the rise of the new global elite chyrstia freeland, the atlantic, jan/feb 2011

The Rise of the New Global Elite

Chyrstia Freeland, The Atlantic, Jan/Feb 2011

Is growing income inequality a “national crisis”?

Even “market fundamentalists” like former Fed Chairman Alan Greenspan think so

Between 2002 and 2007, 65% of all income growth went to the top 1% of the population

Though world GDP has risen and world poverty has declined significantly, income inequality within nations has been growing

Though China’s middle class has grown exponentially and tens of thousands have been lifted out of poverty, the superelite has pulled away

Income inequality has also increased in developing markets like India and Russia, and across much of industrialized West, from the laissez-faire US to social democratic Canada and Scandinavia

There are fears we live in a plutocracy, in which the rich have outsize political influence

plutocracy: rule by the wealthy, or power provided by wealth

oligarchy: a society or social system ruled by a few people

Rise of the plutocracy is driven by two phenomena:

the revolution in information technology the liberalization of global trade

the international conference circuit

‘The real community life of the 21st century plutocracy occurs on the international conference circuit, e.g., World Economic Forum in Davos, Switzerland Bilderberg Group TED (Technology, Entertainment, Design)

conference Google’s Zeitgeist conferencec

philanthrocapitalism

Philanthropy has long been seen as a path to social acceptance and immortality for the superwealthy e.g., Andrew Carnegie transformed his image from a

“robber baron” to a “secular saint”

Today’s plutocrats tend to bestow their fortunes in the way they made them: entrepreneurially Rather than merely donating to charities or institutional

endowments, they use wealth to test new ways to solve big problems

“Rootless cosmopolitans”?

The global super-elite don’t seem to have a country of their own, no single national loyalty Mohamed ElErian, CEO of Pimco, the world’s

largest bond manager Son of an Egyptian father and French mother Spent childhood between Egypt, France, US, UK, and

Switzerland Educated at Cambridge and Ozford Leads a US-based company that is owned by a

German financial conglomerate (Allianz SE)

America’s super-elite is adjusting to the more global perspective

In a recent internal debate in one of the world’s largest hedge funds, based in the US, a senior exec argued that the hollowing out of the American middle class really didn’t matter: “…if the transformation of the world economy lifts

4 people in China and India out of poverty and into the middle class, and means one American drops out of the middle class, that’s not such a bad trade”

In a globalized economy, the American middle class is no longer “protected” from foreign competition

Most elites aren’t too sympathetic: “So if you’re going to demand 10 times the paycheck [of a lower-cost worker abroad], you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”

Speaking of value…

In 2009 the top 25 hedge-fund managers were paid more than $1 billion each – equaling they pay of 658,000 entry-level teachers (at salary of about $38,000/yr, including benefits)

Those educators could have brought along over 13 million young people, assuming a class size of 20

Revolt of the elites

There’s a growing disconnect between US business elites and the US workforce

Elites see the world differently See their wealth as a consequence of merit and hard work Feel victimized by criticism, while they see themselves

“doing God’s work,” as the CEO of Goldman Sachs put it Generally blame indebted working and middle classes for

their economic troubles – and for the financial crisis

Bridging the divide

“And ultimately, that is the dilemma: America really does need many of its plutocrats. We benefit of the goods they produce and the jobs they create. And even if a growing portion of those jobs are overseas, it is better to be the home of these innovators—native and immigrant alike—than not. In today’s hypercompetitive global environment, we need a creative, dynamic super-elite more than ever.”