Are The Very Rich So Different?
In Plutocrats, Chrystia Freeland vividly describes the lives of the very rich, but has little to say when it comes to what should be done about this new elite
Lebadev: member of Freeland’s 0.1 per cent
In her work for the Financial Times and Thomson Reuters, Chrystia Freeland has a press-seat view of the lives of the very rich. It’s nice work if you can get it, and between trips to Davos, the Hamptons and the other stomping grounds of the global elite, Freeland has written Plutocrats, in which she takes 350 pages to announce what F. Scott Fitzgerald said more pithily 75 years ago: “Let me tell you about the very rich. They are different from you and me.”
According to the numbers, the rich today are even less like you and me than they once were. In the 1970s the top 1 per cent of American earners captured about a tenth of national income. Today, their share has risen to nearly a third. The numbers in Britain are similar. One particularly jaw-dropping illustration of economic inequality is the total net worth of Bill Gates and Warren Buffett: their combined $90 billion fortune matches the wealth of the poorest 40 per cent of Americans.
Freeland has reported from “exclusive conferences in Europe, conduct[ed] interviews over cappuccinos on Martha’s Vineyard or in Silicon Valley meeting rooms, [and] observ[ed] high-powered dinner parties in Manhattan.” At one such party, diners nod as one guest says: “The thing about 20”—meaning $20 million per year—“is 20 is only 10 after tax.” These are not the worries of the 1 per cent, but the 0.1 per cent. It is this top rung that has pulled away from the rest so dramatically in recent years and this is the group Freeland sets out to study. Just as there is confusion over the point at which “middle-class” becomes “wealthy” (see Lionel Shriver, page 18), it is unclear exactly where Freeland draws the line between the rich and the super-rich. She leaves readers puzzled as she jumps to and fro between the 0.1 per cent and the rest of the 1 per cent. There is a difference between plutocrats and the bankers and lawyers who work for them.
Technological change and globalisation explain the rising wealth of the super-rich; in the developing world, these trends have pulled millions out of poverty but automation and cheap labour abroad mean today’s tycoons have to surrender a smaller portion of their profits than they once did. Freeland is not the sort of know-nothing who wishes globalisation had never happened. She declares herself a capitalist and recognises the rise in living standards brought about by these trends. This good sense makes it all the more surprising when she aligns herself with Peter Orszag, Obama’s former budget chief, who told Freeland that politics should check these economic forces: “Instead of leaning against the wind, we have been putting a little more wind in the sails of rising inequality.”
Governments put wind in those sails for a reason. Economically, Britain was a more equal society before the Thatcherite revolution of the Eighties. It was also less meritocratic and poorer. That was in part due to punitive and self-defeating rates of taxation. Lowering the top rate of income tax, from 83 per cent to 60 per cent in 1979 and to 40 per cent by Nigel Lawson in 1988, was good economics: wealth creation was incentivised and jobs followed. Of course, this revolution was not uniquely British and as a result, today’s plutocrats are more likely to be self-made than their mid-20th-century counterparts. Freeland barely pauses to celebrate this fact.
For much of Plutocrats, Freeland is too busy gawping at the planes, parties and Alpine pow-wows that characterise the lives of the very wealthy to consider whether something should be done about this new elite. Today’s inequality is the product of rising global prosperity, and assuming legal and political institutions are strong enough to withstand the potentially corrupting pressure of extreme wealth, there is nothing wrong with financial inequality per se. Policymakers needn’t read Plutocrats. When it comes to income discrepancies, they should heed the advice of the White Rabbit in Alice’s Adventures in Wonderland: “Don’t just do something. Stand there.”