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The Atlantic Monthly Goes Galt to a Fault

January 24, 2011

Finally got around to “The Rise of the New Global Elite,” Chrystia Freeland’s telling profile of the Asshole Class in the January/February Atlantic Monthly.

Freeland is among the media elite

It’s hard to fault Freeland’s prose, given that (as the former “superstar” editor of the Financial Times, now at Reuters) her livelihood depends on continued access to the wealthiest plutocrats and oligarchs the world has ever known. Without them—without entrée to their parties and invitation to speak at their conclaves—she’d be a wretch like me.

And she has come out in favor of universal health care, at least as an element of national economic growth.

So I suppose it’s churlish to hold her accountable for the horse shit in this piece. But here goes anyway.

The article’s chief weakness is asserting that those who have these billions earned it—by innovation, by changing the world for the better. In taking this assumption as an article of faith and extending it generally to the world’s billionaires, the author blunders badly. Consider:

When the oligarchs of the former Soviet Union first burst out beyond their own borders, they were Marxist caricatures of the nouveau riche, purchasing yachts and sports teams, and surrounding themselves with couture-clad supermodels. Fifteen years later, they are exploring how to buy their way into the world of ideas.

As every Russian knows (and as Freeland herself hints, later in the piece), those “oligarchs” are Mafiosi. And the “world of ideas” to which they aspire is mainly a world of politically engaged think tanks whose principle mission—as Pete Peterson’s billion-dollar Institute for International Economics (renamed the Peterson Institute for International Economics in 2006) demonstrates—is to extract more from those with little and, indubitably, funnel more to those with much.

The story goes through great logical contortions in order to portray today’s million-a-day asshole class as “meritocratic.” The paeans to this group’s alleged work ethic are predictably laughable: There at the 300-acre Grove Hotel resort, “This is not a group that plays hooky: the conference room is full from 9 a.m. to 6 p.m., and during coffee breaks the lawns are crowded with executives checking their BlackBerrys and iPads.”

Imagine the calluses!

To stretch the point that these folks are self-made, Freeland includes even the odious Koch brothers, cackling heirs to a multimillion-dollar oil fortune even before their machinations vaulted them into the Asshole Class stratosphere:

Of the top 10 figures on the 2010 Forbes list of the wealthiest Americans, four are self-made, two (Charles and David Koch) expanded a medium-size family oil business into a billion-dollar industrial conglomerate, and the remaining four are all heirs of the self-made billionaire Sam Walton.

Well . . . one could quibble some even about three of the four—Bill Gates (father a big lawyer, mother on the board of a bank), Warren Buffett (congressman’s son), and Larry Ellison (adoptive father had made, then lost, a fortune in real estate)—who are self-made. But whatever. Moving on.

On Freeland’s hands, the kid gloves wear like velvet pillows, as in this account of a book party for Peterson’s novelist daughter:

As an example, she described a conversation with a couple at a Manhattan dinner party: “They started saying, ‘If you’re going to buy all this stuff, life starts getting really expensive. If you’re going to do the NetJet thing’”—this is a service offering “fractional aircraft ownership” for those who do not wish to buy outright—“‘and if you’re going to have four houses, and you’re going to run the four houses, it’s like you start spending some money.’”

The clincher, Peterson says, came from the wife: “She turns to me and she goes, ‘You know, the thing about 20’”—by this, she meant $20 million a year—“‘is 20 is only 10 after taxes.’ And everyone at the table is nodding.”

Fair enough, I suppose, to use the words of one obscenely rich and privileged person to hold a mirror to the others. But why not insert the facts? I suppose it would have hurt Freeland’s standing among her patrons if she took the opportunity, right there, to point out that the income tax rate paid by those earning 20 (those who deign to pay taxes, anyway), averages less than 25 percent (and only 15 percent for hedge fund winnings). “Twenty,” in the United States, equals (at least) 15, not 10.

