Chrystia Freeland’s Plutocrats: The Rise of the New Global Super-rich and the Fall of Everyone Else (Penguin, 2012) was published to high acclaim and controversy in the fall. At the live Public Books panel in December, Freeland joined three distinguished scholars of economic inequality to discuss the causes and consequences of the new global super-rich and their ascent.
What it means to be rich has changed dramatically in the last few decades, Freeland argues. Although there has always been inequality, the global super-rich are now pulling away—in affluence and power—not only from the majority of the world’s population but even from the wealthiest 1 percent. The merely wealthy are left behind by the rapidly expanding fortunes of the plutocrats. How did this happen? And why should we be concerned?
We are pleased to publish the explanations delivered at the live event by Robert Frank, Professor of Management and Economics at Cornell University, and Shamus Khan, Assistant Professor of Sociology at Columbia University—along with an excerpt from Chapter One of Plutocrats:
— Chrystia Freeland: Excerpt from Chapter One of Plutocrats
— Robert Frank: Expenditure Cascades
— Shamus Khan: The Counter-cyclical Character of the Elite
“1,000,000 people overseas can do your job. What makes you so special?”
— A 2009 billboard above Highway 101, the road that connects Silicon Valley with San Francisco
The Second Gilded Age
If you are looking for the date when America’s plutocracy had its coming out party, you could do worse than choose June 21, 2007. On that day, the private equity behemoth Blackstone priced the largest American IPO since 2002, raising $4 billion and creating a publicly held company worth $31 billion at the time of the offering. Steve Schwarzman, one of the firm’s two co-founders, came away with a personal stake worth almost $8 billion at that time, along with $677 million in cash; the other, Pete Peterson, cashed a check for $1.88 billion and retired.
In the sort of coincidence that delights historians, conspiracy theorists, and book publishers, June 21 also happened to be the day when Peterson threw a party—at Manhattan’s Four Seasons restaurant, of course—to launch his daughter Holly’s debut novel, The Manny, which lightly satirized the lives and loves of financiers and their wives on the Upper East Side. The book fits neatly into the genre of modern “mommy lit”—USA Today advised its readers to take it to the beach—but the author told me that she was inspired to write it in part by her belief that “people have no clue about how much money there is in this town.”
“A lot of people under forty years old are making, like, $20 million or $30 million a year in these hedge funds, and they don’t know what to do with it.”
Holly is slender, with the Mediterranean looks she inherited from her Greek grandparents—strong features, dark eyes and eyebrows, thick brown hair. Over a series of conversations Ms. Peterson and I had after that book party, she explained to me how the super-affluence of recent years has changed the meaning of wealth.
“There’s so much money on the Upper East Side right now,” she said. “A lot of people under forty years old are making, like, $20 million or $30 million a year in these hedge funds, and they don’t know what to do with it.” As an example, she described a conversation at a dinner party: “They started saying, if you’re going to buy all this stuff, life starts getting really expensive.
If you’re going to do the NetJets thing”—this is a service offering “fractional aircraft ownership” for those who do not wish to buy outright—“and if you’re going to have four houses, and you’re going to run the four houses, it’s like you start spending some money.”
The clincher, Peterson said, came from one of her dinner companions.
“She turns to me and she goes, ‘You know, the thing about twenty is’ ”—by this she means $20 million per year—“ ‘twenty is only ten [after taxes].’ And everyone at the table is nodding.”
Peterson is no wide-eyed provincial naïf, nor can she be accused of succumbing to the politics of envy. But even from her gilded perch, it is obvious that something striking is happening at the apex of the economic pyramid.
“If you look at the original movie Wall Street, it was a phenomenon where there were men in their thirties and forties making two and three million a year, and that was disgusting. But then you had the Internet age, and then globalization, and money got truly crazy,” she told me.
“You had people in their thirties, through hedge funds and Goldman Sachs partner jobs, people who were making twenty, thirty, forty million a year. And there were a lot of them doing it. They started hanging out with each other. They became a pack. They started roaming the globe together as global high rollers and the differences between them and the rest of the world became exponential. It was no longer just Gordon Gekko. It developed into a totally different stratosphere.”
Ms. Peterson’s dinner party observations are borne out by the data. In America, the gap between the top 1 percent and everyone else has indeed developed into “a totally different stratosphere.” In the 1970s, the top 1 percent of earners captured about 10 percent of the national income. Thirty-five years later, their share had risen to nearly a third of the national income, as high as it had been during the Gilded Age, the previous historical peak.
