skirkle, let's talk about the plutocracy

[Kuya]

The good news—and the bad news—for America is that the nation’s own super-elite is rapidly adjusting to this more global perspective. The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.

I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, 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.”

At last summer’s Aspen Ideas Festival, Michael Splinter, CEO of the Silicon Valley green-tech firm Applied Materials, said that if he were starting from scratch, only 20 percent of his workforce would be domestic. “This year, almost 90 percent of our sales will be outside the U.S.,” he explained. “The pull to be close to the customers—most of them in Asia—is enormous.” Speaking at the same conference, Thomas Wilson, CEO of Allstate, also lamented this global reality: “I can get [workers] anywhere in the world. It is a problem for America, but it is not necessarily a problem for American business … American businesses will adapt.”

Wilson’s distinction helps explain why many of America’s other business elites appear so removed from the continuing travails of the U.S. workforce and economy: the global “nation” in which they increasingly live and work is doing fine—indeed, it’s thriving. As a consequence of this disconnect, when business titans talk about the economy and their role in it, the notes they strike are often discordant: for example, Goldman Sachs CEO Lloyd Blankfein waving away public outrage in 2009 by saying he was “doing God’s work”; or the insistence by several top bankers after the immediate threat of the financial crisis receded that their institutions could have survived without TARP funding and that they had accepted it only because they had been strong-armed by Treasury Secretary Henry Paulson. Nor does this aloof disposition end at the water’s edge: think of BP CEO Tony Hayward, who complained of wanting to get his life back after the Gulf oil spill and then proceeded to do so by watching his yacht compete in a race off the Isle of Wight.

It is perhaps telling that Blankfein is the son of a Brooklyn postal worker and that Hayward—despite his U.S. caricature as an upper-class English twit—got his start at BP as a rig geologist in the North Sea. They are both, in other words, working-class boys made good. And while you might imagine that such backgrounds would make plutocrats especially sympathetic to those who are struggling, the opposite is often true. For the super-elite, a sense of meritocratic achievement can inspire high self-regard, and that self-regard—especially when compounded by their isolation among like-minded peers—can lead to obliviousness and indifference to the suffering of others.

Unsurprisingly, Russian oligarchs have been among the most fearless in expressing this attitude. A little more than a decade ago, for instance, I spoke to Mikhail Khodorkovsky, at that moment the richest man in Russia. “If a man is not an oligarch, something is not right with him,” Khodorkovsky told me. “Everyone had the same starting conditions, everyone could have done it.” (Khodorkovsky’s subsequent political travails—his oil company was appropriated by the state in 2004 and he is currently in prison—have tempered this Darwinian outlook: in a jail-cell correspondence last year, he admitted that he had “treated business exclusively as a game” and “did not care much about social responsibility.”)

Though typically more guarded in their choice of words, many American plutocrats suggest, as Khodorkovsky did, that the trials faced by the working and middle classes are generally their own fault. When I asked one of Wall Street’s most successful investment-bank CEOs if he felt guilty for his firm’s role in creating the financial crisis, he told me with evident sincerity that he did not. The real culprit, he explained, was his feckless cousin, who owned three cars and a home he could not afford. One of America’s top hedge-fund managers made a near-identical case to me—though this time the offenders were his in-laws and their subprime mortgage. And a private-equity baron who divides his time between New York and Palm Beach pinned blame for the collapse on a favorite golf caddy in Arizona, who had bought three condos as investment properties at the height of the bubble.

However histrionic his imagery, Schwarzman (who subsequently apologized for the remark) is a Republican, so his antipathy toward the current administration is no surprise. What is more striking is the degree to which even former Obama supporters in the financial industry have turned against the president and his party. A Wall Street investor who is a passionate Democrat recounted to me his bitter exchange with a Democratic leader in Congress who is involved in the tax-reform effort. “Screw you,” he told the lawmaker. “Even if you change the legislation, the government won’t get a single penny more from me in taxes. I’ll put my money into my foundation and spend it on good causes. My money isn’t going to be wasted in your deficit sinkhole.”

Much of this pique stems from simple self-interest: in addition to the proposed tax hikes, the financial reforms that Obama signed into law last summer have made regulations on American finance more stringent. But as the Democratic investor’s angry references to his philanthropic work suggest, the rage in the C-suites is driven not merely by greed but by a perceived affront to the plutocrats’ amour propre, a wounded incredulity that anyone could think of them as villains rather than heroes. Aren’t they, after all, the ones whose financial and technological innovations represent the future of the American economy? Aren’t they “doing God’s work”?

You might say that the American plutocracy is experiencing its John Galt moment.

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. Yet, as a metaphor, Galt’s Gulch has an ominous ring at a time when the business elite view themselves increasingly as a global community, distinguished by their unique talents and above such parochial concerns as national identity, or devoting “their” taxes to paying down “our” budget deficit. They may not be isolating themselves geographically, as Rand fantasized. But they appear to be isolating themselves ideologically, which in the end may be of greater consequence.

And, ultimately, that is the dilemma: America really does need many of its plutocrats. We benefit from 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.

There is also the simple fact that someone will have to pay for the improved public education and social safety net the American middle class will need in order to navigate the wrenching transformations of the global economy. (That’s not to mention the small matter of the budget deficit.) Inevitably, a lot of that money will have to come from the wealthy—after all, as the bank robbers say, that’s where the money is.

It is not much of a surprise that the plutocrats themselves oppose such analysis and consider themselves singled out, unfairly maligned, or even punished for their success. Self-interest, after all, is the mother of rationalization, and—as we have seen—many of the plutocracy’s rationalizations have more than a bit of truth to them: as a class, they are generally more hardworking and meritocratic than their forebears; their philanthropic efforts are innovative and important; and the recent losses of the American middle class have in many cases entailed gains for the rest of the world.

But if the 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.

What say you, skirk?

[Kuya]

http://www.theatlantic.com/magazine/...-elite/8343/1/

[Qalbert]

http://disneyclipart.net/wp-content/...-ClipArt-4.gif

[Conrad]

It's very difficult not to be cynical, Kuya.

[Kuya]

I wonder if you agree specifically with the last part i quoted.

[Kuya]

The last four paragrahs

[Kuya]

It's very difficult not to be cynical, Kuya.

It's actually a very good article. In fact, you might be left with confused feelings on the super rich given that the article intends to show that they are not spoiled brats or old money.

[Kuya]

And in fact, most of the super rich are not old money.

[Kuya]

The article also mentions "philantrocapitalism" which i thought was cute.

[Conrad]

I'll read it in full later, admittedly skimmed after the first few paragraphs