Throughout the piece, Freeland seems unaware of her story’s contradictions, particularly the clash between the modern plutocrats’ up-from-nothing, jobs-making propaganda and the actual nature of their primary endeavors. Of Stephen Jennings and his company, Renaissance Capital, she writes: “Renaissance’s roots are in Moscow, where Jennings maintains his primary residence, and his business strategy involves positioning the firm to capture the investment flows between the emerging markets, particularly Russia, Africa, and Asia.”

This description perfectly epitomizes what the new global elite actually do. They do not, by and large, create wealth. They do not invent world-improving products. They “capture the investment flows.” This is the secret of wealth, today and always: the skim. The extraction of vigorish. And it is also the secret to the elite’s self-referential global society—the ostensible subject of this long story—and to the many nonprofit foundations and think tanks and endowed chairs at the University of Chicago School of Economics the Asshole Class, on a strictly tax-exempt basis, so generously funds. Because to continue to extract the skim, these folks require a legal and social structure that not only allows it, not only defends it, but actively encourages it. By the alchemy of economic theory, think-tank position papers, endless propaganda, and strong-arm lobbying, the act of skimming must be transmogrified into production—into “work.” And thereon into the “engine of the economy.” The Asshole Class must create the illusion that they are essential. And furthering that process is what this article, and this author, are bound to do.

Freeland presents the skim as a fait accompli, the need for more as an immutable law of nature, and the dilemmas arising from this natural law a challenge—not to refuse and rebel and rebuild, not to rethink or re-imagine—but to adapt:

I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”

Peterson could not have said it better. But, indeed, today’s CEOs and hedge fundies receive not 10, but 100 or more times the compensation their forefathers did. Do they deliver those multiples of value? Freeland does not, apparently, think to ask the question.

Or, perhaps, she thinks better of it.

Toward the end, Freeland momentarily goes all sappy and populist, quoting that old rabble-rouser Paul Volcker:

Critiques of the super-elite are becoming more common even at gatherings of the super-elite. At a Wall Street Journal conference in December 2009, Paul Volcker, the legendary former head of the Federal Reserve, argued that Wall Street’s claims of wealth creation were without any real basis. “I wish someone,” he said, “would give me one shred of neutral evidence that financial innovation has led to economic growth—one shred of evidence.”

By her own research, Freeland offers none, of course, just more assumption that it has. And with that she segues without grace or logic into

the dilemma: America really does need many of its plutocrats. We benefit from the goods they produce and the jobs they create. And even if a growing portion of those jobs are overseas, it is better to be the home of these innovators—native and immigrant alike—than not. In today’s hypercompetitive global environment, we need a creative, dynamic super-elite more than ever.

And so, in conclusion:

The lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth. It is obvious which of these would be the better outcome for America, and the world. Let us hope the plutocrats aren’t already too isolated to recognize this. Because, in the end, there can never be a place like Galt’s Gulch.

Well. If only.

But there is such a place, and that place is Davos, and Sun Valley, and everywhere else the so-called Masters of the Universe land their jets and dock their yachts to the exclusion of us, inviting Freeland to moderate their discussion panels and bring us the troubling news of their ever-expanding needs—and our need to accommodate them. Ayn Rand’s crazy fantasy was not that the elite would go on strike. It was that the elite were actually productive, and most of the elite still believe it—after all, aren’t they on their BlackBerrys, making big deals?

But the evidence suggests the elite are parasites on the rest of us, inserting their blood funnels into “capital flows” while demanding that we take pay cuts and benefit cuts and work longer hours to buy their newest obsolete monopoly software while handing over at least 8 percent of our meager and heavily taxed paychecks for their minions to manage (after extracting a small annual fee, of course) for our retirement.

NAFTA, the “Flat World,” the 401(k) , the coming (renewed) attack on Social Security, the U.S. Supreme Court’s decision to allow unlimited corporate contributions to political campaigns, and the Excess of Stupid running from Accuracy in Media to Rush Limbaugh to Fox News—all of these are products of Galt’s Gulch.

The strike is ongoing; it began in the 1970s, and you are probably too young to remember the world before. With Freeland and the Atlantic Monthly guiding, you are meant to remain too awestruck and ignorant even to imagine something better.

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