The damaging power of the .01 percent

Alas, great wealth doesn't bring great wisdom.

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Tuesday, June 25, 2019

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A flurry of new skyscrapers are reshaping the New York City skyline. Karsten Moran for The New York Times

Paul Krugman

Opinion Columnist

The other day a student attending Inequality by the Numbers, a week-long workshop run by CUNY's Stone Center for the Study of Socioeconomic Inequality, asked me a very good question: Why do we talk about the "1 percent"? The phrase is often used as shorthand for the economic super-elite, the kind of people who get flown by private jet among their multiple mansions. Yet the threshold for the statistical 1 percent is only around $400,000 a year.

No need to feel sorry for that class of people, who experience a level of comfort, even luxury, and security unimaginable to, well, 99 percent of the country. But membership in the plutocracy comes with a much higher price tag. What people really mean when they talk about the 1 percent is actually more like the 0.01 percent, a few thousand people who really do live in a different social and material universe from the rest of us.

To some extent this was always true; America has never been an egalitarian society. Even during the 1950s and 1960s, when we considered ourselves a middle-class nation, the incomes of the top 0.01 percent were more than a hundred times those of typical families. But now the ratio is more like 400 to 1. And this growth in disparities hasn't just enhanced the elite's purchasing power, it has expanded its political power too.

As Benjamin Page, Jason Seawright and Matthew Lacombe point out in their excellent book "Billionaires and stealth politics," most of this power is deployed quietly. There are some liberal billionaires like George Soros and Warren Buffet, but they're quite atypical both for the positions they hold and for their willingness to talk publicly about their views. Most billionaires are quietly deploying their wealth on behalf of tax cuts for themselves and benefit cuts for the poor and middle class, unpopular causes that nonetheless have a tendency to flourish politically. Funny how that works.

But it's not just that the 0.01 percent can buy political influence. Often it's able to set the terms of policy discussion.

Over the weekend I decided to write down some musings on how this happened in the aftermath of the 2008 financial crisis, when somehow what I used to call the Very Serious People decided that fighting mass unemployment wasn't a priority, but "entitlement reform," a.k.a. cuts to Social Security and Medicare, was. Somehow my musings turned into an 1800 word blog post. The tl;dr version is that many journalists and "centrists" internalized the interests and preferences of the wealthy, and imagined that they defined the limits of sound policy.

Unfortunately, far from leading to sound policy, the obsession with deficits and social spending was deeply destructive, keeping unemployment much higher for much longer than necessary.

Will something like this happen again? Definitely — if not during the coming presidential campaign, then for sure if a Democrat wins the White House.

So be prepared, and always remember: the rich may be different from you and me, but they aren't any wiser, and there's no reason to believe that what's good for billionaires is good for America.

An aside: If you're looking for some midday entertainment, tune into a Twitter chat at 3 p.m. Eastern time with Cory Doctorow, who just penned this Op-Ed from the future, "I Shouldn't Have to Publish This in The New York Times"

Quick Hits

The America I grew up in was a lot more equal than today's society. But I have to admit that the food was terrible.

No, really, the rich are different. Most Americans get the bulk of their income from wages. The top 0.1 percent mainly lives off capital and business income.

The stunningly unequal consequences of the economic crisis in Spain, which is sometimes described as a euro success story, since the economy did finally more or less recover.

The team of wonks behind Elizabeth Warren's policy agenda.

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