Conventional wisdom used to be that Europeans envy the rich, while Americans hope to emulate them. Now, Americans are increasingly concerned about rising inequality and the influence of the tiny elite of the super rich.
Plutocracy is a very popular topic of discussion in the US media at the moment. I am quite surprised.
It can't be a coincidence that even mainstream and center-right publications like Foreign Affairs, The American Interest and The Atlantic write about it extensively right now:
We mean not just rule by the rich, but rule by and for the rich. We mean, in other words, a state of affairs in which the rich influence government in such a way as to protect and expand their own wealth and influence, often at the expense of others. As the introductory essay to this issue shows, this influence may be exercised in four basic ways: lobbying to shift regulatory costs and other burdens away from corporations and onto the public at large; lobbying to affect the tax code so that the wealthy pay less; lobbying to allow the fullest possible use of corporate money in political campaigns; and, above all, lobbying to enable lobbying to go on with the fewest restrictions. Of these, the second has perhaps the deepest historical legacy.
Scandalous as it may sound to the ears of Republicans schooled in Reaganomics, one critical measure of the health of a modern democracy is its ability to legitimately extract taxes from its own elites. The most dysfunctional societies in the developing world are those whose elites succeed either in legally exempting themselves from taxation, or in taking advantage of lax enforcement to evade them, thereby shifting the burden of public expenditure onto the rest of society.
Walter Russell Mead discusses "American Dreams, American Resentments":
The professional upper-middle class identifies with populist anger about the wealthy and Wall Street. What it cannot understand is that the plumbers, factory workers and truckers often seem angrier with them than they are with Wall Street malefactors of far greater wealth.
Analysts like Thomas Frank interpret the failure of the lower- and middle-middle class to focus on the real plutocracy rather than the upper-middle class as a symptom of the false consciousness of American workers that has historically stunted the development of genuinely progressive ideology and social movements in the United States.
Chrystia Freeland writes about "The Rise of the New Global Elite" in The Atlantic:
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.
Through my work as a business journalist, I've spent the better part of the past decade shadowing the new super-rich: attending the same exclusive conferences in Europe; conducting interviews over cappuccinos on Martha's Vineyard or in Silicon Valley meeting rooms; observing high-powered dinner parties in Manhattan. Some of what I've learned is entirely predictable: the rich are, as F. Scott Fitzgerald famously noted, different from you and me.
What is more relevant to our times, though, is that the rich of today are also different from the rich of yesterday. Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition-and many of them, as a result, have an ambivalent attitude toward those of us who didn't succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today's super-rich are increasingly a nation unto themselves. (...)
Goldman Sachs CEO Lloyd Blankfein waving away public outrage in 2009 by saying he was "doing God's work" (...)
At a Wall Street Journal conference in December 2009, Paul Volcker, the legendary former head of the Federal Reserve, argued that Wall Street's claims of wealth creation were without any real basis. "I wish someone," he said, "would give me one shred of neutral evidence that financial innovation has led to economic growth-one shred of evidence." (...)
. 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.
Robert C. Lieberman, professor at Columbia University, writes a book review in the latest issues of Foreign Affairs "Why the Rich Are Getting Richer. American Politics and the Second Gilded Age":
Increasing inequality in the United States has long been attributed to unstoppable market forces. In fact, as Jacob Hacker and Paul Pierson show, it is the direct result of congressional policies that have consciously -- and sometimes inadvertently -- skewed the playing field toward the rich. (...)
The wealthiest Americans, among them presumably the very titans of global finance whose misadventures brought about the financial meltdown, got richer. And not just a little bit richer; a lot richer. In 2009, the average income of the top five percent of earners went up, while on average everyone else's income went down. This was not an anomaly but rather a continuation of a 40-year trend of ballooning incomes at the very top and stagnant incomes in the middle and at the bottom. The share of total income going to the top one percent has increased from roughly eight percent in the 1960s to more than 20 percent today.
This is what the political scientists Jacob Hacker and Paul Pierson call the "winner-take-all economy." It is not a picture of a healthy society. Such a level of economic inequality, not seen in the United States since the eve of the Great Depression, bespeaks a political economy in which the financial rewards are increasingly concentrated among a tiny elite and whose risks are borne by an increasingly exposed and unprotected middle class. Income inequality in the United States is higher than in any other advanced industrial democracy and by conventional measures comparable to that in countries such as Ghana, Nicaragua, and Turkmenistan. It breeds political polarization, mistrust, and resentment between the haves and the have-nots and tends to distort the workings of a democratic political system in which money increasingly confers political voice and power.
What do you think?
Does the US (and increasingly Europe) resemble a plutocracy? What's the effect on the "health" of our societies/democracies?
Is the American Dream still relevant because many super rich were not born rich and many in the lower middle classes blame the upper middle class rather than the super rich?
Can you provide Volcker with the requested shred of neutral evidence that financial innovation has led to economic growth?