In March last year, Emmanuel Saez, a sober economist at the University of California, published a sensational analysis that ought to change the way you see the world.
Saez had set himself the apparently mundane task of collecting data on how the super-rich had fared after the crash of 2007-2008. If you had asked commentators around at the time, we would have said that the great recession would hammer the plutocracy hardest. After the crash of 1929, former titans of finance died in poverty. The Dow did not reach its 1929 levels again until 1954. Dealing in funny money became disreputable and Wall Street became a backwater until former US president Ronald Reagan and former British prime minister Margaret Thatcher revived casino capitalism.
For a while, it seemed as if history had repeated itself. Average real income for the US’ top 1 percent fell by almost a third. The incomes of the remaining 99 percent fell sharply too — by 11.6 percent. However, as was traditional, those with the most to lose took the biggest hit.
Then came the US recovery of 2010. It showed that the past was no longer a reliable guide to the future. The incomes of the top 1 percent grew by 11.6 percent while the incomes of the bottom 99 percent rose by a pathetic 0.2 percent. The rich captured nearly all the income growth going in US and this when the country was led by US President Barack Obama, a milksop of a politician, whom idiot conservatives denounce as some kind of socialist.
To put it another way, far from being an end of an era, the Great Recession was a temporary blip in the global march of the oligarchs. They will pass their wealth to their children and establish aristocracies of wealth — not only in the US, but in Britain, China, Russia, India, Mexico and Brazil too. After 1929, the administration of then-US president Franklin Roosevelt took political action to make US society fairer. After 2008, the Obama administration and that of former British prime minister Gordon Brown did nothing, and so nothing changed. They did not even tell the banks that had taken public money that they could not give bonuses to their staff.
At a meeting in the British House of Commons last week, Chrystia Freeland cited Saez’s research and shared her worry that democratic capitalist societies cannot survive if such lopsided inequalities of wealth persist. They will go the way of the Venetian republic, she said: An open commercial society that was taken over by a hereditary elite.
If you look at how popular the old ideas of limiting trade union influence, encouraging corporate political donations and keeping taxes low and regulation weak remain in conservative circles, you have to concede that she has a point.
Freeland, the author of Plutocrats: The Rise of the New Global Super Rich, is not from the political left, however. To my mind, the most interesting thing about her is that she is a free-market conservative, whose family fled communism. The crash came when she was researching her book. With the resigned air of an author who has been overtaken by events, she assumed that, by the time it came out, Plutocrats would be a work of history. No one was more shocked than Freeland when the plutocracy carried on as before, while the developed world’s middle class saw declines in its income and status.