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US 'top dogs' in denial over public anger
Chrystia Freeland in New York | March 27, 2009
It has been a good week for US plutocrats and technocrats. The Andrew Cuomo-prompted give-back of the bulk of the $165m in AIG bonuses appeased the angry, anti-bankster mob, and probably its congressional backers, too, and Wall Street's warm reception of the latest iteration of Tim Geithner's toxic debt plan gave the under-staffed Treasury a much-needed public win.
But when Barack Obama, the President, meets the nation's financial titans on Saturday, US populist rage should still be at the top of the agenda. This week was just a lull in the storm: the nation's widespread and deeply felt anger at financial capitalists and capitalism remains the new and dominant fact of the country's political life. So far, neither Washington nor Wall Street seems to have fully grasped this political sea-change, or figured how to deal with it.
Part of the problem, as Congressman Barney Frank, the Massachusetts Democrat, told me, is that elite and mass opinion in the US are sharply and dangerously divided, a cleavage he sees as deep as the more frequently discussed partisan split. From the perspective of the nation's elite - not just the Greenwich, Connecticut, fund manager, but also the Stanford professor and the DC think-tanker - this new populism is irrational, inchoate and illegitimate.
On this view, the angry citizenry - and the ignorant lawmakers and red-veined pundits stepping up to voice the popular rage - just don't understand. Ordinary citizens do not comprehend obvious elite truths such as the financial crisis was a systemic failure, not a personal one, that Wall Street wizards need to be paid as much to unwind the mess as they earned creating it, and that saving the system as a whole is a more worthy and urgent task than punishing individual miscreants.
We shouldn't be surprised by this incomprehension of the wider public's anger. The US's national mythology remains firmly anti-elitist. Politicians, especially patricians such as the last president, have long found a man-of-the-people schtick to be essential political armour. Even the current president only gets away with his egg-head tendencies by also playing up his devotion to ESPN and basketball and his own humble roots.
Wall Street's masters of the universe are equally adamant about claiming their popular credentials. Phil Falcone, one of the five top-earning hedge fund managers summoned to appear before congress last autumn, prefaced his testimony with a lengthy description of his humble and provincial childhood. Jake DeSantis, the AIG executive who this week very publicly refused to give back his bonus (he is donating it to charity instead, which you could argue amounts to much the same thing), took care to inform the country of his school-teacher parents and student-loan financed education.
The US's top dogs, they all would have us know, are meritocrats, not aristocrats. Their money, power and influence are the fruits of smarts, hard work and chutzpah, not an accident of birth. There is a lot of appeal - and some truth - to the country's mass self-characterisation as a nation of Horatio Algiers.
But this populist iconography obscures the statistical fact that, over the past quarter century, US life has become much more stratified, especially at the very top.
You may have gone to a public school and your parents may not have earned much more than the minimum wage, but if a combination of luck and talent have made you a plutocrat, your life experience is separated from that of ordinary citizens by a far wider gap than at any time since the Gilded Age.
That divide is relatively new - for much of the 20th century the US became more, not less, economically equal - and in recent years it was obscured by the easy money that allowed even some of the poorest to aspire to a plutocratic lifestyle. Those NINJA - "No-Income-No-Job-or-Assets" - home loans and that abundant credit card debt obscured the effects of income inequality for many middle class citizens.
One of the important political consequences of the financial crisis has been to shatter that debt-fuelled illusion. As a result, fairness and yes, even equality, have become more important to ordinary people than at any time since the Great Depression. Like all political revolutions, the privileged class is finding it hard adapting to this shift. But ignorance is dangerous: in the days after the Bolshevik revolution, Russia's bourgeoisie didn't think much had happened, either, and stock prices held steady on the Petrograd exchange.
Copyright The Financial Times Limited 2009