Robert Reich, the labor secretary under Bill Clinton, has illustrated the disparity with a vivid example: In 2005, Bill Gates was worth $46.5 billion and Warren Buffett $44 billion. That year, the combined wealth of the 120 million people who made up the bottom 40 percent of the U.S. population was around $95 billion—barely more than the sum of the fortunes of these two men.
These are American billionaires, and this is U.S. data. But an important characteristic of today’s rising plutocracy is that, as Ms. Peterson put it, today’s super-rich are “global high rollers.” A 2011 OECD report showed that, over the past three decades, in Sweden, Finland, Germany, Israel, and New Zealand—all countries that have chosen a version of capitalism less red in tooth and claw than the American model—inequality has grown as fast as or faster than in the United States. France, proud, as usual, of its exceptionalism, seemed to be the one major Western outlier, but recent studies have shown that over the past decade it, too, has fallen into line.
Meanwhile, the vast majority of American workers, who may be superbly skilled at their jobs and work at them doggedly, have not only missed these windfalls—many have found their professions, companies, and life savings destroyed by the same forces that have enriched and empowered the plutocrats.
The 1 percent is outpacing everyone else in the emerging economies as well. Income inequality in communist China is now higher than it is in the United States, and it has also surged in India and Russia. The gap hasn’t grown in the fourth BRIC, Brazil, but that is probably because income inequality was so high there in the first place. Even today, Brazil is the most unequal of the major emerging economies. To get a sense of the money currently sloshing around what we used to call the developing world, consider a conversation I recently had with Naguib Sawiris, an Egyptian telecom billionaire whose empire has expanded from his native country to Italy and Canada. Sawiris, who supported the rebels on Tahrir Square, was sharing with me (and a dinner audience at Toronto’s Four Seasons hotel) his mystification at the rapacious ways of autocrats:
“I’ve never understood in my life why all these dictators, when they stole, why didn’t they just steal a billion and spend the rest on the people.”
What was interesting to me was his choice of $1 billion as the appropriate cap on dictatorial looting. In his world, I wondered, was $1 billion the size of fortune to aim for?
“Yes, to cover the fringe benefits, the plane, the boat, it takes a billion,” Sawiris told me. “I mean, that’s my number for the minimum I want to go down—if I go down.”
Meanwhile, the vast majority of American workers, who may be superbly skilled at their jobs and work at them doggedly, have not only missed these windfalls—many have found their professions, companies, and life savings destroyed by the same forces that have enriched and empowered the plutocrats.
Both globalization and technology have led to the rapid obsolescence of many jobs in the West; they’ve put Western workers in direct competition with low-paid workers in poorer countries; and they’ve generally had a punishing impact on those without the intellect, education, luck, or chutzpah to profit from them: median wages have stagnated, as machines and developing world workers have pushed down the value of middle-class labor in the West.
Through my work as a business journalist, I’ve spent more than two decades shadowing the new global 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 put it, different from you and me.
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.
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, as a result, have an ambivalent attitude toward those of us who haven’t succeeded quite so spectacularly. They tend to believe in the institutions that permit social mobility, but are less enthusiastic about the economic redistribution—i.e., taxes—it takes to pay for those institutions. Perhaps most strikingly, 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.
The emergence of this new virtual nation of mammon is so striking that an elite team of strategists at Citigroup has advised the bank’s clients to design their portfolios around the rising power of the global super-rich. In a 2005 memo they observed that “the World is dividing into two blocs—the Plutonomy and the rest”: “In a plutonomy there is no such animal as ‘the U.S. consumer’ or ‘the UK consumer’ or indeed ‘the Russian consumer.’
There are rich consumers, few in number but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the nonrich, the multitudinous many, but only accounting for surprisingly small bites of the national pie.”
Jump to remarks:
Robert Frank, Shamus Khan
Plutocrats richly merits all the attention it’s been getting because it gets the big story about inequality exactly right. Popular press accounts focus on the fact that the top 20 percent have seen their incomes grow rapidly relative to the rest of the population. That’s true, but a much bigger story lies within the top 1 percent. The real story is the explosive growth in income and wealth among the top one-tenth—and even more so among the top one-hundredth—of 1 percent.
Few people could have written this book. Chrystia Freeland has been going to the Aspen Ideas Festival, the Davos World Economic Forum, and other leading playgrounds and intellectual gatherings of the top one-tenth of one percent for many years now as a journalist. She knows these people—as personal friends, in many cases.
