American plutocracy

By Felix Salmon
December 5, 2011
Michael Lewis puts his finger on something important:

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Michael Lewis puts his finger on something important:

Ordinary Greeks seldom harass their rich, for the simple reason that they have no idea where to find them. To a member of the Greek Lower 99 a Greek Upper One is as good as invisible.

He pays no taxes, lives no place and bears no relationship to his fellow citizens. As the public expects nothing of him, he always meets, and sometimes even exceeds, their expectations. As a result, the chief concern of the ordinary Greek about the rich Greek is that he will cease to pay the occasional visit.

That is the sort of relationship with the Lower 99 we must cultivate if we are to survive. We must inculcate, in ourselves as much as in them, the understanding that our relationship to each other is provisional, almost accidental and their claims on us nonexistent.

I can’t help but remember that George Papandreou was born in Saint Paul, Minnesota, grew up with Greek as a second language, and was schooled in Canada, the US, Sweden, and England. He’s part of the Greek social compact entirely by choice; he arrived when he wanted to, and can leave for a comfy sinecure in some English-speaking country any time he wants. Meanwhile, for every Papandreou who was born in the US and made his career in Greece, there are many more highly successful people — think Pete Peterson or Arianna Huffington — who moved the other way.

Indeed, the elite of most countries in the world is there by choice rather than by any kind of necessity. Chrystia Freeland — herself a Canadian who has lived and travelled widely in Russia and who cemented her reputation by working for the New York bureau of a London newspaper — wrote a great story about the “new global elite” earlier this year which made the point that the very rich are, these days, largely stateless:

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 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.

Chrystia quotes Silver Lake’s Glenn Hutchins as saying of the super-elite that “we are much less place-based than we used to be”, which is true. But the US has, historically, been behind this particular curve. It tends to import talent rather than export it: I don’t have exact numbers, but I’m sure that there’s an order of magnitude more foreign-born billionaires living in the US than there are US-born billionaires living abroad. For all that hedge-fund managers, in particular, are constantly threatening to leave the country if they get taxed more, the fact is that the US is so big and so rich that it actually does an extremely good job of retaining its billionaires, roping them in to the social compact whether they like it or not.

This is why the Occupy movements are particularly American. The Russians can’t Occupy anything: all their billionaires are in London. And while there’s an enormous number of the global elite living in Switzerland, they’re not actually Swiss: they’ve already broken the bounds of national identity, and have basically created a stateless stratospheric sovereignty of their very own.

In a way it’s reassuring that America’s billionaires are still so civic-minded that they buy laws and political parties: it’s a sign that they’re invested in the country and are here for the foreseeable. And the one law they’re not going to repeal any time soon is the most important one — the one which says that US citizens have to pay US federal taxes on their global income, no matter where they live. (Or at least demonstrate that they’ve paid at least that much in taxes elsewhere.) American plutocrats, almost uniquely, are tied to their home country in a way that other members of the global elite can barely imagine.

If you live in London, you’re constantly aware of the contingency of residency: you know those multi-million-dollar Chelsea homes are occupied for maybe only a few weeks per year by their Saudi or African owners. In America, by contrast, the rich can buy their fourth or even tenth home without ever having bought property abroad. So while America’s rich might dream of a stateless existence, they don’t have it — not yet. And I don’t think it’s coming any time soon.

Update: Pete Peterson, the son of Greek immigrants, was actually born in Kearney, Nebraska.


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This reminds me of Grand Illusion, certainly one one of the greatest films ever made: llusion_(film)

It tells the story of the transnational aristocracy that would disappear after WWI. The whole plot of the movie revolves around a French aristocrat who has more in common with his German captor than with his fellow countrymen.

This state of affairs might look only natural for now but any system which outlives its usefulness will eventually collapse. I have good hope that democracy will find a way to restrain the parasitic tendencies of plutocrats.

Posted by lemarin | Report as abusive

Snaps to the idea that US plutocrats are, like our Great Nation, exceptional in that they’re engaged enough to corrupt our democracy. However, you and Freeland both equate monster wealth with talent. I don’t think that’s a terribly thoughtful position to take.

