Outrageous fortunes

Published in The Observer (November 4th, 2012)

Plutocrats: The Rise of the New Global Super Rich by Chrystia Freeland (Allen Lane)

Who is the richest person to have lived? Given the impossibility of comparing chariots with private jets, this is an absurd question. But it is still one economists have sought to answer, with perhaps the best measure – as defined by Adam Smith – based on annual income as a multiple of the average wage of fellow citizens.

Their answer is not Marcus Crassus, whose fortune was the same size as the entire government treasury of the Roman Empire. His annual return was paltry for a plutocrat, equating to the average yearly income of 32,000 Romans. Nor was it those robber barons of the Gilded Age – Andrew Carnegie, whose wealth peaked in 1901, took home the same as 48,000 typical Americans while John D Rockefeller’s vast riches yielded an annual income equal to 116,000 of his countrymen.

The wealth of these figures from history pales in comparison with the strutting financiers of Wall Street, the geeky billionaires of Silicon Valley and the grisly oligarchs who plundered Russia. Trumping them all is Carlos Slim, the telecoms tycoon whose £53bn fortune is equal to that of an incredible 400,000 of his fellow Mexicans.

There has always been a gap between rich and poor but this is just one sign of how the gulf has widened into a chasm over the past few decades. Creaming off more and more wealth is a new elite, a transglobal class of mainly self-made men carving out unimaginable fortunes. They are the subject of this timely and absorbing analysis by former Financial Times deputy editor Chrystia Freeland.

Forget the 1% targeted by the Occupy mob. Freeland is talking about the 0.1 per centers who look down with disdain at the paupers scrabbling around on a few million a year. She quotes another shocking sign of our times: three decades ago the average American chief executive made 42 times as much as the average worker; today this ratio is an obscene 380. And bear in mind the richer you are, the smaller proportion of your income you tend to pay in tax, levels diminishing even at the very top of the tree.

Despite the cheap book cover and passing mention of private parties with pop stars paid a million dollars to perform, this is no voyeuristic glimpse into the fabulous lifestyles of the rich and famous. Freeland charts the rise of this class by examining global trends and exploring the consequences of the creation of such a money-laden elite, shifting smoothly from dense academic studies and interviews with George Soros to grappling with the success of Lady Gaga.

So who are these people? They are nearly all men for a start, sacrificing family life in their search for a fortune. One executive spending a third of the year in transit says forlornly: “We are the people who know flight attendants better than we know our own wives.”

Often middle-class and frequently mathematicians, they make their own money rather than inheriting it. They go to the top universities and create their first fortunes early. Many are outsiders to some extent – most Russian oligarchs, for example, were Jews clever and driven enough to get degrees from top universities under the old Soviet system – and often they are immigrants. Unsurprisingly, bankers and financiers dominate this club, followed by the technology titans, but – like pilot fish feeding on the leftover food from sharks – the likes of lawyers and even dentists who service their needs can join their ranks. “The superstars who work for the super-rich can charge super fees,” observes Freeland drily.

Her findings are fleshed out with fine research, strong statistics and neat nuggets of information. She argues that technology and globalisation are creating winner-take-all superstars in many sectors who join a cosy, conformist bubble. These people flit round the world attending the same events and using the same services; they freely admit to having more in common with one another than their fellow citizens, whether coming from Africa, Asia or the west.

Some display extraordinary arrogance. “If a man is not an oligarch there is something wrong with him,” said Mikhail Khodorkovsky, once Russia’s richest man – although his outlook has since been tempered by his time in jail. Indeed, extreme wealth and rampant egotism can be a combustible mix; in China, at least 14 billionaires have been executed over the past decade.

Although short of solutions, Freeland highlights the danger when a small, self-serving and self-satisfied group dominate public discourse, then seek a system tilted even more in their favour. “I think the ultra-wealthy actually have an insufficient influence,” says one billionaire Republican donor. Another says taxes should be virtually abolished, arguing that the government should pay the likes of Bill Gates and Steve Jobs for their contributions to society. “It’s that top 1% that probably contributes more to making the world a better place than the 99%,” he concludes outrageously.

Yet these super-elites are not evil people; they genuinely think what is good for them is good for the rest of society. The irony, as the author points out, is that a big intrusive state is often the plutocrat’s best friend, whether it’s a state capitalist regime such as China or the protectionist capitalism of the west. Just look at all those fat-cat bankers who pushed for the biggest state intervention for a century to rectify their disastrous mistakes – although, needless to say, they don’t blame themselves but all those poor people who choked on cheap credit after buying their dodgy products.

As the financial meltdown showed, the best brains follow the money, so the regulators – earning a fraction of the immense incomes enjoyed by bonus-chasing bankers – were no match for the global behemoths. Such is their power and wealth, these mega-rich plutocrats proclaim free market values yet lobby hard and often successfully to bend markets in their favour, devastating the traditional middle classes and dislocating social mobility. In so doing, they are destroying the very things that gave birth to so many of them – to all our detriment.

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