Inside the minds of the global financial elite

During the first year of the U.S. economic recovery, 93 percent of the gains from growth went to the top 1 percent of income earners, and 37 percent went to the top 1/100th of 1 percent.

Bill Moyers did a good show a few nights ago about the mentality of this elite of wealth—how they regard themselves as Ayn Rand characters who are carrying the rest of the world on their shoulders, their limitless sense of entitlement to their special privileges, and their isolation from ordinary people and their conerns.

Moyers interviewed Chrystria Freeland, editor of Thomson Reuters Digital and author of a new book, Plutocrats: The Rise of the New Global Superrich and the Fall of Everyone Else, and Matt Taibbi, who reports on high finance and politics for Rolling Stone.

As Freeland and Taibbi noted, the wealthy elite do not think of themselves as plutocrats.  They sincerely think that they are absolutely entitled to their wealth and privileges.  As a group, they are smart and hard working, and have risen largely through their own efforts.  As a result, they think they owe nothing to anyone else.  They think that they created the world’s wealth by themselves solely through their own efforts, and that they are carrying the rest of the population, especially the American middle class, are parasites.

Both Freeland and Taibbi got their start in journalism reporting on Russia in the 1990s.  They saw the rise of an oligarchy of wealth, which got control of resources based on their connections in government, and who lived lives of luxury behind guarded walls, cut off from the struggling majority of the population.  Now they see the same thing happening on a global basis.

Income inequality is rising everywhere, not just in the United States, but in France, Canada and other countries.  The elite of each country feel they have little in common with ordinary people in their own countries, but much with the rest of the global elite.

Freeland talked about “cognitive capture”—how politicians and intellectuals have come to accept that the plutocracy deserve their privileges, and how even poor people in the United States (not necessarily in other countries) believe they deserve to be poor.

On the other hand, Taibbi and Freeland said, there is class conflict within the upper 1 percent of income earners.   Millionaires resent the way government gives preferential treatment to billionaires.  Silicon Valley entrepreneurs resent Wall Street bankers.

My response to all this:

• The fact that someone is highly intelligent and works very hard does not mean that person deserves to be rich.  I know smart, hard-working people who are barely making it.  You deserve to be richly rewarded if you make a contribution to society of great value.  Some members of the global elite do make a positive contribution.  Others do not.   Some are no better than thieves.
• Many members of the global elite have determined that a prosperous middle class and a well-paid working class are not needed.  They can get along very well without  us.   But that is not the issue.  The issue is whether working people and middle-class people need the global elite.
• The global elite think of themselves as “job creators.”  Another way of putting it is that they are gatekeepers who determine access to gainful employment.  There is a lot of work that needs to be done—in the United States, repair of aging water and sewerage systems, for example—that does not necessarily enrich the elite.   They shouldn’t have a veto over whether it is done.
• It is a misnomer to label the plutocracy as “libertarian.”  They are libertarians or statists depending on what is to their interest at the time.  What is constant is their sense of entitlement.
• I think the complaints of the millionaires against the billionaires, and the Silicon Valley elite against the Wall Street elite, probably have some merit.  There are many bankers who have operated on sound banking principles, and been overshadowed by bankers who’ve grown by gambling recklessly and then being bailed out by the government from their losses.

Click on The Rise of the New Global Elite for an article by Chrystia Freeland in The Atlantic.

Click on Plutocracy Rising Transcript for a written transcript of the show.

Click on Chrystia Freeland | Analysis & Opinion | Reuters for her blog.

Click on Matt Taibbi | Taibblog | Rolling Stone for his blog.

Click on Moyers & Company for Bill Moyers’ home page.

A Plutonomy world – we just live in it

PLUTONOMY is a word coined five or so years ago by Ajay Kapur, then a global strategist at Citigroup, to describe the United States economy.  It is a kinder, gentler synonym for plutocracy or oligarchy.  It means an economic system based on serving the needs and desires of the ultra-rich.

In the United States, 1 percent of the population has wealth equivalent to the bottom 90 percent.  And, according to Kapur, their share of the national wealth is likely to continue to increase.

Ajay Kapur

One implication of this fact is that it makes more sense for business to make products for the ultra-rich than for the mass public. He recommended a Plutonomy investment portfolio, in stocks of Tiffany’s, Sotheby’s, Burberry, the Four Seasons and other companies that cater to the wealthy elite.

Another is that many of the problems that affect the general public – for example, rising gasoline and food prices – do not affect the Plutonomy.  That means little is likely to be done about these problems.

After Michael Moore cited Kapur in his documentary movie, “Capitalism: a Love Story,” his writings were taken down from the Internet.  But earlier this year Kapur, who now is head of Asian equity strategy for Deutsche Bank, resurfaced with an interview by Robert Frank of the Wall Street Journal.

Kapur said the Plutonomy is alive and well, and is so well entrenched it is unlikely to go away anytime soon.  In fact, he now sees the whole world, not just the United States, as a Plutonomy.

The foundation of Plutonomy is deregulation and low taxes, Kapur said, and the Plutonomy is so politically powerful that it can resist populist pressures for the indefinite future.

Unlike me, he has no problem with this.  He sees the desire to join the Plutonomy as the driving force of progress.  And as for an economy in which most people work to serve the desires and interests of the rich, he has made a good career doing just that.

The rising tide lifts the high net worth folks

“High net worth individuals” – people with $1 million or more in ready cash to spend – are leaving behind the vast majority of people worldwide, who are treading water or sinking economically, according to a report by Capgemini, a French consulting firm, and Merrill Lynch.

High net worth individuals are more numerous and individually wealthy than before the recession.  And within this wealthy group, there is an ultra-rich group with $30 million each available to spend.  They are 1 percent of high net worth individuals, but they hold more than a third of the total wealth of people in this category.