Header graphic for print
China Law Blog China Law for Business

On The Global Classes. Et Tu China?

By Dan Harris on Posted in Recommended Reading

I have been sitting on this Atlantic Magazine article for too long. When I first read it, I found it mostly true and I knew it to be important. I was planning to write a long post on it, but I kept finding myself tongue-tied for words and eventually concluded that I am not qualified to write on it as I am neither an economist or sociologist.

The article is entitled “The Rise of the New Global Elite” and it is written by Chrystia Freeland. It has the following subtitle:

Scott Fitzgerald was right when he declared the rich different from you and me. But today’s super-rich are also different from yesterday’s: more hardworking and meritocratic, but less connected to the nations that granted them opportunity—and the countrymen they are leaving ever further behind.

Though I have nothing of any substance to say on this article, I want people to read it and, of course, comment below.  In other words, what do you think? And where does China fit into all this?

  • CeCe

    That is a good article. Thanks for running it.

  • LH

    Yeah, I saw that article when it came out and thought it was very good, as a lot of Atlantic articles are.
    This phenomenon is at the root of what’s ailing the US economy IMO. A lot of so-called “American” companies are no longer American in any meaningful sense; they spend most of their payroll and earn most of the revenue outside the US. This has become true of all the big technology companies in the US. And it’s natural that the same point of view is taken on by those who run and work for those companies. So the trade policy and other economic policy they push naturally doesn’t have the interest of the US as its focus; it has the interest of international business as its focus. And the gov’t of the US is nonplussed. The gov’t was never staffed by business genuises in the first place, but at this moment they (gov’t) are weirdly disconnected from economic reality in the US. It’s interesting but devastating at the same time. On the Chinese side the gov’t is so much better tuned in to the realities of international business.
    -LH

  • Eric Lindo

    You’re Talking about Writing. I prefer Hemingways real adventures to be honest.

  • http://buxiebuxing.livejournal.com Phil

    Ugh.
    Sociologically, clearly all true. Today it’s possible to move around the globe, and therefore a group of people has emerged who move around the globe a lot. I kind of count myself as one of them, and I’m not even super rich.
    But the economics is horrible. First there’s the rather starry-eyed gushing: “Its members are hardworking, highly educated, jet-setting meritocrats…”
    Then there’s the joyless fetishisation of absurd numbers: “Stephen Schwarzman, one of the firm’s two co-founders, came away with a personal stake worth almost $8 billion, along with $677 million in cash; the other, Peter Peterson, cashed a check for $1.88 billion and retired.”
    Then there’s the logical FAILs: “Carnegie…hospitals, concert halls, libraries, and university…Nobel…What is notable about today’s plutocrats is that they tend to bestow their fortunes in much the same way they made them: entrepreneurially.” Er, you’ve just named two historical rich people who were incredibly innovative and, yes, entrepreneurial about using their wealth… what’s the contrast you’re trying to draw here?
    And finally, the Ayn Rand Prize for I Did It All Myself: “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.””
    Yes, that’s right, anonymous quote guy. Income is all about your individual value as a human being. And if you can’t screw on widgets as fast as a poor guy in China, you’re not delivering the value. Forget institutions and growth models and civil societies and culture and politics and justice and the labour movement and the history of the 20th century. If the American middle class can’t get its act together and behave like the Chinese, NOW, then we should take away their toys.
    What’s depressing is that this is the new “common sense”. People actually believe this crap.

  • Twofish

    LH: This phenomenon is at the root of what’s ailing the US economy IMO. A lot of so-called “American” companies are no longer American in any meaningful sense; they spend most of their payroll and earn most of the revenue outside the US.
    And this is to be expected. The US makes up 5% of the world population. It had a two decade run where the US was running the world, but that period of history has ended.
    One issue here is how local interests work in a global economy. For example, I am a US citizen, and if there is a proposal that will move US jobs to India, then I’m going to do what I can to keep those jobs in the US. The trouble is that a lot of the people involved in making these sorts of decisions are Indian, so they are going to be extremely happy if those jobs move from the US to India. Other people involved are from countries other than the US or India. A citizen of France is going to care if French jobs move to India, but there is no particular reason for him to keep American jobs in the United States, since he is French. So what ends up happening is that “national interests” get ignored and the decision is based on economics. After all, why should the Indian or Chinese governments have a particular interest in the fate of US workers?
    The other issue is a particular issue in the US is that a lot of the people that support low taxes and worship the super-wealthy are people that aren’t that rich themselves. One thing that I’ve noticed is that people with extremely large amounts of money tend to support tax increases more than “wannabee super-rich.” If it really was the super-rich versus everyone else, the super-rich would lose because they don’t have enough votes. The fact that people are voting for candidates that are opposed to higher taxes means that there is something more complicated going on. It could be that the super-wealthy are brainwashing people through control of the media, but that implies extremely large number of people that are willing to be brainwashed.
    The other issue is that it’s just not the case that people in the super-elite agree with each other. “I’m one of you” is one of the more common lies that politicians tell. Any US politician that has a viable chance of becoming President is a member of the super-elite, and Obama and Rick Perry really do disagree on some fundamental things.

