Last months issue of the Atlantic had a fascinating article on the global elites, here are some snippets I found interesting:
From a global perspective, the impact of these developments has been overwhelmingly positive, particularly in the poorer parts of the world. Take India and China, for example: between 1820 and 1950, nearly a century and a half, per capita income in those two countries was basically flat. Between 1950 and 1973, it increased by 68 percent. Then, between 1973 and 2002, it grew by 245 percent, and continues to grow strongly despite the global financial crisis. …
One reason for the spikes is that the global market and its associated technologies have enabled the creation of a class of international business megastars. As companies become bigger, the global environment more competitive, and the rate of disruptive technological innovation ever faster, the value to shareholders of attracting the best possible CEO increases correspondingly. Executive pay has skyrocketed for many reasons—including the prevalence of overly cozy boards and changing cultural norms about pay—but increasing scale, competition, and innovation have all played major roles.
But while their excesses seem familiar, even archaic, today’s plutocrats represent a new phenomenon. The wealthy of F. Scott Fitzgerald’s era were shaped, he wrote, by the fact that they had been “born rich.” They knew what it was to “possess and enjoy early.”
That’s not the case for much of today’s super-elite. “Fat cats who owe it to their grandfathers are not getting all of the gains,” Peter Lindert told me. “A lot of it is going to innovators this time around. There is more meritocracy in Bill Gates being at the top than the Duke of Bedford.” Even Emmanuel Saez, who is deeply worried about the social and political consequences of rising income inequality, concurs that a defining quality of the current crop of plutocrats is that they are the “working rich.” He has found that in 1916, the richest 1 percent of Americans received only one-fifth of their income from paid work; in 2004, that figure had risen threefold, to 60 percent.
Peter Peterson, for example, is the son of a Greek immigrant who arrived in America at age 17 and worked his way up to owning a diner in Nebraska; his Blackstone co-founder, Stephen Schwarzman, is the son of a Philadelphia retailer. And they are hardly the exceptions. Of the top 10 figures on the 2010 Forbes list of the wealthiest Americans, four are self-made, two (Charles and David Koch) expanded a medium-size family oil business into a billion-dollar industrial conglomerate, and the remaining four are all heirs of the self-made billionaire Sam Walton. Similarly, of the top 10 foreign billionaires, six are self-made, and the remaining four are vigorously growing their patrimony, rather than merely living off it. It’s true that few of today’s plutocrats were born into the sort of abject poverty that can close off opportunity altogether— a strong early education is pretty much a precondition—but the bulk of their wealth is generally the fruit of hustle and intelligence (with, presumably, some luck thrown in). They are not aristocrats, by and large, but rather economic meritocrats, preoccupied not merely with consuming wealth but with creating it.
One of the parts that especially struck me was this:
The good news—and the bad news—for America is that the nation’s own super-elite is rapidly adjusting to this more global perspective. The U.S.-based CEO of one of the world’s largest hedge funds 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 didn’t 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 means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.
I’ve made this argument several times to a friend at work. He is someone who always pouts and complains every time he hears about another branch of our company operating overseas. I try to explain to him the benefits of free-trade, how it’s not a zero sum economy and more jobs overseas does not mean less jobs here. But even if what he is saying is true, I argue, you have to look at this from a global perspective. More jobs in India, China, and other developing countries has to be a good thing, even if it means less jobs in the richest country in the world. I mean, these are the worlds poorest people and we are the worlds richest people. We will, in the end, be okay.
This point should be especially persuasive to him, as he is a guy who has a bachelors degree from UCSD, graduating top of his class, a perfect score on the GRE, and a masters from Stanford University. All in the most sought after field, electrical engineering. But still, my arguments largely fall on deaf ears.