Romney or Obama: does it matter in terms of global economic impact which one wins?
Absolutely. This is a seminal election in the United States. Romney and Obama have very different economic visions. Both because the US is the world’s largest economy and because the US can still determine the world’s ideological weather, this election matters greatly for the world, too.
You’ve studied the rich. Are they that different?
Very much so. As Hemingway legendarily quipped in reply to F Scott Fitzgerald, the big difference is that they have more money! In recent decades, though, that distance has become a yawning chasm, as those at the very top of the income distribution have pulled away from everyone else. But today’s global super-rich aren’t the leisured, hereditary gentry of yesteryear. They are, in the words of Berkeley economist Emmanuel Saez, “the working rich”. In an inversion of our historical expectation, those at the very economic summit work longer hours than those lower down. They are comfortable with risk. They are highly numerate. Call it the rise of the alpha geeks. And at the very highest levels of money, they are almost all men.
Can capitalism be reinvented?
It must be! Capitalism today isn’t delivering for the middle class – middle-class jobs are being hollowed out and incomes are stagnating. As we did after the Industrial Revolution, we need to invent new social and political institutions to accommodate the powerful economic change being driven by the technology revolution and globalisation.
Does it matter that inequality within countries has grown if inequality between countries has narrowed?
That’s one of the central questions. One of the plutocrats I spoke to suggested that if three or four people join the middle class in India or China and one person drops out of the middle class in the West, that’s not such a poor trade. And, indeed, one reason I’m a big fan of globalisation is that it is pulling some of the world’s poorest people out of poverty. But that doesn’t mean we should be sanguine about the plight of the Western middle class. We also should be thoughtful about a world in which the super-elite’s economic interests have diverged sharply from those of the middle class in their putative home country.
Isn’t greed good if it leads to more philanthropy?
Charity is a virtue, particularly when it is used to support causes you personally favour. But we should be wary of the nascent idea of the “self-tax”. This line of thinking, which was introduced to me by Wyoming financier Foster Friess, who bankrolled conservative politician Rick Santorum in the Republican primaries, is that philanthropy is a fine substitute for paying taxes – it is a “self-tax”. Friess believes self-taxation is better than state taxation because it is more satisfying to spend your money on causes you believe in, rather than ones the state chooses.
The current UK Government is derided for being full of out-of-touch “toffs”. Does it matter if leaders are drawn from a narrow social grouping?
It certainly does. Behavioural economists have shown that human beings have a powerful capacity to rationalise the pursuit of their own self-interest by seeing it as serving the common good. When a country’s leaders are drawn from a narrow class, they are likely to act in the interest of that class – even as they sincerely believe that they are implementing policies that serve the national interest.
Would you make the super-rich pay more tax?
Yes. Warren Buffett shouldn’t pay taxes at a lower effective rate than his secretary. Mitt Romney’s effective tax rate should be far higher than 14 per cent.
Is the emergence of a global super-elite good or bad for societies such as Britain and the US?
What is bad is that the rise of the super-elite and the hollowing out of the middle class are two sides of the same economic coin. We need to make capitalism work for everyone. And we need to be alert to the inevitability that vast disparity in economic power will create vast disparities in political power. For the super-elite, the temptation to tilt the rules of the economic game further in their own favour will be hard to resist.
Are you encouraged by the emergence of a new middle class in parts of Africa and Asia?
Very much. This is one of the most encouraging transformations of our time. But we should also not overlook the fact that, just as the Western world experienced surging inequality and winners and losers during its own age of rapid industrialisation, the economic rise of the emerging markets is internally uneven and brings with it tremendous social and political tensions.
Do we need quotas to get more women into corporate power roles?
No. But we have to do a much better job of teaching our daughters maths and science and encouraging them to be comfortable being aggressive, taking risks and making mistakes.
Chrystia Freeland is the author of ‘Plutocrats: The Rise of the New Global Super-Rich’, published by Allen Lane