PUBLISHED : Sunday, 29 September, 2013, 12:00am
UPDATED : Sunday, 29 September, 2013, 1:22am

Plutocrats feeling persecuted. Beware!

With ordinary people having bailed out the rich, how can it be the 1 per cent are feeling so peeved about an absence of adulation?


Paul Krugman is a professor of economics and international affairs at Princeton University and an op-ed columnist for The New York Times. Krugman received the Nobel Memorial Prize in Economic Sciences in 2008 for his work on international trade patterns.

Robert Benmosche, the chief executive of the American International Group, said something stupid the other day.

And we should be glad, as his comments help highlight an important but rarely discussed cost of extreme income inequality - the rise of a small but powerful group of what can only be called sociopaths.

For those who don't recall, AIG is a giant insurance company that played a crucial role in creating the global economic crisis, exploiting loopholes in regulations to sell vast numbers of debt guarantees that it had no way to honour. Five years ago, US authorities, fearing AIG's collapse might destabilise the financial system, stepped in with a huge bailout.

But even the policymakers felt ill-used - for example, Ben Bernanke, the chairman of the Federal Reserve, later testified that no other episode in the crisis made him so angry.

And it got worse.

For a time, AIG was essentially a ward of the federal government, which owned the bulk of its stock, yet it continued paying large executive bonuses. There was, understandably, much public furore.

So here's what Benmosche did in an interview with The Wall Street Journal: he compared the uproar over bonuses to lynchings in the Deep South - the real kind, involving murder - and declared that the bonus backlash was "just as bad and just as wrong".

You may find it incredible that anyone would, even for an instant, consider this comparison appropriate.

But there have actually been a series of stories like this. In 2010, for example, there was a comparable outburst from Stephen Schwarzman, the chairman of the Blackstone Group, one of the world's largest private-equity firms.

Speaking about proposals to close the carried-interest loophole - which allows executives at firms like Blackstone to pay only 15 per cent taxes on much of their income - Schwarzman declared: "It's a war; it's like when Hitler invaded Poland in 1939."

Stuff like this is surely what the Masters of the Universe say to each other all the time, to nods of agreement and approval. It's just that sometimes they forget that they're not supposed to say such things where the rabble might learn about it.

Also, notice what both men were defending: namely, their privileges.

This is important. Sometimes the wealthy talk as if they were characters in Atlas Shrugged, demanding nothing more from society than that the moochers leave them alone. But these men were speaking for, not against, redistribution - redistribution from the 99 per cent to people like them. This isn't libertarianism; it's a demand for special treatment. It's not Ayn Rand; it's ancien regime.

Sometimes, in fact, members of the 0.01 per cent are explicit about their sense of entitlement. Charles Munger, the billionaire vice-chairman of Berkshire Hathaway, declared that we should "thank God" for the bailout of Wall Street, and ordinary Americans in financial distress should just "suck it in and cope". In another interview, Benmosche declared that the retirement age should go up to 70 or even 80.

The thing is, by and large, the wealthy have got their wish. Our so-called recovery has done nothing much for ordinary workers, but incomes at the top have soared, with almost all the gains from 2009 to 2012 going to the top 1 per cent, and almost a third going to the top 0.01 per cent - people with incomes over US$10 million.

So why the anger and whining? Well, I have a theory. When you have that much money, what is it you're trying to buy by making even more? You already have the multiple big houses, the servants, the private jet. What you really want now is adulation; you want the world to bow before your success.

It is, of course, incredibly petty. But money brings power, and thanks to surging inequality, these petty people have a lot of money. So their whining, their anger that they don't receive universal deference, can have real political consequences. Fear the wrath of the .01 per cent!

The New York Times


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