Chrystia Freeland on the Plutocrats, Angus Deaton on the American white poor



Our Minister of Foreign Affairs, Chrystia Freeland, was once a senior economics writer at Thomson Reuters and The Financial Times. She is the author of Plutocrats (2012).

I urge you to read it. Chrystia wrote this book without rancor or malice, which only makes the results more devastating. The 1%, and the one tenth of 1% , have become fantastically richer since the late 1970s. Though they have worked hard for their money, the majority of the super-rich have made their money out of finance not manufacturing.

Freeland concludes her book with a warning about cognitive capture: the process whereby the super rich come to believe their interests really are the most important in society, and the capture of legislatures composed largely of members of the 1% means that the interests of the truly very rich will be attended to by those who only have a few millions, and want to join.

Speaking of the Venetian Republic, that famous example of a highly successful commercial empire, she traces its decline from measures it took to close off access to its wealthiest classes by young entrepreneurs. The closure was a change of the rules on joint ventures, whereby the rich financed the young and adventurous. It was called la Serrata.

She fears for the same tendency in the world of the ultra rich today.

“This cultural Serrata matters because it increases the political myopia of the plutocrats. Add to that ordinary greed and a society that has turned its capitalists into popular heroes and you have an economic elite primed to repeat the mistake of the Venetian merchants – to drink its own Kool-Aid (or maybe prosecco is the better metaphor) to conflate its own self-interests with the interest of society as a whole. Low taxes, light-touch regulation, weak unions, and unlimited campaign contributions are certainly in the best interests of the plutocrats, but that doesn’t mean they are the right way to maintain the economic system that created today’s super elite.”

I shall make some inferences from having read this book, which may not be justified, but which I suspect are true.

  1. The author of this book is a very clever cookie, and it is a credit to Canada that somehow she has climbed this far.
  2. Her analysis of what it means to live in a society dominated by plutocrats is the same as Trump’s: the domestic working class is being neglected and the plutocrats do not give a damn for maintaining first world salaries or wage rates.

Points one and two can be demoinstrated by reading her book. My third inference is more conjectural.

3. The reason the Trudeau Liberals have refrained from criticism and restrained themselves from doing anything stupid in relation to Trump, the reason they have appointed a serious senior finance journalist to the international affairs ministry, is that their analysis of the large picture –  framed in the light of arguments made by Freeland – is not much that different from Trump’s intuitive take on the position we have arrived at. Too much plutocracy; too much influence of the plutocrats over politics and governments.

If you doubt Freeland’s take for partizan reasons (fool!), I would like to refer you to Angus Deaton, the Princeton economist (of Scottish origin) and Nobel winner whose work on inequality, and increasing mortality rates in the American working class, should inform everyone who is trying to make sense of politics these days.

For my part, I recommend Plutocrats for a sane and carefully researched appreciation of the large picture. It is an easy read, and that is a compliment.

A more scholarly and broader ranging interpretation is given in Deaton’s book, The Great Escape: Health, Wealth and the Origins of Inequality,  which I have just ordered. The key charts you should look at are found in Deaton’s discussion in the Wharton business school article “Is Despair Killing the White Working Class?”

The article contains one graph which shows why Trump won, which you have to click on to expand to its full size. The complete article and its charts are found here.