/ 16 November 2012

The world’s megarich keep getting richer

Mexican telecommunications and retail tycoon Carlos Slim Helu.
Mexican telecommunications and retail tycoon Carlos Slim Helu.

But it is still one economists have sought to answer and perhaps the best measure – as defined by Adam Smith – is based on annual income as a multiple of the average wage of ­fellow citizens.

The answer then is Carlos Slim, the tele-coms tycoon whose £53-billion fortune is equal to that of an incredible 400 000 of his fellow Mexicans.

There has always been a gap between rich and poor, but the gulf has widened into a chasm over the past few ­decades. Creaming off more and more wealth is a new elite – a transglobal class of mainly self-made men carving out unimaginable fortunes. They are the subject of Plutocrats: The Rise of the New Global Super Rich, a timely and absorbing analysis by former Financial Times deputy editor Chrystia Freeland.

Forget the 1% targeted by the Occupy mob. Freeland is talking about the 0.1% who look down with disdain at the paupers scrabbling around on a few million a year. She quotes another shocking sign of our times: three decades ago the average United States chief executive made 42 times as much as the average worker; today this ratio is an obscene 380. And bear in mind that the richer you are, the smaller proportion of your income you tend to pay in tax, with the levels diminishing at the top of the tree.

Freeland charts the rise of this class by examining global trends and exploring the consequences of the creation of such a money-laden elite, shifting smoothly from dense academic studies and interviews with George Soros to grappling with the success of Lady Gaga.

First fortunes
So who are these people? They are nearly all men, for a start, sacrificing family life in their search for a fortune. One executive who spends  a third of the year in transit said forlornly: "We are the people who know flight attendants better than we know our own wives."

Often middle class and frequently mathematicians, they make their own money rather than inheriting it. They go to the top universities and create their first fortunes early.

Unsurprisingly, bankers and financiers dominate this club, followed by the technology titans, but – like pilot fish feeding on the leftover food from sharks – the likes of lawyers and even dentists who service their needs can join their ranks.

Freeland's findings are fleshed out with fine research, strong statistics and neat nuggets of information. She argues that technology and globalisation are creating winner-take-all superstars in many sectors who join a cosy, conformist bubble.

Public discourse
Freeland highlights the danger when a small, self-serving and self-satisfied group dominate public discourse, then seek a system tilted even more in their favour. Yet these super-elites are not evil people; they genuinely think what is good for them is good for the rest of society.

The irony, as she points out, is that a big intrusive state is often the plutocrat's best friend, whether it is a state capitalist regime such as China or the protectionist capitalism of the West.

As the financial meltdown showed, the best brains follow the money, so the regulators – earning a fraction of the immense incomes enjoyed by bonus-chasing bankers – were no match for the global behemoths.

These megarich plutocrats proclaim free market values, yet lobby hard and often successfully to bend markets in their favour, devastating the traditional middle classes and dislocating social mobility.

In so doing, they are destroying the very things that gave birth to so many of them – to the detriment of all. – © Guardian News & Media 2012