The Rise of the New Global Elite

http://www.theatlantic.com/magazine/archive/2011/01/the-rise-of-the-new-global-elite/8343/

by pointillistic • 16 years ago

149 86 16 years ago

> . . . but less connected to the nations that granted them opportunity—and the countrymen they are leaving ever further behind.

Because opportunity springs not from the ingenuity of man but the granting of nations who "own" him.

simon_• 16 years ago

I understand your sentiment, and don't really disagree, but keep in mind that it's basically impossible to innovate or build wealth under unfavorable institutions. So... some value probably "should" accrue to nations.

jamesaguilar2• 16 years ago

Yes, for sure. Some of the benefits should return to the nation that provided the favorable conditions (and do, in the form of that person's taxes and also in the form of opportunity-seekers from around the globe flocking to the places where growth is possible). But I don't like the notion that people owe their successes to their country any more than I believe they are indebted to oxygen or gravity.

DanielBMarkham3• 16 years ago

This might be a good time to take a look at history. Lots of examples of institutions destroying innovation. By contrast, not as many examples of them creating it.

Or, to put another way, we did just fine innovating and inventing and such on our own -- in caves, on the Savannah, on trade routes, as part of tribes or guilds. Innovation and entrepreneurship is as natural a part of life as breathing. If this weren't true, we'd still be hanging around in trees waiting for the big cats to leave their prey.

Of course, you can argue that institutions accelerate this natural ability, but there's a lot of room for doubt over exactly what magic sauce makes people super productive. At the very least we can agree that different folks have different answers to that question. (If there were some "proven" answer, we'd just all copy that and the world would be full of Thomas Edisons) I understand there are a lot of works of fiction and nonfiction that claim to explain why so much innovation happened in such and such a place, but it's easy to say or write something like that. In reality, lots of really smart folks have went at this problem and haven't gotten very far in terms of reproducible results.

I find this line repeated over and over again -- that somehow if there is a lot of innovation in situation X that it naturally follows that we know all about X and why all this innovation happened. I think that's stretching logic a bit too much for my tastes.

edj• 16 years ago

Single page: http://www.theatlantic.com/magazine/print/2011/01/the-rise-o...

relic173• 16 years ago

Sadly, yet another author who either did not bother to read and think about Ayn Rand's work, or, worse, pretends to have NOT understood it.

forensic6• 16 years ago

explain

sp332• 16 years ago

Rich people already have power. Trying to minimize their political power, in favor of a more "democratic" system, is just denying the reality that the rich are powerful. If the government antagonizes rich people, the rich will fight back economically until they get what they want anyway (with lots of collateral damage). On the other hand, if you give the rich political power to begin with, you are merely acknowledging that they have power. Then they can wield it more effectively, and (Ayn Rand hopes) society will be better off.

Edit: Also, income inequality is no big deal if the rich aren't stepping all over the poor. As the article points out, the super-elite in Shanghai haven't stopped the middle class in China from exploding, and average income is growing strongly despite the financial crisis. The super-elite aren't hurting anything.

relic173• 16 years ago

"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."

The above paragraph suggests that the author is aware of Ayn Rand and disagrees with both her (who was not libertarian) and the libertarians. Then the author goes on to imply that the free market is responsible for the rising income inequality and to put all the rich under the same common denominator, with no regard for the source of their wealth (note how many names are cited and the widely varying reputations of the businessmen in question). Ayn Rand is very explicit on the distinction of gaining wealth through thoughtful and productive effort on the one hand and through special privileges on the other. It is this observation that the author has ignored.

Second, the author concludes that "the lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth", so they must choose one of these options. This message ends an article that would constitute a weak response to Ayn Rand (if the article was meant to be one). It sanctions a systems that says: the rich, no matter how they got to be rich in the first place, should either abuse the rest of the population, as they often did in feudal times, or will have to see their property seized by force, as it is done in socialist and communist countries. Otherwise, they cannot survive. Well, that's a very dangerous proposition for individual rights.

chunkbot• 16 years ago

Rand's philosophies are far from universal truths.

relic173• 16 years ago

My intention was not to imply that Ayn Rand's philosophy is the universal truth, though I find it very logical. My intention was to say that the author, who refers to Rand in the opening paragraphs in a manner suggesting philosophical opposition, goes on to make a weak argument. If the author was really familiar with Rand's work (which the reference implies), she (the author) would hardly lump all the rich under the same common denominator, without consideration for the source of their wealth (ability vs. privilege), and conclude that they are all awaiting the same grim fate - turning either into victims or dictators.

sayemm• 16 years ago

Good read on the world trending towards meritocracy, esp during these times as a lot of older institutions are getting turned upside-down. It reminds me of this old PG post, "After Credentials" - http://www.paulgraham.com/credentials.html

"The course of people's lives in the US now seems to be determined less by credentials and more by performance than it was 25 years ago."

drinian• 16 years ago

This is a fine exposition on the state of the world today -- and the hope that these hard-working global citizens will help create a more equitable world -- but it's worth remembering that there's nothing new under the sun.

