The Plutocrats by Chrystia Freeland

The title is alluring and readers may expect a Hello magazine or Tatler coverage for describing the lives of the rich and famous. At the outset I felt that the author might be heading this way. I could not be more wrong.

Chrystia Freeland is a scholar of economics, business and political economy and has turned her attention to explain how and why certain people, mainly males, have become so successful in the current industrial revolution based on financial services and communications.  She is also a first rate journalist and explains certain workings of the global economy with a clarity seldom achieved by academic economists.

For more general reviews the reader can consult those posted on Amazon or published in papers like the Daily Telegraph and Globe and Mail. The following comments address several specific topics.

Laws, regulations and policies to  prevent a repeat of mortgage lending practices and the credit default swap fiasco have yet to be implemented, namely Basel III, or US Congressional legislation. Both are being strongly opposed by the financial institutions responsible for the crisis in the first place. The plutocrats who caused the problems either deliberately or in ignorance are leading this opposition.

Freeland notes how the regulatory gamekeepers in the US are both outwitted and outpaid by the financial poachers they oversee. If and when the new policies are in place, there is little hope that the gamekeepers will do much better. Only when the financial executives suffer serious personal and corporate financial loss is there a possibility that change will occur; of course, corporate loss will be at the expense of shareholders and deposit owners, namely us.

In the past extreme income inequality  lead to revolution, the French for example which provided a lesson to others to amend their political and economic ways. Introduction of welfare state measures in democratic countries provides one example of the responses.

Could there be revolutionary forces today? Most commentators are too polite to raise the issue, but signs exist. The Tea Party Movement, Occupy Wall Street, UK, French and Canadian student protests against fee increases, aboriginal protests in Canada and social unrest expressed on the web are all signs of unrest which could mushroom. Public protests in Spain and Greece are occurring for economic reasons. The Arab Spring in North Africa and the Middle East are other signs, although for different reasons. Protesters around the world can now both watch and communicate with each other which creates opportunities for revolutionary contagion.

The plutocrats seriously believe that what serves their industry interests serves the country’s interest as well, known as cognitive capture. When you have lived and worked in one industry only, this is what tends to happen. The same is probably true for other occupations, school teachers and university professors included. The latter defend the restrictions resulting from tenure as being in the national interest. Interestingly this will be undermined as courses increasingly go online. In one high school I visited in Singapore, the students are organizing online courses and instruction, to the consternation of their teachers. More widely the online offerings by Coursera are worth watching.

This book raises the question of whether market capitalism contains the seeds of its own destruction. I read this book and watched a  DVD of The Inside Job shortly afterwards. The combination is not comforting. The hope is that the period since 2007-08 is an aberration in a longer period of postwar relatively stable economic growth. What may turn the dial to lessen growing inequality is global communications which allow the many to challenge the few in a way Russia, China and North Korea are finding difficult to stop. The political plutocrats have as much to be concerned as the financial ones. Online activism is a new force. How it will play out is unclear.

Freeland is an admirer of Mark Carney and his handling of the financial tycoons. Both Carney and Freeland were born in northern Canada. Freeland is of Ukrainian heritage with a degree from Harvard, a Rhodes scholar and Phd from Oxford. Both are citizens of the world worth listening to about conditions today. Carney may have the harder time in managing events as Governor of the Bank of England. Freeland will be there to tell us.


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