The birth of the Occupy Wall Street protest movement last September helped return America's rising inequality to a dominant place in the public eye. Though most rhetoric has focused on the growing rift between the 1% and everyone else, here comes a book to warn that the most shocking story may be the rise of those even higher up the socioeconomic ladder.
According to writer Chrystia Freeland, the gap between the super rich and everyone else is wider today than it's been since the Gilded Age, the late 19th-century period when dishonest financial titans amassed eye-popping wealth from the country's industrialization, and income taxes did not yet exist.
In the 21st century, who are the super-wealthy and how did they amass their fortunes? In "Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else," Freeland gets financially intimate with a new breed of global billionaires and details the economic and political forces that have helped them rise above the rest of us.
Unlike the rich of yesteryear, today's titans are mostly self-made, and in an era of globalization, increasingly impervious to national borders. As Freeland writes, "they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home."
Freeland, a veteran financial reporter and digital editor at Thomson Reuters, draws on two decades of covering the global business elite to reveal a portrait of the ultra-rich that few other journalists have had the access to capture.
In Freeland's view, it is not individual plutocrats, per se, who should be held accountable for rising inequality. For the most part, they have been in the right place at the right time to capitalize on larger economic forces and public policy decisions that have enabled the very rich to "tilt the rules of the game in their favor."
She is far from a champion of the global plutocracy. But her interviews with several of its most visible members -- from Eric Schmidt, former CEO of Internet giant Google, to jailed Russian oligarch Mikhail Khodorkovsky – put human faces on the individuals, mostly men, who have risen to the height of global affluence.
In the United States, technology advances and globalization, which helped perpetuate economic stagnation among the middle class, are an important part of the story. Yet, a shift in public policy has been just as crucial in eroding what Freeland calls the "Treaty of Detroit:" the post-World War II era of high taxes, strong unions, and high minimum wages that for a while shrank the gap between the 1% and everyone else.
Since the late 1970s, Freeland explains, tax cuts and other forms of economic liberalization have reversed the tide in favor of the wealthy. This is particularly true in finance, where the creation and marketing of increasingly complex financial instruments -- spurred by deregulation -- allowed America's biggest banks, and their executives, to reap larger and larger windfalls.
"Much of the story of the rise of the 1%, and especially of the 0.1%," Freeland writes, "is the story of the rise of finance."
As Plutocrats explains, the extreme wealth of America's top financiers is a cautionary tale of so-called "rent seeking," an economic term describing enrichment through reallocation rather than the creation of wealth. This phenomenon is by no means unique to the U.S.
Take a look at China's National People's Congress. As the country evolves into an urbanized industrial superpower, China is becoming rife with rent-seeking billionaire legislators who are growing rich through ties to the state apparatus. In China, however, the enrichment of elites has coincided with a dramatic rise in the average citizen's living standards, which has not been the case in 21st-century America.
Freeland argues that this is the most worrisome aspect of the rise of the plutocrats: that America, long a land of economic opportunity, will increasingly veer toward oligarchy, with avenues for advancement shut off by elites who are determined to maintain their hold on power and "tempted to pull up the ladder they climbed to the top."
This shift away from a democratic, politically inclusive society, Freeland warns, would not be unprecedented among a major global power. A similar fate, she explains, befell 14th-century Venice, once the richest city in Europe. After prospering through policies that promoted social mobility, Venice fell into decay once the reigning elite used their wealth to shut out other would-be competitors – an era known as La Serrata, or the closure.
Unlike some critics on the left, Freeland does not vilify her super-rich protagonists – a nonpartisan approach that helps make Plutocrats harder to ignore. But her warning that the U.S. may someday face a Serrata of its own is a message – however uncomfortable – that Americans may want to heed, particularly at a time when the nation's economic future is so uncertain.