After all, the British royal family is of German descent.

pero• 16 years ago

"Peter Lindert is an economist at the University of California at Davis and one of the leaders of the “deep history” school of economics, a movement devoted to thinking about the world economy over the long term—that is to say, in the context of the entire sweep of human civilization."

North America: "Deep history" school of economics

Rest of the World: "Marxist"

Stuart Hall must be impressed...

gwern• 16 years ago

Pattern match detected: 'Deep history' and 'Marxism' both discuss human economies over millennia. Conclusion: Deep history == Marxism.

Pattern match detected: 'George W. Bush' and 'a duck' both have 2 legs. Conclusion: George W. Bush == a duck.

wazoox2• 16 years ago

> Conclusion: George W. Bush == a duck.

You're probably onto something here.

patrickgzill2• 16 years ago

I question exactly how long-lived this new wealth is or will be.

Look at the Rothschilds - they have figured out a way to take the initial 1700s wealth and keep it (we can assume mostly) together in a relatively cohesive lump for some 300 years.

A less "notorious" example would be the duPonts, easily trillionaires if you were to add up the wealth accumulated amongst this wealthy family.

Against that, someone worth $100 million who gives 90% of it away when he/she passes doesn't seem all that significant.

Not sniping, just expressing a contrary POV to consider...

cturner• 16 years ago

   > keep it .. we can assume mostly.. in a relatively
   > cohesive lump for some 300 years.

I think I disagree but it might just be over choice of words. It's an interesting topic that I want to develop and I'll charge on.

On the topic of intergenerational wealth, it's not enough to say that you can keep a lump of wealth. During the 300 years you talk about, governments rose and fell, and currencies and sovereign debt with them. In order to stay above water, you have to float your position across multiple regimes and positions. Or keep it in a lump of gold. That didn't do that - they worked money hard.

Rothschilds took on huge positions in the Napoleonic wars that could easily have gone wrong. They then would have lost it all due to poor timing over the end of the waterloo campaign but leveraged up by taking an audacious position on sovereign bonds that paid off and made them even richer. My point is, they gambled the house at several points.

Part of what's striking about the Rothschilds specifically is that they kept a healthy mindset across several generations. This is a wildly interesting topic that has crossover with another article hacker news today link today to the atlantic, http://news.ycombinator.com/item?id=2072200

In that article you see lots of people who came from aspirational backgrounds. But how do you keep that? How do you raise a wealthy family in a way that passes on those values?

patrickgzill2• 16 years ago

I upvoted you because you have hit on the core question: how do you stay hungry after that first x million, and how do you pass it on to the next generation?

Some family members have achieved relative wealth and I see this with their children who attend private schools ... I see nephews and nieces likely to pursue professions, but do not see the same competitive drive being passed along.

narrator• 16 years ago

One thing that's disturbing these days is there is even a huge gap in wealth between someone in the top 1% and the top 0.1%.

brc4• 16 years ago

Why? Why is that disturbing? This is a genuine question.

It doesn't disturb me one bit. As long as each generation is relatively wealthier than the prior one, I don't care about the spread within that generation.

My grandfather died of pneumonia at age 56 due to a lack of oxygen and antibiotics at the hospital. They didn't have enough money to paint their house and instead used old tractor sump oil. My parents, when married, didn't have hot water or a toilet inside the house. They had never travelled more than 200 miles from their place of birth.

My kids have access to better health, leisure, education, food and housing than even I did, which is not that long ago.

This continual improvement in wealth amongst my own family is proof enough that the very rich aren't impinging on what really matters, which is improving living standards for the majority of people.

Paraphrasin PG in one of his essays - it doesn't disturb me that Mozart was 1 million times more musically talented than I am, or that Tiger Woods is 10 million times better at golf. Their ability and success doesn't impede on my life at all - if anything - it improves it. It's not unfair (in any real sense) that Federer can play tennis very well and I can't hit the ball to save myself. So why is it unfair that someone has talent at making money and can make a million times more money than I can? In a free society, (apart from a very tiny minority who steal or lie their way to it) the only way they can get (and stay) rich is by providing excess value to everyone else. That's true whether you are kicking a ball, trading stocks or building software.

Nobody has ever successfully convinced me why wealth disparity in a free society is a problem. If anything, I see it as a sign of a healthy society.

giardini• 16 years ago

"...apart from a very tiny minority who steal or lie their way to it..."

