No mention of banking monopolies and how they contribute to the deterioration of or working class. I could go on and on.
If you want to read a book that speaks only about success stories of the few who prosper due to hard work, privileged education and a little bit of nepotism, then this book is for you. If you want to learn about the other 98% of the worlds hard working people who are subject to the injustice and oppression of Crony Capitalism, corporate lobbyists and banking monopolies I suggest you left click your mouse on a different icon and hightail your way off this page.
on November 5, 2012
This book was probably not intended to be frightening. But it left me enlightened, depressed and just a little terrified. The power and the arrogance of the world's wealthiest is simply a fact that the rest of us must deal with daily. Without a revolutionary movement like the communist uprisings during the last century, the wage inequality and shrinking middle class in the developed world will only get worse.
Author Chrystia Freeland got many things right in this book. I'd like to see more development of the concept called "political capture." The whole subject called "capture" is not new but has traditionally been effectively censored. Now with the Internet we can see analysts discussing how the financial sector powers "captured" Congress, to give just one example of how "capture" is used online.
Analysis of the increasing costs of running for office shows the kind of leverage wealth provides. At some point the political process gets away from the average person because the costs of participation become unreachable. Each campaign sets new records for spending, pricing out more and more would-be investors (voters).
I think the major contribution of this book is that it helps us to see how drastically things changed over the last couple decades. For living Americans in particular, this is something different, mysterious and even difficult to comprehend. It boggles my mind when I survey the magnitude of these social changes over many years.
Freeland dismisses any notion that the super rich have different attributes than the rest of society. She identifies forces of globalization and technology as having created a "winner-take-all" economic system. She compares the U.S. with China, showing how the two countries are essentially the same in terms of domestic social and economic inequality. Of course, the Chinese government would say they're not as unequal as we are, and our government would say China is more unequal.
on November 18, 2012
Perhaps I expected more from this book, since I had seen the author interviewed about it on tv. It seemed to me to spend too much time on the experience of individual plutocrats. I wanted more analysis of the effect of this group on society.
on October 31, 2012
Reading through this book, it struck me how Freeland makes no distinction between capitalism (as it is usually defined), and the RUNAWAY capitalism which is highly destructive to America's middle class; and it is the latter which enabled the plutocrats in the first place. I forgive her for this, because most people probably don't understand that difference either: they tend to lump both forms of capitalism together under the same label.
Nevertheless, Freeland gives us a pretty accurate description of how more-or-less egalitarian capitalism became distorted by a few individuals' greed, with nothing to stop them, until it reached a point where it has become increasingly self-enabling, and feels itself increasingly less obliged to respect the concept of the social contract.
If you read this book as I have, you may likewise understand that the reasons why America is hurtling toward neo-feudalism are both a lack of financial transparency and the absence of any kind of check or balance against runaway capitalism's ability to make its own rules.