January 1st, 2013
in Op Ed
The Rise of the New Global Super-Rich and the Fall of Everyone Else
by Dirk Ehnts, Econoblog101
Chrystia Freeland from Reuters paints a panorama of the global 1% in her new book Plutocrats. The last chapter, which describes the Serrata in 12th century Venice, sums up the point that the author wants to make. The global rich are about to kick away the ladder which enabled themselves to get up in society. Many billionaires chronicled in this book come from a moderate background, went to an Ivy League University and then got rich. Increasingly access to Ivy League education is blocked for those whose parents did not already attend one of these institutions (priority is given to the children of those that have attended). This closure resembles that of Venice, where a golden book included all the rich in one moment of time and those who were not in the book were denied access to higher ranks.
The book draws on a variety of academic books and papers. If the idea was to create a panorama of the super-rich, it was successful. The discussion of the causes of the existing inequality includes the usual suspects like globalization and skill-biased technical change (premium for those with tertiary education), but also one whole chapter (out of six) on rent seeking. Freeland makes the point that everybody is rent seeking, and that therefore political institutions should be divided from business interests. Having Wall Street in mind, with its big bonuses – even when profits came from government loans invested in risk-less government bonds – and subsequent bail-out, she is not shy of criticizing those that, as she herself says, are partly her friends.
The books weakness is that Chrystia Freeland has shied away from anything that is politically incorrect. She lets Romney get away as someone who is in the “empiricist camp” and uses this to justify his flip-flopping on some issues (p. 93-4). A moral judgement would be in order at this point, but Freeland makes it by not making it. Describing Romney’s running mate as a “conservative intellectual Paul Ryan” (p. 83) seems to be another concession to political correctness. The issue of political correctness should be part of the book really, since it is used to isolate people from critique and hence enables the global plutocrats to live in a “bubble”, where all disturbing information is filtered out. This together with the competition to get into the billionaires club seems to create this gap between normal people and the Plutocrats, both real and wanna-be. This kind of argument builds on the economics of Thorstein Veblen, who combines economics with sociology to draw a more vivid picture of society. By the way: Marx is mentioned, too (5 times).
Chrystia Freeland’s book is a nice read for everybody who want a condensed form of the explanations of the rise of the plutocrats.