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

technological change is faster than it has ever been and it is moving from sector to sector,” Mokyr told me. “It is likely that it will keep on expanding at an exponential rate. As individuals, we aren’t getting smarter, but society as a whole is accumulating more and more knowledge. Our access to information and technological assistance in going through the mountains of chaff to get to the wheat—no society has ever had that. That is huge.”
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    This double-barreled economic shift has coincided with an equally consequential social and political one. MIT researchers Frank Levy and Peter Temin describe the transformation as a move from “The Treaty of Detroit” to the “Washington Consensus.” The Treaty of Detroit was the five-year contract agreed to in 1950 by the United Auto Workers and the big three manufacturers. That deal protected the carmakers from annual strikes; in exchange, it gave the workers generous health care coverage and pensions. Levy and Temin use “The Treaty of Detroit” as a shorthand to describe the broader set of political, social, and economic institutions that were established in the United States during the postwar era: strong unions, high taxes, and a high minimum wage. The Treaty of Detroit era was a golden age for the middle class, and a time when the gap between the 1 percent and everyone else shrank.
    But in the late 1970s and early 1980s, the Treaty of Detroit began to break down. This was the decade of Ronald Reagan and Margaret Thatcher. They both sharply cut taxes at the top—Reagan slashed the highest marginal tax rate from 70 percent to 28 percent and reduced the maximum capital gains tax to 20 percent—reined in trade unions, cut social welfare spending, and deregulated the economy.
    This Washington Consensus was exported abroad, too. Its greatest impact, and its greatest validation, was in communist regimes. The collapse of communism in the Soviet bloc and the adoption of market economics in communist China ended that ideology’s seventy-year-long intellectual and political challenge to capitalism, leaving the market economy as the only system anyone has come up with that works. That red threat was one reason the plutocrats accepted the Treaty of Detroit, and its even more generous European equivalents. The red surrender emboldened the advocates of the Washington Consensus and helped them to create the international institutions needed to underpin a globalized economy.
    These three transformations—the technology revolution, globalization, and the rise of the Washington Consensus—have coincided with an age of strong global economic growth, and also with the reemergence of the plutocrats, this time on a global scale. Among students of income inequality, there is a fierce debate about which of the three is the most important driver of the rise of the 1 percent. Ideology helps to shape the argument. If you are a true-faith believer in the Washington Consensus, you tend to believe rising income inequality is the product of impersonal—and largely benign—economic forces, like the technology revolution and globalization. If you are a liberal and regret the passing of the Treaty of Detroit, you tend to attribute the changed income distribution chiefly to politics—a process Jacob Hacker and Paul Pierson have powerfully described in Winner-Take-All Politics .
    This is an important argument, with real political implications. But, viewed from the summit of the plutocracy, both sides are right. Globalization and the technology revolution have allowed the 1 percent to prosper; but as the plutocrats have been getting richer and more powerful, the collapse of the Treaty of Detroit has meant we have taxed and regulated them less. It is a return to the first gilded age not only because we are living through an economic revolution, but also because the rules of the game again favor those who are winning it.
    “The bottom line: we may not be able to reverse the trend, but don’t