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.
Her audience merited a close examination, too. It was not made up of leftists. Jesse Norman, an independent and thoughtful Conservative MP, chaired the debate. The Henry Jackson Society, a neo-conservative think tank, organized the meeting. If anything, they were more worried than Freeland. Norman had already written well about how capitalism must reward hard work and thrift if it is to prosper, and looked with anger on the taxpayer bailout of the bank’s crony capitalists.
People should take notice and not only because it is always worth keeping an eye out for splits in the ruling class. A country does not always change when a government that calls itself “right wing” is replaced by a government that calls itself “left wing.” Changes in the spirit of the age matter more than changes in personnel.
Despite its many achievements, I cannot see historians treating the last UK Labour government with anything other than despair. Labour could not see a capitalist crisis when it was staring it in the face. Former British prime minister Tony Blair knighted just about every megalomaniacal scoundrel in the financial sector.
Brown gushed to the bankers: “What you have achieved for the financial services sector, we, as a country, now aspire to achieve for the whole British economy,” a few years before financial services brought down the British economy.
I know for a fact that after I wrote about the disgrace of a Labour government honoring the tax-avoiding retailer Philip Green, Blair told friendly journalists that all tycoons behaved like Green and there was nothing he could do about it.
Although you can find cases of individual Labour politicians leaving office for well-rewarded jobs, high finance did not corrupt the party with money bribes. It did not need to. The spirit of the age had already captured Labour politicians. Even though that age is as dead as any corpse in the graveyard, its ideas continue to animate many on the British right.
British Chancellor of the Exchequer George Osborne wasted his political capital to cut the top rate of income tax and block British Business Minister Vince Cable’s plans to tax the super-rich’s mansions. The financial sector or a confederacy of Russian oligarchs did not slip money into a private bank account. The unbribed Osborne believed that he could revive the economy by lifting the burden on wealth-creators.
The failure of his policy, along with an authentically conservative disgust at the sight of the taxpayer propping up the lame ducks of the financial sector, is leading Norman and others to think radically.
I am not asking you to expect too much from a party that puts the interest of keeping Russian billionaire Roman Abramovich’s council-tax payments low, before the interests of the mass of working and middle-class people, just saying watch for signs that the old order is passing and to do what you can to push it on its way.
Whenever you listen to British Prime Minister David Cameron you should remember that he was once a public relations man. Nevertheless, when he said last week that he wanted to stop conglomerates avoiding the taxes the little people must pay, I sat up.
It says much about the scandalous age we have lived through that I could not imagine any modern prime minister speaking so clearly, I thought to myself. Maybe, after all these years, British society is on the move.