Book Review: Plutocrats Again

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland probably didn't restructure my world view quite so drastically as Guns, Germs, and Steel but it is another book packed with deep insights into the way today's world works. Freeland knows her subjects very well, and has spent a couple of decades observing them. It is by no means a "life-styles of the rich and infamous" book, though there is a sampling of that, but rather, a detailed economic history.

It's pretty clear that she combines a certain admiration for their intelligence, diligence and entrepreneurial spirit with a well-justified suspicion of the risks their ascendancy poses for the rest of us. I have written extensively on her ideas in these previous reviews, but her final chapter deserves some additional commentary.

It's theme is the natural human tendency of those who have scaled the heights to pull up the ladder after them, and the method is to seize control the levers of power in the state and cultural institutions. It's not a new trick. She illustrates her case with the story of the rise and fall of the trading empire of Venice.

In the early fourteenth century Venice had become the richest city in Europe.

Venice owed its might and money to the super-elites of that age, and to an economic and political system that nurtured them. At the heart of the Venetian economy was the commenda, a basic form of joint-stock company that lasted for a single trading mission. The brilliance of the commenda was that it opened the economy to new entrants. It was a partnership between a “sedentary” investor, who financed the trip, and a traveler, who did the hard and risky work of making the journey.

Freeland, Chrystia (2012-10-11). Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (p. 278). Penguin Group. Kindle Edition.

This system led to high social mobility, as reflected in the records of the city, but the wealthy of the day could not resist pulling up the ladder. The paths to economic and social power were closed off to all but their descendants, and the economic disintegration of Venetian power commenced. Adam Smith warned that the capitalists would be unable to resist trying to undermine the market, and Marx counted on that inclination to destroy capitalism. Well, it hasn't, at least not yet.

Marx understood the dangers of a capitalist Serrata— indeed he was counting on it. “The capitalist system carries within itself the seeds of its own destruction,” he famously argued. Marx predicted that the rising capitalist class, like the shortsighted Venetian elite, would overreach itself and create a system that so effectively consolidated its supremacy that it would eventually choke off economic growth and become politically unsustainable. The most astonishing political fact of the past two centuries is that that didn’t happen. Unlike the Venetian elite, Western capitalists submitted themselves to creative destruction, to the competition of new entrants, and created ever more inclusive economic and political orders. The result is the most vigorous era of economic progress in human history.

Freeland, Chrystia (2012-10-11). Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (p. 284). Penguin Group. Kindle Edition.

We would wise to limit the power of the Plutocracy precisely to make sure things stay that way.