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Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else Hardcover – October 11, 2012
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A Booklist Editor's Choice of 2012
"Rising inequality is one of the most pressing issues of our time. Chrystia Freeland's Plutocrats provides us with a glimpse of the lives of America's elites and a disquieting look at the society that produces them. This well-written and lively account is a good primer for anyone who wants to understand one extreme of America today."
--Joseph Stiglitz, author of The Price of Inequality; University Professor, Columbia University
"Mix crisp economics, ripe history, and two pinches of salty gossip, and you have the flavor of Chrystia Freeland’s entertaining book. From the opulent Bradley Martin ball of 1897 to its modern echoes in Sun Valley and Davos, Plutocrats chronicles the habits of the workaholic overclass—its taste for British public schools, its immodest philanthropy, its fundamental rootlessness. Even as she describes this gilded tribe, Freeland advances a paradoxical warning. Open societies may allow super-achievers to pile up extraordinary riches—and to feel that they have more or less deserved them. But the more these meritocrats succeed, the more likely they are to entrench their own offspring at the top of the heap, negating the very meritocracy that afforded them their chances. Already in the United States, graduating from college is more closely linked to having wealthy parents than to grades in high school. When class matters more than going to class, Freeland’s message must be treated with the utmost seriousness."
--Sebastian Mallaby, author of More Money than God: Hedge Funds and the Making of a New Elite
"Our world increasingly revolves around global elites who not only have an oversized effect on our politics but also set the trends and furnish us with the dominant discourse. In this delightful book, Chrystia Freeland tells the story of how we got here and what distinguishes our elites from those of previous epochs. Most importantly, she explains why the elites' dominance, even when it appears benign, is a challenge to our institutions and gives us clues about how we can overcome it."
--Daron Acemoglu, co-author of Why Nations Fail; economics professor, Massachusetts Institute of Technology
"The world’s wealthy elite are more wealthy, more knit together, more separate from their fellow citizens and probably more powerful than ever before. This very important book describes their lives and more important how their lives affect all of ours. It should be read by anyone concerned with how their world is being shaped and how it will evolve."
--Lawrence Summers, Former U.S. Treasury Secretary; Charles W. Eliot , University Professor, Harvard University
"Chrystia Freeland has written a fascinating account of perhaps the most important economic and political development of our era: the rise of a new plutocracy. She explains that today’s wealthy are different from their predecessors: more skilled and more global; and more often employees than owners, notably so in finance and high technology. By putting together stories of individuals with reading of the scholarly evidence, she gives us a clear view of what many will view as a not so brave new world."
--Martin Wolf, Chief Economics Commentator for the Financial Times
Top Customer Reviews
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.
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.