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This review is from: Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (Hardcover)
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.
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Showing 1-3 of 3 posts in this discussion
Initial post: Oct 30, 2012 8:44:22 PM PDT
Collin White says:
In reply to an earlier post on Nov 10, 2012 8:39:22 AM PST
Collin: you are mistaking the issue. Among 'wage earners', it makes sense to have more highly skilled make more.
This isn't about wage earners.
It's about the mega rich who have a lot of power to extract wealth and limit opportunity.
While the middle class has lost 40% of its money, the megar cish are are new highs. As the book correctly says, it's not even about 'the 1%' - though they have doubled their share of income. It is even not about the 0.1%, who have tripled their share of income, in my opinion.
It's a different game between you making a bit of money and the mega rich. Something else you don't seem to understand is that helping the poor is notjust a moral issue, which is it, but an investment.
You also don't understand where this leads - the norm in human history of plutocracy - a few very rich, most poor, without the unusual middle class we have. Even in the US, in 1900 the average income adjusted for inflation was $10,000. Think about that - is that where you want the country to return? To that era of 'robber barons'?
A Supreme Court Justice said a great concentration of wealth is incomatible with democracy - you can have one or the other.
He's right. We're seeing that. Even today, a few days after the re-election of Barack Obama, we have a historic high in state governments controlled by Republicans since 2010 - paid for by a few plutocrats like the Koch brothers. And those states gerrymandered so that Republicans kept control of the House - which will greatly harm the Obama agenda - even though more citizens voted Democratic in House races.
And those same wealthy-funded Republican state governments tried to supress the vote, which had not many of those efforts been blocked by courts, could well have given the election to Romney, who would further plutocracy.
And the right-wing takeover of the courts is already strong, after 8 years of Bush appaointments, giving us rulings from Citizens United to overturning Montana's hundred year law to not let their elections be dominated by money.
You should read the book and get more informed.
I also haven't read it yet, but am familiar with the isssue and comments such as yours. When American workers got the right to organize - which had been illegal - it raised their wages (up from that $10,000 average wage). That created a stronger middle class and grew the economic pie.
That's what we need - not a return by the uninformed supporting moving to plutocracy.
You've clearly fallen for a bad ideology, where you unwittingly support the mega rich not understanding how you will be hurt by those policies, how redistribution gives you opportunity.
Want a good politician to read on these issues? Senator Bernie Sanders.
In reply to an earlier post on Jan 17, 2013 7:59:16 PM PST
Lady Tate says:
Interesting.... but all that has been happening (for the past few decades especially), has revolved around these three things: opportunity, resources, and globalization. The process moves on, and eventually, ways shall evolve whereby the "redistribution" of wealth comes about.... as things currently are standing, it is not in the long run going to bring any benefit to anyone, so as everything under the sun, this all too, shall have to run it's course!
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