  • LH

    @Twofish: “And this is to be expected. The US makes up 5% of the world population. It had a two decade run where the US was running the world, but that period of history has ended.”
    But whether a company is American or not has nothing to do with world domination, haha. When the US was a dominant power, there was Sony, but no one in the US regarded it as an American company and gave it special consideration in policy matters because it was an American company (because it wasn’t). There will always be American companies, e.g., local small businesses. They are undoubtedly American, even if the US is a minor power.
    The thing that’s gone wrong IMO is that many big companies with headquarters in the US and that started out as American companies by any and every reasonable definition, have morphed into something entirely different. GE, Apple, many others fall into this category. They are American in name and were once upon a time undoubtedly American companies but they aren’t any longer. And yet they have tremendous influence of trade and tax policy in the US. This doesn’t make any sense and it’s hurting the country enormously.
    It’s exactly as you say, national interests get ignored, but the thing is that as laws are put together at present in the US, the national interest is not even represented in the process. *That’s* the thing that’s so different to China and India; in the case of both those countries, the gov’t is very actively engaged in industrial policy on behalf of national interests. In the US, to the extent that the gov’t is engaged, it is so on behalf of corporate interests but the US national interest is badly underrepresented.
    -LH

  • MHB

    The UK has a top rate of income tax at 50% for annual earnings over £150,000 (roughly US$230,000 or RMB 1.5 million). The current right of centre government hates this – but the present social inequality makes it a politically difficult tax to remove.
    They are researching and proposing that the deterrent value of this high rate tax outweighs the income benefits. High earners can pick and choose – they can live where they please. Why should they pay tax to the UK government?
    The papers are full of arguments which can basically be described as blackmail – if you keep this tax, the rich won’t pay (by moving abroad).
    Similar arguments are run by the banks – if you increase regulation, profits will drop (and so will the economy and tax receipts).
    The supremacy of the banks and of the rich is unchallenged. The government is powerless if the banks and the rich don’t make profits. The government needs profits for tax, it needs rich residents for tax.
    The mobility of capital poses a big problem for nation states – can they survive with this parasitic model?
    The China model is different – the government is involved in business. The Party is pervasive. It is not yet powerless against profits, but it has yet to experience a recession.

  • James G

    @Phil,
    Fantastic and insightful comment. Careful saying that though: when discussing globalization, anything other than getting out the incense and knee pads is considered flat earth theory these days.

  • James G

    @Twofish
    As to your comment about why the “wannabe super-rich” support tax increases more than the super-rich themselves do, what do you think about the idea that taxes are (in the eyes of many Americans) a direct assault on their “freedom” and support for freeloaders, ne’er-do-wells, and (other people’s) pork projects?
    I think that even the hard-core taxistas are quite willing to pay higher taxes if you frighten them about the right boogeyman first, and then you charge them indirectly.

  • http://wasatchecon.com Scott Peterson

    This sentiment is contemptible:
    “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.” ”
    In many cases, “adding value” amounts to engaging in regulatory arbitrage; that is moving production to countries where environmental and worker protection laws are non existent or scarcely enforce.

  • http://wasatchecon.com Scott Peterson

    This part of the article:
    “For the super-elite, a sense of meritocratic achievement can inspire high self-regard, and that self-regard—especially when compounded by their isolation among like-minded peers—can lead to obliviousness and indifference to the suffering of others.
    Unsurprisingly, Russian oligarchs have been among the most fearless in expressing this attitude. A little more than a decade ago, for instance, I spoke to Mikhail Khodorkovsky, at that moment the richest man in Russia. “If a man is not an oligarch, something is not right with him,” Khodorkovsky told me. “Everyone had the same starting conditions, everyone could have done it.” ”
    is utter rubbish. Russian oligarchs gained their wealth from a criminal manipulation of a “privatization” process that the well connected and ruthless in a post Soviet Russian crisis of governance.