How to deal with the plutocrats

The blog post below is a good summary of a fantastic article in the  
Atlantic.  I encourage you all to read the article referenced within  
it.  Learning the mindset of those oligarchs in power is important I  
think in understanding where we are and where we are heading.  The  
article doesn't answer the subject title, and I'm not really sure  
whether it can be answered.  Even if there were a reconstitution of  
worker unions to try and balance the global elite power structures,  
how can Americans compete in the labor market with such a huge global  
imbalance?  I've seen this first hand in India and I can tell you that  
we most definitely can't.  I was recently told at work that our  
divisional goal was 75% outsourced for IT workers and to start using  
labor from Brazil and Mexico for standard working hours.  The global  
labor rebalancing is occurring with frightening speed and the global  
elites mentioned below consider this a good thing.

regards,
-Lance

----------------
http://blogs.reuters.com/felix-salmon/2011/01/04/how-to-deal-with-the-plutocrats/

Felix Salmon
How to deal with the plutocrats
JAN 4, 2011 14:48 EST

Chrystia Freeland has a long essay in the Atlantic (http://www.theatlantic.com/magazine/print/2011/01/the-rise-of-the-new-global-elite/8343/ 
)  on the new global elite, which will eventually become her next  
book. It’s well timed to coincide with the self-congratulatory  
plutocratic gabfest that is Davos, which kicks off in three weeks’  
time, and with which Chrystia is very familiar.
The difference between the new global elite and the old global elite  
is that today the world is owned and run largely by first- or second- 
generation money: people who tend to think that they’ve earned it,  
somehow, especially if they came to their wealth from a background in  
the lower-middle classes:

While you might imagine that such backgrounds would make plutocrats  
especially sympathetic to those who are struggling, the opposite is  
often true. For the super-elite, a sense of meritocratic achievement  
can inspire high self-regard, and that self-regard—especially when  
compounded by their isolation among like-minded peers—can lead to  
obliviousness and indifference to the suffering of others…

When I asked one of Wall Street’s most successful investment-bank CEOs  
if he felt guilty for his firm’s role in creating the financial  
crisis, he told me with evident sincerity that he did not. The real  
culprit, he explained, was his feckless cousin, who owned three cars  
and a home he could not afford. One of America’s top hedge-fund  
managers made a near-identical case to me—though this time the  
offenders were his in-laws and their subprime mortgage. And a private- 
equity baron who divides his time between New York and Palm Beach  
pinned blame for the collapse on a favorite golf caddy in Arizona, who  
had bought three condos as investment properties at the height of the  
bubble.

It’s not that these people are utterly bereft of noblesse oblige:  
Chrystia points out that “in this age of elites who delight in such  
phrases as outside the box and killer app, arguably the most coveted  
status symbol isn’t a yacht, a racehorse, or a knighthood; it’s a  
philanthropic foundation.” But those philanthropies don’t benefit the  
left-behind middle classes: they tend to follow a barbell  
distribution, with the money going either to the world’s poorest or  
else to well-endowed universities and cultural institutions. The US  
middle class is sneered at for being fat and lazy and unworthy of  
their wealth:

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 heard a similar sentiment from the Taiwanese-born, 30-something CFO  
of a U.S. Internet company. A gentle, unpretentious man who went from  
public school to Harvard, he’s nonetheless not terribly sympathetic to  
the complaints of the American middle class. “We demand a higher  
paycheck than the rest of the world,” he told me. “So if you’re going  
to demand 10 times the paycheck, 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.”

This mindset is dangerous, but it’s not clear how dangerous it is.

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.

Mohamed El-Erian, the Pimco CEO, is a model member of the super-elite.  
But he is also a man whose father grew up in rural Egypt, and he has  
studied nations where the gaps between the rich and the poor have had  
violent resolutions. “For successful people to say the challenges  
faced by the lower end of the income distribution aren’t relevant to  
them is shortsighted,” he told me. Noting that “global labor and  
capital are doing better than their strictly national counterparts” in  
most Western industrialized nations, ElErian added, “I think this will  
lead to increasingly inward-looking social and political conditions. I  
worry that we risk ending up with very insular policies that will not  
do well in a global world. One of the big surprises of 2010 is that  
the protectionist dog didn’t bark. But that will come under pressure.”

If this is true, then the members of the super-elite should be falling  
over each other to pay more in taxes out of simple enlightened self- 
interest—rather than saying that a perfectly sensible tax hike is  
“like when Hitler invaded Poland in 1939.”

But it seems to me that the inchoate anger of the masses shows no sign  
of cohering into anything at all, let alone protectionism, which seems  
to have been dying a slow death ever since the protests against Nafta.  
The Tea Party, which is the closest thing we have to a populist  
revolt, is bought and paid for by plutocrats and shows no  
protectionist tendencies whatsoever. If they keep on going on their  
present trajectory, they’re just as likely to continue unimpeded as  
they are to run into some kind of atavistic class warfare.

So I’m unconvinced that the plutocrats have any real incentive to  
restrain themselves, or to stop moaning around an Upper East Side  
dinner table that $20 million a year isn’t all that much—it’s really  
only $10 million a year, after taxes.

And I’m also unconvinced that we actually need the plutocrats as much  
as Chrystia says we do:

Not all plutocrats, of course, are created equal. Apple’s visionary  
Steve Jobs is neither the moral nor the economic equivalent of the  
Russian oligarchs who made their fortunes by brazenly seizing their  
country’s natural resources. And while the benefits of the past  
decade’s financial “innovations” are, as Volcker noted, very much in  
question, many plutocratic fortunes—especially in the technology sector 
—have been built on advances that have broadly benefited the nation  
and the world. That is why, even as the TARP-recipient bankers have  
become objects of widespread anger, figures such as Jobs, Bill Gates,  
and Warren Buffett remain heroes.

And, ultimately, that is the dilemma: America really does need many of  
its plutocrats. We benefit from 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.

I would put this another way. The Silicon Valley mega-wealthy are good  
for the US economy, but they’re not going anywhere: Silicon Valley  
hasn’t managed to reproduce itself elsewhere in the US, let alone  
anywhere else in the world. When it comes to US plutocrats, however,  
most of them are very similar to the Russian oligarchs who seized  
their country’s natural resources — they’re bankers and hedge-fund  
managers who seized their country’s financial resources. They produced  
no goods, and they created no jobs — quite the opposite. And so it  
makes sense for Americans who have lost their jobs and their hope to  
reclaim those financial resources, through mechanisms like a wealth  
tax or a financial transactions tax. The Silicon Valley elite would  
happily pay such things. And if the angry bankers went off to  
destabilize some other financial system, they wouldn’t actually be  
missed.
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