Indeed, although the U.S. economy as a whole is still rather frail, the healing we have seen so far has been what you might call a 1-per-cent recovery. According to economists Emmanuel Saez and Thomas Piketty, in the 2009-2010 return to growth, 93 per cent of the increase in incomes went to the top 1 per cent. The top 0.01 per cent enjoyed 37 per cent of the total rebound in income, with an increase of $4.2-million per household.
But material self-interest is not the only force stoking he plutocrats’ ire with Mr. Obama and his supporters. Part of what is going on is the contradictory consequence of meritocracy.
Mr. Saez describes today’s 1 per cent as “the working rich” – a contrast to the inherited wealth of the plutocrats of the Gilded Age. F. Scott Fitzgerald memorably pointed out in that era that the very rich “are different from you and me.” That is still the case. But the second, less cited, part of his observation was that root of this difference was that they are “born rich” and therefore “they possess and enjoy early, and it does something to them.”
That’s not true of today’s superrich, many of whom started out in the middle class. These are people whose identity is built around the conviction that they did it themselves – even if an affluent upbringing gave them a head start.
Not surprisingly, the Russian oligarchs express this sentiment most vividly. In 1998, when he was the richest man in Russia, oil baron Mikhail Khodorkovsky told me, “If a man is not an oligarch, something is not right with him. Everyone had the same starting conditions, everyone could have done it.” Likewise, American Tony Hsieh, co-founder of the Zappos empire, insists: “I could start off anywhere in America with $100 and by the end of the year I’d be a millionaire.”
What most defines today’s plutocracy, though, is how globalization and technology have changed the relationship between every nation’s rich and its middle class.
For most of the 20th century, those at the top needed everyone else. This is the Henry Ford paradigm: His workers needed to earn enough to buy his cars. Today, that connection has become more fragile: capitalists can – indeed, they must – find labour and markets wherever in the world they are cheapest and most profitable.
The results are not always negative. The U.S.-based CEO of one of the world’s largest fund managers told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing out of the American middle class did not really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile one American drops out of the middle class, that’s not such a bad trade.”
I heard a similar sentiment from the Taiwanese-born, thirtysomething chief financial officer of a U.S. technology company. A gentle, unpretentious man who went from public school to Harvard, he is nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheque than the rest of the world,” he said. “So if you’re going to demand 10 times the paycheque, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”
If some of some business elites speak bluntly on this subject, though, others are profoundly uncomfortable. They came of age in a culture that, at the level of the lizard brain, bought into the idea of trickle-down economics. The success of those at the top, Americans believed, translated into greater prosperity for everyone else – specifically, prosperity for fellow Americans. Challenging that connection, as the Democrats have done during this election campaign, most notably with their attacks on the job-creating credentials of Bain Capital, is not just an economic threat, it is a moral one.
“[The 1 per cent] need to believe that the carried-interest tax exemption is moral, that it is good for the country,” says Nick Hanauer, an early investor in Amazon, technology entrepreneur and himself a plutocrat. “That is what makes them moral and not villainous.
“I feel their pain, because I remember how fun it was to believe that stuff. If this is true, then I don’t have to feel bad about driving past the guy standing next to the freeway exit with a sign that says, ‘Please help me, I have no food.’ ”
This essay has been adapted from Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.