She is also one of only a handful of journalists with the intellectual horsepower to digest the economics literature about the processes that have been generating the income and expenditure patterns we’ve seen unfolding over the past several decades. She has reported on the members of my profession accurately, and has brought their arguments to life, even for people with no training in economics.
Most dentists make little more, in real terms, than thirty years ago, but a handful of the leading cosmetic dentists in each city have become multimillionaires.
As far as available data allow us to see, incomes for most Americans within any group have been stagnant, except for those of a small slice at the very top. This fractal pattern holds for real estate agents, college graduates, English majors, lawyers, engineers, and journalists. What a strange thing! Most dentists make little more, in real terms, than thirty years ago, but a handful of the leading cosmetic dentists in each city have become multimillionaires. That’s the striking change that has reshaped the economy.
Are winner-take-all markets—like those inhabited by plutocrats—widespread, and are they important for public policy? Cass Sunstein (the chief overseer of federal regulatory efforts during President Obama’s first term) and I once debated these questions with Sherwin Rosen and Kevin Murphy at the University of Chicago. Winner-take-all markets concentrate the rewards from a broad field in the hands of a very few. In that forum, Sherwin said that winner-take-all markets are an isolated phenomenon of little policy interest. He described the phenomenon as his own idea, and a poor one to begin with. (A transcript of the session is located in the “Related Items” at the bottom of this article.) Sunstein and I countered by defending the thesis that Philip Cook and I advanced in our 1995 book, The Winner-Take-All Society. We argued that the winner-take-all phenomenon has been spreading and intensifying, and that it is very much a subject of legitimate policy concern. Our conclusion, which Chrystia has embraced, predicts continuing growth in income and wealth inequality.
There’s of course an upside to the winner-take-all phenomenon. To an unprecedented degree, it enables us to buy from the best producers. If your child had a serious illness, you’d want to consult the world’s reigning authority on that illness rather than your local specialist. The former option is practical now because your child’s medical records can be sent across time zones with a single mouse click. That the world’s most able people have been able to extend their reach so broadly constitutes an enormous benefit.
On balance, however, Chrystia is right to view winner-take-all markets as worrisome. If inequality continues to grow, it will eventually provoke violent revolution, as it has in many other countries. As Richard Nixon’s chief economist Herb Stein once said, “If something cannot go on forever, it will stop.”
Notwithstanding last year’s Occupy Wall Street movement, a second American revolution hardly seems imminent. An attractive feature of American culture has always been that the rich provoke so little resentment. Partly that’s because people believe—in most cases, incorrectly—that they, too, will be rich someday, or that their children will be. That’s less likely now than ever before—in part because, as Chrystia explains, plutocrats have increasingly monopolized the pathways to success on behalf of their children.
Among the seniors from Princeton University who had found jobs in 2006, 46 percent were bound for the financial services industry. Many of them once would have chosen careers in engineering or medicine or academia.
But even apart from the threat of violent unrest, growth in inequality exacts a price. One problem, which Chrystia mentions briefly, is persistent overcrowding in superstar markets. People see the super-rich and ask, “How can I join them?” An important qualification for landing even an interview for a coveted job at McKinsey or Covington & Burling is to have graduated from one of a small handful of elite universities. And so it’s become vastly more competitive to get into those universities, whose graduates increasingly aspire to lucrative careers on Wall Street. Among the seniors from Princeton University who had found jobs in 2006, 46 percent were bound for the financial services industry. Many of them once would have chosen careers in engineering or medicine or academia.
If, as many economists assume, pay is a good measure of what someone contributes to society, what’s the problem with that? Pay is in fact often a poor measure of social value added, especially in the financial services industry. That industry spends an enormous amount of money on “positional arms races,” my term for mutually offsetting jockeying for position by economic rivals. Financial firms now spend tens of millions of dollars to develop faster computer trading systems, and even more on PhDs in physics and math to develop models that produce speedier forecasts of an asset’s price change. Those who get there first often make billions, while those just seconds behind them come up empty. The corresponding social returns on such investments are negligible. As in the familiar stadium metaphor, everyone stands to get a better view, yet no one sees better than if everyone had remained comfortably seated.
