A consequence of globalization is polarization
Chuck Schumer, the senior Democratic senator from New York, already has one of his talking points for 2012 — he plans to lambaste the Republicans for their “tax cuts for millionaires,” a reference to the right’s refusal to end the Bush tax breaks at the upper-end of the income distribution.
That’s a big deal, because for much of the post-war era, class has been a forbidden subject in U.S. politics. Americans were sold on the idea of living in the land of opportunity — their country, after all, was the one huddled masses fled to for the chance to build a better life. That self-image was so appealing and so powerful that politicians ran against it at their peril—Morning in America played better on the campaign trail than class war.
Schumer is a centrist whose constituency includes many of America’s plutocrats —he has sometimes been called the Senator from Wall Street. He is also one of the country’s savviest politicians. So his judgment that “millionaires tax break” will make a good bludgeon for Republicans says a lot about how deep the chasm has become between America’s super-elite and everyone else, and how worried middle-class Americans are that the old promise of social mobility is no longer delivering.
Liberals concerned about this divide have focused on the ways in which it has been created by pro-rich tax policies, a concern documented in Winner-Take-All Politics by Jacob Hacker and Paul Pierson, and further stoked by this week’s tax deal. That’s a legitimate gripe.
But the two Americas are moving further and further apart for another reason, too, and it is one over which U.S. legislators and U.S. voters have little control. After a century when succeeding in America was the surest route to commercial success, the country’s best businessmen and women have realized that the way to win is to go global.
A favorite complaint of foreigners has been to point out that Americans, for all their international might, are actually rather parochial. That slightly smug assertion is true: to take one example, according to research by head-hunter Elisabeth Marx, in 2007, nearly one third of British FTSE 100 CEOs were foreign nationals; in the U.S., just 10 per cent of Fortune 500 chiefs were foreigners.
Now that the American century is over, however, America’s business leaders are catching on fast. One sign of the times was the recent decision, first reported by my Reuters colleague Megan Davies, of Stephen Schwarzman, the trend-setting boss and co-founder of private equity group Blackstone, to move to Paris for three to six months next year. Another major New York private equity house hopes to send one of its partners to Hong Kong.
Nor is this shift limited to finance. In a speech at Stanford business school this year, GE CEO Jeff Immelt said that when he was an up-and-comer at the industrial giant in the 1980s, developed nations accounted for 80 per cent of global economic growth. In the coming decade, he said, that equation is expected to flip, with 80 per cent of international growth coming from emerging markets. Like Blackstone, GE is moving its chiefs to where the action is: last month John Rice, a GE vice-chairman, was reassigned to Hong Kong, where he will oversee non-U.S. sales, marketing and operations.
Or consider McKinsey, the premier management consulting firm, founded in Chicago in 1926. Today, McKinsey’s managing director is a Canadian, Dominic Barton, who lives in London, but whose assistant is based in Singapore. “There are more and more global CEO meetings in the emerging markets, especially China,” Barton told me over breakfast in midtown Manhattan late last month. He was due to see Schwarzman later that day, but recalled that “the last time I saw Steve was in China” where Blackstone held a meeting this fall. Barton himself was traveling to Chile later in the week, then on to Sao Paolo, where McKinsey was holding its own board meeting.
The Luddites and isolationists in both parties are already starting to argue that this globalization of American business is a bad thing. They are wrong — surely America would be even worse off if its brightest businesses leaders were missing out on globalization and the rise of the emerging markets. But the shift of American capital and American capitalists outside the U.S. will further polarize an already bitter national debate. By 2012, Americans won’t just be arguing about tax-breaks for millionaires, they’ll be targeting the millionaires who spend 6 months a year in Paris or Hong Kong. That will be dangerous not just for the global super-elite, but for the entire world economy.