Posted by Eericsonjr | Report as abusive

It’s not just plutocrats. Thanks to inexpensive international travel and more or less stateless Internet sites, I might have more shared interests with a worldwide community of like-minded professionals than I do with the folks down the street. I might be willing to make the argument that it represents the beginning of the end of traditional national boundaries and governments.

Posted by Curmudgeon | Report as abusive

“hedge-fund managers, in particular, are constantly threatening to leave the country if they get taxed more”

If only that were true, it would be a win-win situation, to raise taxes on hedge fund managers. However, I don’t think they threaten to leave the U.S., but rather New York, and maybe we’ll get to see how sincere those threats are if Cuomo actually follows through on his plan to raise taxes for the wealthy.

Posted by KenG_CA | Report as abusive

Suggested Headline: “US Plutocrats Stuck from Owning Federal Government: Buyers Difficult to find in Down Market”

Posted by Arin_Dube | Report as abusive

“American plutocrats, almost uniquely, are tied to their home country in a way that other members of the global elite can barely imagine.” Yeah, they’re the greatest plutocrats on earth. Can’t be otherwise :-)

Posted by hansrudolf | Report as abusive

Grand Illusion was the first thing that came to my mind also, great movie.

Posted by H2O2 | Report as abusive

The best part in Freeland’s article comes at the end.

“The lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth. It is obvious which of these would be the better outcome for America, and the world. Let us hope the plutocrats aren’t already too isolated to recognize this. Because, in the end, there can never be a place like Galt’s Gulch.”


Alas, I’m afraid that plutocrats are not so much isolated but ignorant, ignorant of history, having lived through a fairly exceptional period of mostly peace for the past 65 years. People like Soros, who lived World War II in Eastern Europe, remember how ugly the convulsions of history can look like. But most plutocrats remember nothing of the like. They only know peace and a favorable order. And they’ll take that for granted. They always do, at most afraid for their personal safety, hiding in gated communities or foreign residence, as if it were the issue.

The real risk for them is the rise of nationalistic governments and the expropriation of “foreign” owners that would inevitably follow.

Posted by Frwip | Report as abusive

Frwip, I think you’re right about the plutocrats being ignorant, but I would also add delusional. for the most part, they believe they they are all job creators, that when they extract more wealth from society, society is better off, and that the market makes everything work in the end.

Up until 2008, i used to think the plutocrats would certainly prevent a crisis from escalating out of control, because they wouldn’t want to kill the goose that lays their golden eggs. I’m not sure of that any more. I don’t think they are any different than the middle class lobsters who have been sitting in a pot of water with the heat cranked up. None of them are realizing they can get boiled to death.

Posted by KenG_CA | Report as abusive

I’m of east Indian background, born and raised in Canada, studied and now practicing medicine in the US. The future is a cosmopolitan one, and we are indeed living in an era where national boundaries and borders will start to become irrelevant.

Posted by Kaloo008 | Report as abusive

It works until it does not..think 1913. Keynes has some wonderful quotes about how cosmopolitan, free market and global that era was. Then ww1 and by many metrics it takes until the mid 1990s to return to the same levels of globalization. Be careful how far you push the masses you myopic and ignorant plutocrats.

Posted by gmant | Report as abusive

While US citizens resident outside of the USA are still taxed by the US they will never reach the heights of statelessness possible to those of other Nationalities. Most of the non-US non-working 1% ensure they live nowhere for more than six months a year so they pay income tax nowhere, just that paid by their investments that cannot be reclaimed.

Hedge Fund managers threatening to move out of the US are not all making strong threats, because if they are US citizens they’d only gain an increase to $90,000 in their non-taxable income per year – and these folks earn millions.

Posted by FifthDecade | Report as abusive

Only in the US do you think that aristocracy is a new thing.

It was ever so.

American superpower status allows it to tax aggressively. The rise of China will put an end to that.

Posted by Dafydd | Report as abusive

The book “Richistan” by Robert Frank is an enjoyable read that explores this issue in depth. It is definitely worth reading.

Posted by TheDagger | Report as abusive

The plutocrats are still here because America isn’t sucked dry yet. The money is all going in one direction. Everyone says it’s the top 1%(3M+people),the true power lies with the 0.1% how fast is their piece of the pie growing?

Posted by dinge61 | Report as abusive