Chrystia also displays a modern economist’s sensibility about the outsized role that luck often plays in labor market outcomes. Looking back on their achievements, most of her plutocrats view their successes as having been inevitable. Anyone who was as smart as they were and who worked as hard as they did would of course become a billionaire! Yet most career trajectories are highly chaotic. If any of a host of seemingly trivial random events had happened differently, the entire trajectory could easily have been transformed completely.
The story of Bill Gates is a case in point. He was smart, hardworking, and willing to take risk, all of which were necessary for his success. But these characteristics were not sufficient. And to Gates’s credit, he’s been humble enough to recognize how lucky he was. He knows that if IBM hadn’t carelessly granted him the right to sell the DOS operating system on a royalty basis, nobody ever would have heard of Microsoft.
Chrystia is also on target when she pokes fun at the plutocrats who blame consumers for the financial crisis. If only the consumers who wanted houses with vaulted ceilings and granite countertops had realized that they couldn’t afford those luxuries! But that portrayal ignores the forces that drove the housing bubble.
When I bought my first house, long ago, I had to put 25 percent down. But as income inequality grew, the wealthy had more and more money to invest, which led many to lobby for banking industry deregulation. During the housing bubble, banks were offering home loans with nothing down and low teaser interest rates. Critics say that if you can’t afford a house, you shouldn’t buy it. But that admonition ignores the pressures that consumers were experiencing from what I call “expenditure cascades.”
Because the rich have a lot more money than they used to, they’ve been doing what everybody in that situation does—buying bigger houses, more expensive automobiles, more jewelry, and so on. Middle-income people, gazing admiringly at the mansions, don’t seem to mind. But those just below the top, who travel in the same social circles, now need a bigger house because it’s become the custom to hold their daughters’ wedding receptions at home. So they build bigger, which shifts the frame of reference that shapes demands for others just below them, and so on. The median new house built in 2007 was around 2,300 square feet, more than 50 percent larger than its counterpart from 1970.
Why did it get so much bigger? Not because the median earner had higher real income: the median earner hourly wage actually fell in real terms. Median family income rose slightly, but only because there were more two-earner households in 2007. Here’s the problem: because the better schools tend to be located in more expensive neighborhoods, to send your kids to even the median quality school for your city, you must buy a house in a neighborhood in which house prices are near the middle of the city’s housing price distribution.
Suppose the median family declines a bank’s offer of a mortgage with nothing down. If others like them seize that opportunity, they’ll outbid the family for a house in the 50th percentile school district. The catch is that a good school, like so much else, is a relative concept. When all families borrow and spend more, they succeed only in bidding up the prices of houses in better school districts. Half of all kids still end up in bottom-half schools. In short, the explosive growth in incomes has spawned expenditure cascades that have made basic goals more expensive for middle-income families to achieve.
Complaining that corporate compensation committees have lost their moral compass won’t solve this problem. Chrystia is surely right that high CEO pay is sometimes unjustified by high performance. But the far more important cause of explosive CEO pay growth has been that good executive decisions have become vastly more important.
Think about Apple CEO Tim Cook. The company, which earned a net profit of $41.7 billion last year, has two runaway hit products: iPhones and iPads. Only small shares of the potential markets for them have been served so far, and with each product update, Apple’s biggest challenge has been to meet surging demand. Tim Cook is the world’s acknowledged supply-chain genius. Even if he were only 1 percent better than Apple’s runner-up candidate, the company’s earnings would have been $400 million higher because of him. If he were 3 percent better, it would have earned $1.2 billion more.
Higher top marginal tax rates would reduce inequality directly, and would indirectly curb the expenditure cascades that have made life more difficult for the middle class.
Cook was compensated with $378 million in 2011, far more than he’ll ever spend. But capping CEO pay or scolding corporate pay committees won’t solve the problems caused by inequality. Tax policy offers our only real leverage for addressing those problems. Higher top marginal tax rates would reduce inequality directly, and would indirectly curb the expenditure cascades that have made life more difficult for the middle class.
Chrystia’s plutocrats inevitably object that higher taxes will destroy jobs. But that objection doesn’t make economic sense. The logic that drives hiring decisions is simple. If workers are expected to bring in more than you have to pay them, you should hire them, whether you’re rich or poor. Otherwise, hiring makes no economic sense, even if you’re a billionaire. Income tax rates are simply irrelevant for hiring decisions.
Higher taxes also won’t make it harder for the wealthy to buy what they want. The limited number of penthouse apartments with sweeping views of Central Park go to the highest bidders. If taxes rise, the wealthy can bid less than before, but since it’s relative bidding that matters, the apartments end up in the same hands as before.
