Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else Read Online Free PDF Page A

characteristic which is both bad and good, for both the individual and the nation. Good, because it allows neither to stand still, but drives both for ever on, toward some point or other which is ahead, not behind nor at one side. Bad, because the chosen point is often badly chosen, and then the individual is wrecked; the aggregations of such cases affects the nation, and so is bad for the nation. Still, it is a trait which is of course better for a people to have and sometimes suffer from than to be without.”
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    The paradox was that even as Carnegie, America’s leading capitalist, acknowledged that the country’s economic transformation had ended the age of “social equality,” political democracy was deepening in the United States and in much of Europe. The clash between growing political equality and growing economic inequality is, in many ways, the big story of the late nineteenth century and early twentieth century in the Western world. In the United States, this conflict gave rise to the populist and progressive movements and the trust-busting, government regulation, and income tax the disgruntled 99 percent of that age successfully demanded. A couple of decades later, the Great Depression further inflamed the American masses, who imposed further constraints on their plutocrats: the Glass-Steagall Act, which separated commercial and investment banking, FDR’s New Deal social welfare program, and ever higher taxes at the very top—by 1944 the top tax rate was 94 percent. In 1897, the year of the Bradley Martin ball, incomes taxes did not yet exist.
    In Europe, whose lower social orders had never had it as good as the American colonists, the industrial revolution was so socially wrenching that it inspired the first coherent political ideology of class warfare—Marxism—and ultimately a violent revolutionary movement that would install communist regimes in Russia, eastern Europe, and China by the middle of the century. The victorious communists were influential far beyond their own borders—America’s New Deal and western Europe’s generous social welfare systems were created partly in response to the red threat. Better to compromise with the 99 percent than to risk being overthrown by them.
    Ironically, the proletariat fared worst in the states where the Bolsheviks had imposed a dictatorship in its name—the Soviet bloc, where living standards lagged behind those in the West. But in the United States and in western Europe, the compromise between the plutocrats and everyone else worked. Economic growth soared and income inequality steadily declined. Between the 1940s and 1970s in the United States the gap between the 1 percent and everyone else shrank; the income share of the top 1 percent fell from nearly 16 percent in 1940 to under 7 percent in 1970. In 1980, the average U.S. CEO made forty-two times as much as the average worker. By 2012, that ratio had skyrocketed to 380. Taxes were high—the top marginal rate was 70 percent—but robust economic growth of an average 3.7 percent per year between 1947 and 1977 created a broadly shared sense of optimism and prosperity. This was the golden age of the American middle class, and it is no accident that our popular culture remembers it so fondly. The western Europe experience was broadly similar—strong economic growth, high taxes, and an extensive social welfare network.
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    Then, in the 1970s, the world economy again began to change profoundly, and with that transformation, so did the postwar social contract. Today two terrifically powerful forces are driving economic change: the technology revolution and globalization. These twin revolutions are hardly novel—the first personal computers went on sale four decades ago—and as with everything that is familiar, it can be easy to underestimate their impact. But together they constitute a dramatic gearshift comparable in its power and scale to the industrial revolution. Consider: in 2010, just two years