When Tom Perkins, the billionaire co-founder of the venture capital firm Kleiner Perkins Caufield & Byers, warned in a letter to the Wall Street Journal that the “demonization of the rich” in America was comparable to the anti-Semitism that led to Kristallnacht, the coordinated attacks on Jews in 1938 Nazi Germany, the ensuing uproar led even his old firm to disavow his views.
Perkins’s ignorant comments reflect a spreading disquiet among the super-rich that populist attitudes may be getting out of control. Bankers such as Sergio Ermotti, chief executive of UBS, complain about people “constantly bashing banks.” After New Yorkers elected as mayor Bill de Blasio, who pledged to raise taxes on the wealthy to pay for universal pre-school, residents of the ultra-affluent Upper East Side neighborhood claimed that de Blasio ordered snow plows to avoid the area during a recent storm. Home Depot co-founder Ken Langone said that Pope Francis’s broadsides against inequality would reduce donations to the Catholic church.
But it is inequality, not populism, that continues to spiral out of control. Billionaires attending the annual World Economic Forum (WEF) gathering in Davos, Switzerland were greeted with an Oxfam report revealing that the 85 richest people in the world have as much wealth as the 3.5 billion poorest, or one half of humanity, and detailing the “pernicious impact” of the yawning disparities. Academics, including Nobel Prize winner Joseph Stiglitz, argue convincingly that the extreme inequality contributes directly to global stagnation. And even the WEF’s own poll of movers and shakers this year named the growing wealth divide as the leading geopolitical risk. President Obama has chimed in as well, terming inequality the “defining challenge of our time.”
In the United States, the rich, not the poor, are winning big. The obscene tax break for hedge fund operators still exists. The wealthy, such as Mitt Romney, still pay lower tax rates than their secretaries. Corporate and personal tax havens abroad still shelter trillions from taxes. Our perverse system of rewarding chief executives still bloats their salaries. The president is still promoting trade pacts negotiated in secret with corporations at the table. In reality, Jason Furman, head of the President’s Council of Economic Advisors, was surely right to scorn talk of what Perkins called “a progressive war on the rich” as “hyperventilation.”
Ermotti’s hapless plea that “no one is perfect” ignores the reality: The bankers helped blow up the economy and got bailed out. They engaged in what seems to be an unending list of criminal and fraudulent schemes, yet no leading bankers have been called to the dock.
Perhaps the poster child of this is JPMorgan Chase’s Jamie Dimon, once known as President Obama’s “favorite banker.” On his watch, JPMorgan has settled claims ofdefrauding homeowners,breaking sanctions against Iran, turning a blind eye to Bernard Madoff’s Ponzi scheme, fleecing U.S. soldiers and more. In the past year alone, JPMorgan forked over more than $20 billion in fines and penalties. Yet with no one personally held responsible, this seems merely a minor cost of doing business. Certainly Dimon’s board of directors thought so, giving him a 74 percent pay increase a few weeks after the settlement was disclosed.
So why are the rich so rattled? Surely part of it is awareness of what they have gotten away with. They waged class warfare, as Warren Buffett noted, and they won. They rigged the rules and made out like bandits. And, like bandits, they look over their shoulder constantly, worried there must be a posse out there somewhere.
The best, like Pimco’s billionaire head Bill Gross, argue that they should just turn themselves in, realizing the “era of taxing capital at lower rates than labor should now end,” and that the “privileged 1 percent” should be thankful for “how much of the national income you’ve been privileged to make.”
And, as the old saying goes, just because you are paranoid doesn’t mean you don’t have enemies. If the Justice Department has been moribund, some state attorneys general, including New York’s Eric Schneiderman, have fought to hold the predatory accountable.
The president may describe inequality as the result of impersonal forces — globalization, technology. But some senators — Elizabeth Warren (D-Mass.), Sherrod Brown (D-Ohio) and Bernie Sanders (I-Vt.) — are starting to name names, to show how the rules have been rigged and who did the rigging.
The Davos crowd may be right to worry. The small “d” democratic efforts to call the rich to account, to rescue democracy from the plutocrats, to rebuild an economy that works for working people have only begun. Occupy Wall Street put the issue on the table. And the young people graduating into the most unequal economy since the Great Depression might just make this the moral cause of their generation. But the plutocrats may want to listen to Bill Gross and get in front of the crowd before it runs them over.