I really enjoyed Plutocrats, although at first I thought Chrystia’s gentle tone let many of her subjects off the hook too easily. On reflection, however, I applaud her approach. I hope it leads many of her subjects to consider the possibility that rising inequality causes serious problems that we really do need to address.
Jump to remarks:
Robert Frank, Shamus Khan
Imagine spending late January in the Swiss Alps, wandering the streets of Davos with the world’s political and business leaders. How fascinating it would be at the World Economic Forum, seeing The Davos Man (formerly a Master of the Universe) in his natural environment as he makes sense of his world. But you’re not invited. And chances are that you never will be.
That’s all right. Because you can still meet this man if you pick up Chrystia Freeland’s book Plutocrats. Through it, you’ll learn most of what you need to know. Hers is a rare book—one that traverses a broad range of academic literature ably and accurately, all the while providing keen insights into the world of what Freeland calls “Plutocrats,” the men who increasingly dominate our world.
I know of no one who has enjoyed this level of access to the superelite, and presented their voices so ably. The book is worth reading for this ethnographic content alone. But my praise runs deeper because Freeland doesn’t fall into the very common mistake of using the individual voices and experiences of plutocrats to explain why they are plutocrats.
This challenge is most acute for journalists who frequently ignore structural factors. The typical approach would insist, “If I talk to a bunch of plutocrats, observe them, and identify their attitudes and properties, then I could use these observations to explain how it is that plutocrats become plutocrats.” To be fair, such an approach is also common among academics, where scholars select a dependent variable, identify the sets of characteristics within it, and then argue that those characteristics are explanatory for the outcome itself. What’s nice about Freeland’s work is that instead she provides a portrait of a shifting structure of a global economy and an explanation of what this means for how plutocrats make sense of themselves and the world around them.
What I draw from Freeland’s analysis is the importance of the cultural sensibilities of the plutocrat. Though she rarely speaks of “elite culture,” her work helps us see something about the cultural dynamics of elites that are particularly important.
In order to understand these dynamics we need to consider what I’d call the counter-cyclical quality of elites in America over the last seventy years (and perhaps even longer). When we talk about the difference between the 1 percent and the 99 percent, what we’re saying is that the experience of the 1 percent is quite different than the experience of the 99 percent. And yet while this is often our implicit presumption, we are rarely explicit about its consequences.
The wage gains that we observe within the top .01 percent are dramatic, some might even say, unseemly.
We might ask ourselves, what is the experience of the world from 1945 until the 1970s for two groups: average Americans and very, very wealthy Americans? If you’re an average American in the immediate postwar period, you would experience some of the lowest levels of inequality our nation has ever seen. And as economic inequality and mobility are often intertwined, you’d also experience some of the highest levels of mobility. There are two kinds of mobility: inter- and intra-generational (i.e., your starting versus your ending wages versus how predictive your parents’ position is for your own.) In the postwar period, you’d enjoy substantial mobility over your lifetime and be less hindered by your parents’ wages than your parents were by theirs. Hard fought battles over racial and gender oppression also meant that the relative position of nonwhites and women advanced. We sometimes read our American experience through this moment: one where rights were fought over and won, where opportunity was relatively available, and where inequalities were comparatively low.
But if we were to look within, say, the top .01 percent, we would find something very different. Elites experienced less of both kinds of mobility than in previous eras. That is, their wages were comparatively stagnant. So, too, were their members—movement in (and out of) the elite was comparatively rare.
This is what I mean by the counter-cyclical nature of elites. The average American lived in a world of comparatively low levels of inequality and high levels of mobility; the very, very wealthy lived in a world of relative wage stagnation and comparatively low levels of turnover. And these different experiences produce different sensibilities and understandings of the world.
But perhaps the post-war era was exceptional? Well, it was, and it wasn’t.
What happens if we look in the period immediately following it, which is to say, our last three decades? The average American has experienced comparative wage stagnation and a decrease in intergenerational mobility. That is, how much money you make is increasingly explained by how much your parents made.
However, if we were to look in the very, very rich, we would observe something quite different. The likelihood of being in the top .01 percent is not so strongly related to having parents that were within that group as it was in the 1960s. We have more “new rich” today than we did in the immediate past. And the wage gains that we observe within the top .01 percent are dramatic, some might even say, unseemly.