Do you mean they are a "tiny minority" because

- they are already members of a tiny minority (those who are extremely rich), or

- those "who steal or lie their way" are a small part of those who are extremely rich?

If the latter, then I believe you are wrong. That is, I believe that a very large percentage of those who are extremely rich partook or do partake of significant "stealing and lying" to get there or stay there.

The dictum "follow the money" is a good one for prosecutors. Doing so almost inevitably uncovers corruption and firms working at the ethical edge of society. We merely don't have (or are unwilling to hire) enough financlal police to track them all down. We settle for the occasional big expose', hoping it will instill fear in others. It does not.

So each decade we uncover or are surprised by new financial scams that wipe the economic slate clean and clean out our savings accounts. Then we start all over, like Sisyphus.

SkyMarshal3• 16 years ago

No time for a thorough answer, but a few clues as to why it's not always a great thing.

First, some data:

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

http://www.good.is/post/americans-are-horribly-misinformed-a...

In a nutshell: the top 20% of the populace controls 85% of the US's wealth.

1. Increasing wealth concentration = increasing concentration of political power => democracy undermined. US is excellent example - the populace can vote, but only for candidates preselected by funders in the top 20%; populace can advocate, but top 20% has much better access, influence (due to both campaign funding and 'revolving door' jobs when leaving office), and in some cases actually writes the legislation (bank bailout being a major example).

When that happens, you get capture of the government and regulators, financial excess & crisis, and symptoms of banana republic:

http://www.theatlantic.com/magazine/archive/2009/05/the-quie...

2. 'As long as each generation is relatively wealthier than the prior one, I don't care about the spread within that generation.'

That's held true for decades, but is not guaranteed to continue forever. Problem of induction: no amount of confirming observations can prove a theory true, while one single refuting observation can disprove it. Eg, even if all strata of every generation has always been relatively wealthier than the previous generation, that is no guarantee the same thing will continue indefinitely in the future.

Highly concentrated wealth also skews some economic statistics, masking the plight of the lower and middle class. The latter can even be in decline while the top 20% are making out like bandits by outsourcing chunks of our wealth-creating 'making things' industries to higher-profit-margin manufacturing centers, and that wouldn't show up on some stats based on averages.

The workers get laid off while the CEOs, boards, 'pay consultants', and shareholders pocket the increased profits. And when the top 20% controls 85% of the wealth, guess who those shareholders are. Bottom 80% is increasingly locked out of the wealth that can be generated from ownership, and forced to subsist as wage slaves.

There are arguments that is what is beginning to happen now.

3. 'This continual improvement in wealth amongst my own family is proof enough that the very rich aren't impinging on what really matters, which is improving living standards for the majority of people.'

Your standard for 'proof' is pretty low. That's a single data point anecdote. C'mon now.

4. Extremely high wealth concentration has historically been associated with revolutions and other unrest. The French Revolution comes to mind. I'll let the amateur historians here argue over causality, but it's really not a road we want to go down.

For anyone who believes in the adaptive, corrective power of free markets and democratic government, increasingly extreme wealth concentration should be a concern, since it can and does undermine exactly that.

PS - I'm not implying wealth redistribution is the solution, since that's just a poor kluge that addresses the symptoms rather than the underlying problem/s. But I do think the reasons for this accelerated wealth concentration need to be clearly understood, and in some cases neutralized - unpunished financial fraud that led to the crisis, CEO pay based on board & pay consultant connections, free trade with countries that allow effective slave labor, among others.

anaphoric• 16 years ago

Is wealth/poverty relative or absolute?

I think most people would be happier if they saw it in more absolute terms. I have witnessed wealthy people made to feel like paupers when a yet more wealthy person puts on a display that they can't afford. The phenomena is actually quite comical.

Still it's fairly clear that wealth will always be a measuring stick that people will use to display their relative worth. It's like plumage. A lot of resources go into growing those fancy tail feathers. In itself I don't see anything wrong with that. It's quite natural.

However it's important for societal cohesion that the absolute wealth of the average does not fall and that they can maintain some semblance of dignity.

danenania• 16 years ago

Why is Greenspan so often referred to as libertarian or an ultra-capitalist? Central banking is the polar opposite of both these things.

When Greenspan says something like "capitalism has failed", it isn't some sort of grand ideological reversal, it's an unwitting joke.

borism6• 16 years ago

not that those references are true, but the guy was part of the friggin Ayn Rand Collective.

http://en.wikipedia.org/wiki/Libertarianism_and_Objectivism

stuaxo• 16 years ago

If I wasn't skint I would right now buy the domain

fucktheglobalelite.com

Not sure what it would have apart from a link to the article and "seriously, fuck those guys"

tomjen37• 16 years ago

Why do you have a problem with them? They made money and now they hack word poverty. What's wrong with that?

The Rise of the New Global Elite

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