3. The Rich Are Different From You and Me
Editor, Thomson Reuters Digital
The rich are always with us, as we learned from the Bette Davis film of that name, released in the teeth of the Great Depression. The most memorable part of that movie was its title—but that terrific phrase turns out not to be entirely true. In every society, some people are richer than others, but across time and geography, the gap between the rich and the rest has varied widely.
The reality today is that the rich—especially the very, very rich—are vaulting ahead of everyone else. Between 2002 and 2007, 65 percent of all income growth in the U.S. went to the richest 1 percent of the population. That lopsided distribution means that today, half of the national income goes to the richest 10 percent. In 2007, the top 1 percent controlled 34.6 percent of the wealth—significantly more than the bottom 90 percent, who controlled just 26.9 percent.
That is a huge shift from the post-war decades, whose golden glow may have arisen largely from the era’s relative income equality. During the Second World War, and in the four decades that followed, the top 10 percent took home just a third of the national income. The last time the gap between the people on top and everyone else was as large as it is today was during the Roaring ’20s.
The rise of today’s super-rich is a global phenomenon. It is particularly marked in the United States, but it is also happening in other developed economies like the United Kingdom and Canada. Income inequality is also increasing in most of the go-go emerging-market economies, and is now as high in Communist China as it is in the U.S.
These global super-rich work and play together. They jet between the Four Seasons in Shanghai and the Four Seasons in New York to do business; descend on Davos, Switzerland, to network; and travel to St. Bart’s to vacation. Many are global nomads with a fistful of passports and several far-flung homes. They have more in common with one another than with the folks in the hinterland back home, and increasingly, they are forming a nation unto themselves.
This international plutocracy is emerging at a moment when globalization and the technology revolution are hollowing out the middle class in most Western industrialized nations. Many of today’s super-rich started out in the middle and make most of their money through work, not inheritance. Ninety-five years ago, the richest 1 percent of Americans received only 20 percent of their income from paid work; in 2004, that income proportion had tripled, to 60 percent.
These meritocrats are the winners in a winner-take-all world. Among the big political questions of our age are whether they will notice that everyone else is falling behind, and whether they will decide it is in their interests to do something about that.