INNOVATION HUB
11:45 am
Fri March 22, 2013

The American Plutocracy

Pull out your sixth grade government flash cards— is America a plutocracy? Kara Miller asks Chrystia Freeland, editor of Thompson Reuters Digital and author of “Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.

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How did Bill Gates get to be America's richest man?
Credit Kees de Vos / Wikimedia Commons

Guest:

In the 1970s, the top 1 percent of America's wealthy collected approximately 10 percent of the nation’s income. Today, just a few decades later, they collect for 30 percent. In the United States, as well as in Canada, Scandinavia, and China, the income gap has become the income Grand Canyon.

“There has been a tremendous surge in income inequality, with a particular surge at the very, very top,” says Chrystia Freeland, author of “Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.” “This is particularly acute in the United States, but it is a global phenomenon.”

The Journey to the Top

How have America’s richest come to find themselves even richer? Freeland points to the rapid evolution of technology and increased globalization. Every time a transaction can be completed more quickly, every time a new world market opens up, there is a potential for enormous profit. But these economic trends do have a downside — automation and outsourcing leave the middle class with fewer job opportunities.

“It’s pretty obvious,” says Freeland. “We see how our economy is being transformed in a very disruptive, I think ultimately a very positive, and very fast way. That’s an economic coin that on the one hand is facilitating these huge fortunes, very fast, at the very top — but those same economic processes are also hollowing out the middle class.”

Economic trends aren’t the only factors causing bank accounts to balloon — American political policies have also shifted the burden of payment from the rich to the middle class. In the 1980s, Ronald Regan lowered taxes on the wealthy from a high rate of 70 percent to 28 percent. Since then, tax rates for America’s richest have fallen even lower.

While America’s wealthy have more money than ever before, more of that money is self-made. When she first started researching her book, Freeland thought the myth of the self-made millionaire would forge an understanding between those at the top and the middle class they believed they came from.

“[But] in a lot of cases I think it actually has a distancing effect,” Freeland concedes. “It creates this sense of, ‘I did it myself, you didn’t do it, and therefore this distribution is fair.’”   

The debate over whether American economic policies unfairly favor the rich erupted in the presidential election.

Are the Super-Rich Victims?

But though economic policy has favored them for decades, the tide may be turning against Plutocrats. America watched the fight unfold in the presidential election, when Governor Mitt Romney coined the term “47 percent,” while President Obama called for higher tax rates on the rich.

“Right now you are hearing from the Plutocrats such a shriek of pain. [There’s] a real sense of victimization,” says Freeland. “I think that is because people, including the re-elected president, have started to challenge this notion that what is good for the very, very top…is good for the middle.”

Freeland hopes that the discourse about economic inequality becomes even more frank. Traditionally, she explains, politicians have spoken about economic growth in terms of how they can increase the wealth of the country as a whole. Even in the last election, she feels accusations about class disparity were delicate.

“[It] seemed to me to be relatively mild Populist rhetoric,” Freeland says. “Millionaires and billionaires have to pay their fair share — but this was hardly Lenin on the barricades.”

But for a country that fosters the well being of a small elite, it may be the first step in the right direction.

WATCH: Chrystia Freeland Debates Stephen Colbert About America's Plutocrats

Credit The Colbert Report

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