Chrystia Freeland, now Canada’s Minister of Global Affairs, was, in her former life, a journalist and author. Among her published works was one titled ‘Plutocrats’ in which she recounts the growing inequality of income and discusses the factors that led to it. I enjoyed the book when I read it some years ago and wrote a brief note at the time. Those notes – appended below – are, I think, a useful reminder that there are some thoughtful and knowledgeable people among our governments!
Chrystia Freeland; Plutocrats: The Rise of the New global Super-rich and the Fall of Everyone Else; Doubleday Canada, 2012.
This breezily written book covers a multitude of areas including economic history, income distribution, and the impact of political change, of technological development and of globalization on incomes and economic organization, and something close to social gossip about the lives of the top one per cent of global income earners in the period since the early 1990’s. And all of this in the space of less than 300 pages! Thus the treatment of any one of these issues is, of necessity, anecdotal and sketchy in the extreme. That said, it is a good read and hopefully will provoke thought and discussion about the implications for society and economic policy.
A capsule summary might go something like the following:
- Economic history/income distribution: the last era of extreme inequality was the gilded age from the late 19th century until the great depression. This was followed, beginning in the 1930’s until the early 1990’s by a spell of increasing equality of incomes lasting through the postwar prosperity until the 1980’s. The postwar period saw the growth of a managerial class whose income was not closely related to company performance and whose salaries – although high relative to those of lower level employees – were relatively low compared to what has happened in the era of ‘performance related pay’ that was increasingly implemented beginning in the ‘90’s. Since the ‘90’s income inequality has greatly increased approaching the dispersion of the gilded age.
- Political change/globalization: The fall of the Soviet Union and the subsequent ‘giveaway’ of state enterprises generated a class of extremely wealthy oligarchs. Globalization led to large increases in corporate profits and the ‘hollowing out’ of middle level jobs, mainly in manufacturing, in the industrialized west. Combined with the spread of ‘performance pay’ for executives this exacerbated the trend to income inequality.
- Technology: The rapidity of the electronic revolution combined with globalization which meant that production was increasingly internationally mobile and added to the effects on income inequality. As a footnote here Freeland describes the increasing internationalization of the wealthy; they are equally at home in Europe, North America and Asia. England is no longer English!
- A further effect of technology is its impact on superstars of the entertainment and sports world. Not only can the super rich afford to pay extravagantly for their services but, thanks to technology they can be seen – on television, iPhones and computers = throughout the world.
With respect to the socio-political impact of all of this Freeland notes the emergence of what she calls ‘philanthro capitalism’ and ‘winner take all’ politics. The former leads to increasing influence of the super rich on socio cultural activities and on politics. The latter has been well described and analyzed by Hacker and Pierson[1]
Where does all of this take us? Well, as Freeland concludes:
“…. You have an economic elite primed to …… conflate its own self-interest with the interests of society as a whole. Low taxes, light-touch regulation, weak unions, and unlimited campaign donations are certainly in the best interests of the plutocrats, but that doesn’t mean they are the right way to maintain the economic system that created today’s super elite.”
2/5/13
[1] Jacob S. Hacker and Paul Pierson; Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned its Back on the Middle Class. Simon and Schuster, 2010. See the summary on page 21 above.