Transcript 2.22-The Rise of the Global Elites

The Rise of the
New Global Elite
Chyrstia Freeland, The Atlantic,
Jan/Feb 2011
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Is growing income inequality a
“national crisis”?
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Even “market fundamentalists” like former
Fed Chairman Alan Greenspan think so
Between 2002 and 2007, 65% of all income
growth went to the top 1% of the population
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Though world GDP has risen and world poverty
has declined significantly, income inequality
within nations has been growing
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Though China’s middle class has grown
exponentially and tens of thousands have
been lifted out of poverty, the super-elite has
pulled away
Income inequality has also increased in
developing markets like India and Russia,
and across much of industrialized West, from
the laissez-faire US to social democratic
Canada and Scandinavia
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There are fears we live in a
plutocracy, in which the rich have
outsize political influence
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plutocracy: rule by the wealthy, or power
provided by wealth
oligarchy: a society or social system ruled by
a few people
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Rise of the plutocracy is
driven by two phenomena:
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the revolution in information technology
the liberalization of global trade
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the international conference
circuit
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“the real community life of the 21st century
plutocracy occurs on the international
conference circuit,” e.g.,
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World Economic Forum in Davos, Switzerland
Bilderberg Group
TED (Technology, Entertainment, Design)
conference
Google’s Zeitgeist conference
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philanthrocapitalism
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Philanthropy has long been seen as a path to social
acceptance and immortality for the super-wealthy
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e.g., Andrew Carnegie transformed his image from a
“robber baron” to a “secular saint”
Today’s plutocrats tend to bestow their fortunes in
the way they made them: entrepreneurially

Rather than merely donating to charities or institutional
endowments, they use wealth to test new ways to solve big
problems
7
“Rootless cosmopolitans”?
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The global super-elite don’t seem to have a
country of their own, no single national loyalty
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e.g., Mohamed ElErian, CEO of Pimco, the
world’s largest bond manager
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Son of an Egyptian father and French mother
Spent childhood between Egypt, France, US, UK, and
Switzerland
Educated at Cambridge and Ozford
Leads a US-based company that is owned by a
German financial conglomerate (Allianz SE)
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America’s super-elite is adjusting
to the more global perspective

In a recent internal debate in one of the
world’s largest hedge funds, based in the US,
a senior exec argued that the hollowing out of
the American middle class really didn’t
matter:
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“…if the transformation of the world economy lifts
4 people in China and India out of poverty and
into the middle class, and means one American
drops out of the middle class, that’s not such a
bad trade”
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In a globalized economy, the American
middle class is no longer “protected” from
foreign competition
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Most elites aren’t too sympathetic: “So if you’re
going to demand 10 times the paycheck [of a
lower-cost worker abroad], 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.”
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Speaking of value…

In 2009 the top 25 hedge-fund managers were
paid more than $1 billion each – equaling the
pay of 658,000 entry-level teachers (at salary
of about $38,000/yr, including benefits)
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Those educators could have brought along over 13
million young people, assuming a class size of 20
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Revolt of the elites
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There’s a growing disconnect between US business
elites and the US workforce
Elites see the world differently
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See their wealth as a consequence of merit and hard work
Feel victimized by criticism, while they see themselves
“doing God’s work,” as the CEO of Goldman Sachs put it
Generally blame indebted/over-leveraged working- and
middle-class Americans their economic troubles – and for
the financial crisis
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Bridging the divide
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“And ultimately, that is the dilemma: America
really does need many of its plutocrats. We
benefit of the goods they produce and the
jobs they create. And even if a growing
portion of those jobs are overseas, it is better
to be the home of these innovators—native
and immigrant alike—than not. In today’s
hypercompetitive global environment, we
need a creative, dynamic super-elite more
than ever.”
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