The rise of the new plutocracy

At the Atlantic, Chrystia Freeland writes:

If you happened to be watching NBC on the first Sunday morning in August last summer, you would have seen something curious. There, on the set of Meet the Press, the host, David Gregory, was interviewing a guest who made a forceful case that the U.S. economy had become “very distorted.” In the wake of the recession, this guest explained, high-income individuals, large banks, and major corporations had experienced a “significant recovery”; the rest of the economy, by contrast—including small businesses and “a very significant amount of the labor force”—was stuck and still struggling. What we were seeing, he argued, was not a single economy at all, but rather “fundamentally two separate types of economy,” increasingly distinct and divergent.

This diagnosis, though alarming, was hardly unique: drawing attention to the divide between the wealthy and everyone else has long been standard fare on the left. (The idea of “two Americas” was a central theme of John Edwards’s 2004 and 2008 presidential runs.) What made the argument striking in this instance was that it was being offered by none other than the former five-term Federal Reserve Chairman Alan Greenspan: iconic libertarian, preeminent defender of the free market, and (at least until recently) the nation’s foremost devotee of Ayn Rand. When the high priest of capitalism himself is declaring the growth in economic inequality a national crisis, something has gone very, very wrong.

This widening gap between the rich and non-rich has been evident for years. In a 2005 report to investors, for instance, three analysts at Citigroup advised that “the World is dividing into two blocs—the Plutonomy and the rest”:

In a plutonomy there is no such animal as “the U.S. consumer” or “the UK consumer”, or indeed the “Russian consumer”. There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie.

Before the recession, it was relatively easy to ignore this concentration of wealth among an elite few. The wondrous inventions of the modern economy—Google, Amazon, the iPhone—broadly improved the lives of middle-class consumers, even as they made a tiny subset of entrepreneurs hugely wealthy. And the less-wondrous inventions—particularly the explosion of subprime credit—helped mask the rise of income inequality for many of those whose earnings were stagnant.

But the financial crisis and its long, dismal aftermath have changed all that. A multibillion-dollar bailout and Wall Street’s swift, subsequent reinstatement of gargantuan bonuses have inspired a narrative of parasitic bankers and other elites rigging the game for their own benefit. And this, in turn, has led to wider—and not unreasonable—fears that we are living in not merely a plutonomy, but a plutocracy, in which the rich display outsize political influence, narrowly self-interested motives, and a casual indifference to anyone outside their own rarefied economic bubble.

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Comments

  1. And then you see & hear Mr. Hopey Changey, aka the guy who has assured that his family is well entrenched in the new elite class, and you wonder why would he and his want to change anything? They wouldn’t and won’t. You think so? Watch a preview of the Tuesday shmooze:
    http://www.youtube.com/watch?v=lX2lf4B1CaM

  2. A good, if rather Americocentric article. The greatest harm that the existence of plutocracy generates is the waste and total devaluation of human resources. The un-needed and overly spoiled American middle class that is considered superfluous are the people upon which the present social order raised itself, that are now thrown on the trash heap as being of no further value.

    The ultra-modern elite, inventing a new shiny toy every day — to be consigned to the garbage heap as soon as a new toy surfaces — is like the aristocracy at the fin de siecle before WWI destroyed a whole generation. They are the first class passengers drinking champagne and eating caviar to the sounds of a string orchestra as the global Titanic collides with the realities of climate change and a finite planet. It is from their billions and their so called think tanks (illusion tanks more likely) that the obstructions to effective remediation of the world’s problems come.

    It’s likely that the remedy the French hit on in the late 18th century is the only one that will prove effective, but more corporate deaths instead of bail-outs like Citigroup’s would be a move in the right direction.