Tuesday, January 11, 2011

Plutocrats Need to Decide the Future they Want for Themselves and the World in the 21st century

The lead article in this month's Atlantic by Chrystia Freeland of the Financial Times "The Rise of the New Ruling Class: How the Global Elite is Leaving You Behind" does not offer much in the way of new information about our increasingly isolated and entitled plutocratic class. We have known for a while that the economic meltdown was in part caused by a group of very well educated would be masters of the universe who newly equipped with turbo charged technology tools with money and access to the world's most powerful politicians, journalists and academics. That is why the global meltdown took everyone so much by surprise --I mean everyone! You knew that right? And why the deal that was arranged between the White House, the Congress, the Fed and Wall Street that bailed out the wrong doers was so quickly worked out away from the media spotlight.

What is new and interesting are the details--the quotes from the entitled that reconfirm that they feel victimized by having to pay a few percentage points more for their already grandiose lifestyles and their belief that it was the greed and ignorance of those who got locked into sub-prime mortgages and credit card debt that caused the meltdown. What is disturbing is that some of those most out of touch have working class origins--for example Goldman Sachs CEO Lloyd Blankfein is the son of a Brooklyn post office worker and Tony Hayward the disgraced Shell CEO has also blue collar roots. They all share along with their Russian plutocratic cousins a barely concealed sense of entitlement to not just modest rewards for a job well done but gargantuan ones. One of Freeland's informants comments about the change since the 1980s and 90s when “where there were men in their 30s and 40s making $2 and $3 million a year, and that was disgusting. But then you had the Internet age, and then globalization, and you had people in their 30s, through hedge funds and Goldman Sachs partner jobs, who were making $20, $30, $40 million a year. And there were a lot of them doing it. I think people making $5 million to $10 million definitely don’t think they are making enough money.” The executives featured in the article know the streets of Davos and Aspen where the rich and the famous gather with the rest of the global elite for their annual conferences better than their own neighborhoods. Many of them are as one CEO describes himself-"global nomads open to many perspectives." One of the perspectives is that the US is overpriced and that US businesses if they are going to be successful must "internationalize aggressively"--meaning they have to locate their businesses closer to their customers and that relatively high priced US workers must either take a pay cut
or demonstrate their superior value. One of the CEOs believe that if the price of three or four people in India or China to be lifted out of poverty is for a member of the US middle class to drop their living standards (read unemployed) then the price can be justified. It would be nice to believe they were saying these things because they genuinely wanted to help relieve poverty in Asia but it is doubtful. The real intention seems to be to want to bring the price of labor down everywhere so that profits can be more easily extracted. This maybe what Lloyd Blankfein was referring in his arrogant way to "doing God's work" when he tried to placate public outrage about his role and the role of brokerages like Goldman Sachs during the recent financial meltdown. If they truly believe that the world is better off with their version of global capitalism it would be great to subject these ideas to public debate, but as is so often the case these issues are never properly discussed except among their elite politician friends for whom they raise tremendous amounts of money for. Could we at least expect the media to ask the hard questions of our policymakers now that the public is beginning to discover the unfairness issue. Perhaps they could begin with the simple proposition that if we are to become in the US ten times more productive to successfully compete overseas and justify our more than subsistence level compensation--can the plutocrats give a little more back in taxes to create the kind educational and training opportunities for those most vulnerable to unemployment?

The problem in all this is even in a supercharged competitive global environment the oligarchs who bebenefited so richly from globalization seem blissfully unaware of the need to engage around these political and moral issues. Instead they seem to want more and more rewards for their efforts. It would not be so bad if the Wall Street world they inhabit bore any real relationship to the rest of the economy but like the Tulip crazes of a time ago the derivative markets in particular more closely resemble the casino hall as numerous other commentators have pointed out than they do a stock market. As Freeland remarks, "This plutocratic fantasy is, of course, just that: no matter how smart and innovative and industrious the super-elite may be, they can’t exist without the wider community. Even setting aside the financial bailouts recently supplied by the governments of the world, the rich need the rest of us as workers, clients, and consumers." Politicians and the media have sometimes indulged these fantasies and pretended otherwise glamorizing their outsized life styles and party-going in return for favors large and small. Freeland well the consequences of a world where the media and political elite mingle with plutocrats in meetings like Davos and a score of prestigious think tank events. How these gatherings tend to reinforce each others sense of huge privilege and entitlement. No wonder so many of them are prone to foot in the mouth "let them eat cake" type statements that will eventually in this new age of austerity force a political backlash that will begin a new round of protectionism. As Freeland points out that while "plutocrats’ opposition to increases in their taxes and tighter regulation of their economic activities is understandable, it is also a mistake. The real threat facing the super-elite, at home and abroad, isn’t modestly higher taxes, but rather the possibility that inchoate public rage could cohere into a more concrete populist agenda—that, for instance, middle-class Americans could conclude that the world economy isn’t working for them and decide that protectionism or truly punitive taxation is preferable to incremental measures such as the eventual repeal of the upper-bracket Bush tax cuts." It will be interesting to watch as the next decade unfolds how far this new global class are prepared to push the extremes. Do they really want to live lives ensconced within high security skyscrapers with their own helipads overlooking the slums where their fellow men and women eke out their daily living--is this what they regard as success in the 21st century? In case you don't believe this type of behavior is possible --take a closer look at the photograph at the top of this blog--it is the 27 storey "home" that Indian Billionaire Mukesh Ambani, that according to one report is "believed to be the most expensive home in the world" ….Located in Mumbai it overlooks the sprawling slums, and as well as a Cinema, Swimming Pools it has you guessed it a helicopter pad...maybe for a quick escape?

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