The Ivy League, Wall Street and now this.
Chrystia Freeland's Atlantic piece on the rise of the new global elite is getting some notice, and for good reason. Here's the central premise:
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 many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly. Perhaps most noteworthy, 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 piece then chronicles the nature of this apparently new elite, including the world of conferences, resorts and urban cores than constitutes its nation. In this world, to quote one executive, "Beijing has a lot in common with New York, London, or Mumbai. You see the same people, you eat in the same restaurants, you stay in the same hotels.”
Freeland's conclusion about the stateless nature of the elite is extremely perceptive, but the way she gets there is flawed, and what she leaves out points to a situation even more dangerous than this article suggests.
The piece suffers from the upper-class blinders that often plague the Atlantic's otherwise exemplary work (and overall this is an excellent piece). Specifically, the global elite is not really a meritocracy, and in many ways the situation is less meritocratic than before.
Last year's list of America's 50 richest people reveals that the vast majority were born into wealthy or upper-class families. There are a smattering of upper-middle tech ascendees, a few middle-class risers and exactly one person from an impoverished background.
It's not Freeland's only oversight. The Koch oil business that she terms "medium-sized" was enough to net each brother $300 million on their father's passing. By any measure, that's not very medium at all.
The fact that many of this elite are educated hardworkers doesn't change the fact that the easiest way to become wealthy is still to pop out of the right womb. Of course, many have increased what they were born with, and feel they deserve every bit. Who doesn't?
Today's elite is different from yesteryear's in two major ways, neither having specifically to do with meritocracy.
First, tech elites joined the more traditional business grandees. Fifty years ago, for example, the typical "ceiling" for tech professionals was an upper-middle class job in government or industry. As Silicon Valley took its place alongside traditional fast-track hubs like Wall Street, that radically changed: upper-middle class incomes are now the starting point, and the sky's the limit.
The second major development connected elites from outside the traditional Western sphere, especially as China and India grew dramatically. Combined with a decline in racism, the well-off from around the world joined the global jet-set.
Yet Freeland's point about the increasing isolation of this elite from the economic travails of their nominal homelands reveals that the situation (in the West, at least) is actually less meritocratic.
The effect of background wealth are exponential. Climbing out of poverty takes about three generations, while hardworking people from an upper-middle background have a reasonable chance of climbing several rungs by the end of their lives.
Post-war, stable benefits and better pay provided the opportunity for middle — and even working class — families to secure the amount of built-up capital for their kids to have a shot at ascension. But real wages outside the elite have declined for decades, and rising educational costs cut off a traditional way up. Freeland diagnoses this last ill, but fails to see that it actually makes the new wealthy less meritocratic overall.
At the same time the doors have opened for tech and developing world elites, vast parts of the rest of the populace have seen their chances dwindle.
The same isolation saps the value of the more vigorous additions to the elite as well. The new elite assumes that their constantly rising wages are a product of their talent and economic demand.
Compensation derives from culture as well: create isolated enclaves of very rich people with similar skills, and their perception of the importance of their work — and what they should get paid — steadily rises. This process is already far along in Wall Street. Given a few decades, it's not hard to see Silicon Valley or Shanghai turning inward, with ensuing generations riding family connections to cushy jobs.
In the end, the hotbeds of innovation might end up little more than a global Versailles; a parasite.
However, Freeland points to another metaphorical wonderland — Galt's Gulch — as what the wealthy see:
This plutocratic fantasy is, of course, just that: no matter how smart and innovative and industrious the super-elite may be, they can’t exist without the wider community. Even setting aside the financial bailouts recently supplied by the governments of the world, the rich need the rest of us as workers, clients, and consumers. Yet, as a metaphor, Galt’s Gulch has an ominous ring at a time when the business elite view themselves increasingly as a global community, distinguished by their unique talents and above such parochial concerns as national identity, or devoting “their” taxes to paying down “our” budget deficit. They may not be isolating themselves geographically, as Rand fantasized. But they appear to be isolating themselves ideologically, which in the end may be of greater consequence.
This can even extend to the newer elite's more laudable initiatives. From a more cynical interpretation (and not one I entirely buy), Government 2.0 is just an attempt by tech up-and-comers to gain political clout to match their economic might. Once they've joined the more established legal and business elites at the table, concerns about wider empowerment will largely disappear. Due to increasing isolation, they believe themselves to be "the people."
Andrew Carnegie's public libraries benefited millions, of all classes, while TED mostly remains a way for the already well-connected to talk to each other, however thought-provoking the ideas. Seen from this view, and compounded by the "Galt's Gulch" entitlement Freeland expertly dissects, today's elite are less likely to invest in broad social improvements than their forebears.
Freeland points to the implications, though too softly:
It is not much of a surprise that the plutocrats themselves oppose such analysis and consider themselves singled out, unfairly maligned, or even punished for their success. Self-interest, after all, is the mother of rationalization, and—as we have seen—many of the plutocracy’s rationalizations have more than a bit of truth to them: as a class, they are generally more hardworking and meritocratic than their forebears; their philanthropic efforts are innovative and important; and the recent losses of the American middle class have in many cases entailed gains for the rest of the world.
But if the plutocrats’ opposition to increases in their taxes and tighter regulation of their economic activities is understandable, it is also a mistake. The real threat facing the super-elite, at home and abroad, isn’t modestly higher taxes, but rather the possibility that inchoate public rage could cohere into a more concrete populist agenda—that, for instance, middle-class Americans could conclude that the world economy isn’t working for them and decide that protectionism or truly punitive taxation is preferable to incremental measures such as the eventual repeal of the upper-bracket Bush tax cuts.
True, at least for the short term.
Yet Britain's already seen protests turn bloody as brutal service cuts leave the elite untouched. Many of Apple's trendy products rely on workers kept in such lovely conditions that suicide is a major problem.
Gilded hellholes like Dubai prove that plenty among today's upper echelons — yes, the ones raised in the West too — are just fine with slavery and ecocide as long as the good times roll.
No malevolence is required. Plenty of the elite are humane people who work hard and genuinely want to improve the world. Seeing their positive traits up close, Freeland balks from the harsher insights of her own analysis. But she rightly sees their mindset, in the face of popular anger, curdle into "a wounded incredulity that anyone could think of them as villains rather than heroes."
Fact is, the high-minded talk of Davos contrasts harshly with Whitehall and FoxConn: how the same elites actually act when the chips are down.
This is human nature, after all. It's awesome to have luxurious power, it's easy to ignore the problems of outsiders and no one ever wants to pay the bill.
That does not make it any less a problem.
A line from an insightful discussion Quinn Norton led on class at the last Foo Camp sticks with me. Facing an audience with no small number of the new elite among them, she reminded them that unchecked poverty means "the poor will eat you."
There are few surer routes to societal devastation than an increasingly isolated plutocracy with an ever-growing share of resources. If the decline continues, punitive taxation is the best case scenario for the new elite.
Versailles is always a lovely place, until it breaks.