Revolt Against the Global Super-Rich Is Underway
Chrystia Freeland is a Liberal member of the Canadian Parliament and author of “Plutocrats: The Rise of the New Global Super Rich.”
OTTAWA—2013 was the year the rise of the plutocrats made it to the top of the international agenda. Witness the remarkable consensus at the year’s end of the world’s centers of faith, power and money: Pope Francis published an apostolic exhortation criticizing the “economy of exclusion,” US President Barack Obama named income inequality as the most important issue of our time, and New York, the global capital of the plutocracy, elected a mayor who won by attacking the “tale of two cities” the metropolis lived through during the political reign of its incumbent billionaire boss.
This recognition that surging income inequality is an urgent political problem marks an important shift. That’s because the widening gap isn’t a new story. Income inequality in much of the world has been rising for three decades. But until the 2008 financial crisis, and the global recession which it triggered, there were some plausible ways to deny—or at least to hope—that the rise of the 1 percent wasn’t a problem.
The strongest argument was that even though those at the very top were pulling away from everyone else, people in the middle and even at the bottom weren’t doing too badly either.
Globalization and the technology revolution, the story went, hadn’t only created the vast fortunes of the 0.1 percent, they had improved the lives of the 99 percent with more and less expensive goods and services. That thesis was partly a chimera, magicked into being by the consumer credit bubble which created the temporary illusion of middle class prosperity. But this explanation was also powerful because it was partly true—familiar goods from cars to t-shirts are cheaper and longer-lasting than ever before, and all our lives have been transformed by the internet and mobile communication.
Once the credit bubble burst, though, our wonderful new devices and consumer goods weren’t enough to mask the other reality of the big economic transformation of our time—the hollowing out of middle class incomes and jobs. It is this fact—that, in a time of abundance, middle class incomes are stagnating and employment is anemic—that has transformed rising income inequality from an academic issue into a political one.
And that is why 2013 was the year the revolt against the plutocrats began. Make no mistake—this is a powerful and consequential political moment, which is being felt across the western industrial democracies and whose impact is only beginning.
You see it in the US in the election of Bill DeBlasio as mayor of New York, and, just as significant, his blessing by the Clintons at his inauguration; in California Governor Jerry Brown’s successful tax increase on the rich; in the emergence of Elizabeth Warren as one of her party’s leaders; and in the despair of leading Republican thinkers, like Frank Luntz, who believe the left has won the national argument on income inequality.
You see it in France in the new 75 percent tax on the super-rich. You see it even in Switzerland, long the discrete home of the world’s money, which has passed a law giving shareholders a binding vote on CEO compensation.
For anyone who cares about democracy—and that should be all of us—this populist backlash is deeply reassuring. One of the big fears prompted by the economic rise of the plutocrats was that they would inevitably capture political power, too. It is, after all, hard to disagree with Louis Brandeis’s warning, at the height of America’s first Gilded Age, that “we can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”
Today, Brandeis may again be turning out to be right, but not in the way he had feared: rising plutocratic economic might has certainly led to an attempt to gain political sway, but it isn’t working very well. Instead, the plebes are fighting back.
There’s an arithmetic inevitability to what’s happening—money can buy political voice and encourage the cognitive capture of the political elite. But in democracies, the electoral math is ultimately denominated in demographics not bank balances. Any politically free system which cannot economically deliver for the vast majority of its people—and, today, that means our own—will be challenged.
The big question for 2014 will be how the plutocrats respond. Some are still in denial. Today’s economy is going so well for those at the very top that it can be hard to see how badly it is working for those in the middle and at the bottom.
That blinkered vision is exacerbated, ironically, by the sense of personal virtue and personal achievement felt by so many of today’s super-rich. This is not the fading aristocracy of Downton Abbey, barely hanging on to the spoils accumulated by its ancestors. Many of today’s plutocrats made their own fortunes, and they have the pride and the self-confidence that comes with that accomplishment. They believe they have contributed to the common good to boot, which is why the complaints of the 99 percent feel to them not just bewildering and threatening, they also unjust.
It’s no surprise that the angry 99 percent and their public champions have little sympathy for this bruised amour-propre. The prevailing sentiment is closer to the mood the last time income inequality soared and the masses fought back. The plutocrats didn’t like it then much, either. To which FDR, born to wealth but leading the charge to create a more inclusive capitalism, replied: “We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.”
It may be that today, as in the 1920s and 1930s, a bitter political fight between the economic winners and losers is inevitable. But it would be better for everyone if the plutocrats join in the effort to create capitalism that works for all us, rather than resisting it.
For one thing, in today’s competitive global economy, the countries and communities that succeed will be the ones that keep their homegrown plutocrats, and attract more of the right kind from elsewhere. The stagnant middle class won’t be revived by an exodus of the super-rich—what it needs is an entrepreneurial elite which has chosen to share.
In the 1920s and 1930s, it was those economic elites who compromised with the rest of society, as they ultimately did in North America and western Europe, who fared best.
Compare their fates with their cousins who were defeated by communist revolutionaries, or who won the pyrrhic victories, and self-exile in gated communities, of the super-rich in Latin America. We may need our plutocrats, but they need us, too.