Let’s say I’m fortunate enough to be in the top 0.01 percent. If I look at someone slightly beneath me economically—and as Freeland’s ethnographic work suggests, I might actually think of them as “beneath me”—I find that my wages are growing much faster than theirs are. And if I then look above me, I see that those who make more money than I do are outpacing my wage gains at an even greater rate than I am outpacing the person beneath me. In short, if I’m very, very rich, my experience is one of more mobility and more wage growth than in the past.
But if I’m in the middle of the American wage distribution, I don’t see that at all. What I see is a relative stagnation, all around. And so perhaps the postwar period was an exception in that the majority of Americans enjoyed low levels of inequality and high levels of mobility, and unexceptional in that the elite experience and the experience of the average American were markedly different.
We must not forget that we Americans are comparatively segregated in terms of where we live, not just by race, but also economically. Freeland points out that the plutocrat thinks of neighborhoods not in terms of physical proximity or national bounds; instead, the Davos Man thinks of neighborhoods globally—constituted by where other plutocrats live. The Upper East Side may be closer to Tokyo’s Ginza district than it is Spanish Harlem.
While we may be contemptuous of the elite for not understanding the American experience, we should recognize why this is happening. In part it is because the elite do not regularly encounter the average American (and vice versa), but it’s also because the elite experience has been qualitatively different from that of the rest.
The elite see a lot of wage growth all around them. They are increasingly racially integrated. This is comparative, of course; still, the experience of elite integration is palpable and the differences marked. (Consider that my elite educational institution is now “majority minority”—that’s not just window dressing). And elites see that the people around them are not just the children of other rich people; more and more are self-made.
The experience of thinking that you’re rich because you receive a massive paycheck for your work rather than for the fact that you own something means that you’re likely to think of yourself as not different from everyone else.
This gives the elite an experiential justification for the belief that the world is increasingly meritocratic. And it also allows for a move away from explanations of social outcomes based upon ascribed characteristics; it’s individual-level talent that matters. And so instead of thinking of the importance of social categories—categories like class, race, or gender—one can begin to make arguments that the legacy of these categories has been a legacy of oppression and holding people back. When such things “mattered” they produced social problems.
One of the most fascinating things we see if we compare elites from the tail end of the Gilded Age to those of today is that in the Gilded Age, the richer you were, the more likely you were to rely upon capital for your income. You owned a factory and thereby engaged in a fundamentally different enterprise than most Americans. But today what rich people do for their wealth primarily is to earn it. Now we shouldn’t push this argument too far; the elite still own a vastly disproportionate amount and wealth inequality is even greater than wage inequality. But psychically—or at least culturally—the experience of thinking that you’re rich because you receive a massive paycheck for your work rather than for the fact that you own something means that you’re likely to think of yourself as not different from everyone else. You’re actually just like them. You get up in the morning, you go to work, and you earn a living. And your paycheck is way bigger because while everyone is doing the same thing (working); you’re just more skilled than everyone else.
Don’t believe elites think this? Read Plutocrats. You’ll see them talk all the time in Friedman-esque language of the “flat world of opportunity” and how talented they are to take advantage of it and make value within it (which we all enjoy—almost by their grace).
This helps elites believe something that’s not true—that they are the engines of their own achievement and that their individual characteristics explain the outcomes that they’re experiencing.
One way that elites are like all other people is that they over-generalize from their own experience. Their wages have grown so there is wage growth. They see more mobility around them so the American Dream is alive and well (provided you’re willing to work hard enough). Harvard is terribly diverse so race doesn’t matter anymore. And each of these stories helps justify an individualistic approach to the world. And because of their social power, elites have been successful in imposing their particularistic cultural logic much more broadly, arguing that it helps us better understand how markets and states should work.
Thus the plutocrat—hard working, fantastically wealthy, a man of the world yet isolated from it—sees himself as the maker of his destiny and the rest as takers: unwilling, unable, or too lazy to do much other than demand shares of the plutocrats’ spoils. Freeland gives us cringe-worthy quotes from these men (and they are almost all men), dismissing “the rest,” arguing that minimum wage is too much for them and that perhaps given how productive and efficient the plutocrat is, unemployment will simply have to remain near 10 percent in our new flat world. It would be funnier if it weren’t so tragic. Because the plutocrat lives off extraction, growing their wages as those of the rest remain dormant. What the plutocrats don’t get is the great irony that Romney was right: there are makers and takers in the world. And the plutocrats are the takers.
Jump to remarks:
Robert Frank, Shamus Khan 
