Full Show: Plutocracy Rising
BILL MOYERS:
This week on Moyers & Company…
MATT TAIBBI:
We have this kind of community of rich people who genuinely believe that
they are the wealth creators and that they should get every advantage
and break whereas everybody else is a parasite and they're living off of
them.
CHRYSTIA FREELAND:
How dare they have the gall to actually argue that too much regulation
of American financial services is what is killing the economy.
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BILL MOYERS:
Welcome. The new Gilded Age is roaring down on us, an uncaged tiger on a
rampage. Walk out to the street in front of our office and turn right
and you can see the symbol of it: a fancy new skyscraper going up two
blocks away. When finished, this high rise among high rises will tower a
thousand feet, the tallest residential building in the city.
The New York Times has dubbed it "the global billionaires
club," and for good reason. At least of two of the apartments are under
contract for more than $90 million each. Others, more modest, range in
price from $45 million to more than 50 million.
Simultaneously, the powers-that-be have just awarded Donald Trump --
yes, that Donald Trump -- the right to run a golf course in the Bronx
which taxpayers are spending at least $97 million to build. What
“amounts to a public subsidy,” says the indignant city comptroller, "for
a luxury golf course." Good grief. A handout to the plutocrat's
plutocrat.
This, in a city where economic inequality rivals that of a
third-world country. Of America's 25 largest cities, New York is now the
most unequal. The median income for the bottom 20% last year was less
than $9,000, while the top one percent of New Yorkers has an average
annual income of $2.2 million.
Across America, this divide between the superrich and everyone else
has become a yawning chasm and studies indicate it may stifle jobs and
growth for years to come. At no time in modern history has the top one
hundredth of one percent owned more of our wealth or paid so low a tax
rate. But in neither of the two presidential debates so far has the
vastness of this astounding inequality gap been discussed. Not by Mitt
Romney, who is the embodiment of the predatory world of financial
capitalism. And not even by Barack Obama, whose party once fought for
working men and women against the economic royalists.
So just in time, if not too late, comes this definitive examination of inequality: Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.
Its author is Chrystia Freeland, whose journalism is steeped in years
of covering robber barons from Russia to Mexico and India. Once deputy
editor of The Globe and Mail in Canada and a correspondent for The Financial Times and The Economist, she is now the editor of Thomson Reuters Digital.
We're joined by the perceptive and merciless Matt Taibbi, who has made the magazine Rolling Stone
a go-to source for understanding the financial scandals that roil
America. Who can forget his 2009 article on "The Great American Bubble
Machine," which described investment bank Goldman Sachs as quote, "a
great vampire squid wrapped around the face of humanity, relentlessly
jamming its blood funnel into anything that smells like money”?
Welcome to you both.
MATT TAIBBI:
Thank you.
BILL MOYERS:
Income inequality has soared to the highest level since the Great
Depression, with the top one percent taking 93 percent of the income
earned in the first year after the recovery, the first full year after
the recovery. Why are the two candidates not talking about inequality
growing at breakneck speed?
CHRYSTIA FREELAND:
You know, I think because it is still a taboo in American political life
and in American cultural life. One of the economists I talk to he
works for the World Bank. And he said to me, you know, and he's a
specialist in income inequality.
And he said, "When you go to think tanks you say you'd like to do a
study about poverty, they say, 'That's fine. That's great. We're happy
to fund it,' because writing about poverty makes everybody feel good
and feel that they're being charitable and beneficent. But if you say,
'Actually, I want to study income inequality,' and even most
dangerously, 'I want to study what's happening at the very top of the
distribution," what Branko Milanović said to me is the think tanks
immediately pull away because they say, "Our donors won't like it."
And that actually challenges the whole economic setup of the United
States and of western capitalism. It’s very, very threatening. And I
think that that’s why you've had the billionaire class. You know, the
minute Barack Obama, I would actually say rather gently suggested that
the millionaires and the billionaires should pay a little bit more, you
had immediate cries of class warfare from the plutocrats.
And very emotional. You know, there was an activist investor who sent
an e-mail to his friends. The subject line is, "battered wives." And
in the e-mail he compares himself and his fellow multi-millionaires to
battered wives who are being beaten by the president. He actually uses
those words.
MATT TAIBBI:
And I thought it was really interesting in your book how you pointed out
that Bill Clinton, himself, responded to Obama's criticism by saying,
"You know, I would have done it a little bit differently. I think, you
know, you can't attack these people for their success." And I think
that's very relevant because if you go back in time, it wasn't always
this way.
But I think the shift really began with Clinton and the New
Democrats. I think after, you know, Walter Mondale lost in 1984, the
Democrats decided, "You know, we're never going to lose the funding
battle again." And they began this sort of imperceptible shift, where
they continued to campaign on social issues the same way they had
before.
They retained their liberalism in that sense. But economically, they
began to side more and more with Wall Street and more and more with the
very rich. And they've, I think we've now reached the point where
neither party really represents the very poor in the way that the
Democrats maybe used to. And so, that there's, that's why, you know,
you don't see it in the debates, because neither party is really an
advocate for that kind of left behind class anymore.
CHRYSTIA FREELAND:
It is the people at the bottom, as Matt says. But it's also the people in the middle.
MATT TAIBBI:
Right.
CHRYSTIA FREELAND:
You know, the middle class is being--
MATT TAIBBI:
Decimated, yeah.
CHRYSTIA FREELAND:
--hammered. Those jobs are hollowed out. And where are the people
pulling back and saying, "Okay, technology revolution, we love it."
Globalization, I love that too. And I think it's great people are being
raised up in India and China and now Africa. But let's think about how
our society and our politics need to change to accommodate this. And
no one is doing that. And meanwhile, the guys at the top, who are
making, who are doing so, so well actually are saying, "We need to slant
the political system even more in our own favor."
BILL MOYERS:
Why are we so passive about this?
MATT TAIBBI:
Well, I think the, first of all the poor in this country have been
incredibly demoralized whether it's the relentless attention of, you
know, bill collectors. Or if you go to poor neighborhoods, you know, I
was out in Queens last night interviewing a kid who's been stopped and
frisked 70 times already. He's 22 years old. You have this constant
interference by the police if you live in a bad neighborhood.
There're all these obstacles to getting up and rising up and having
your own voice. And also I think in the media we get these relentless
messages that being poor is actually your own fault and that people who
are rich deserve to be rich. And a lot of Americans are disillusioned
about their situation. They believe, they actually do believe on some
level that if they're poor, they deserve to be that way. I think
they're, and so they're reluctant to go out and revolt the way maybe
Europeans in the last century, early in the last century would have.
BILL MOYERS:
Left unanswered, left unanswered where does this vast inequality take America?
CHRYSTIA FREELAND:
Well, I think to a very bad place. And I see two real and present
dangers. One is that you see an increase of the political capture.
BILL MOYERS:
Of what?
CHRYSTIA FREELAND:
Of the political capture. So of the people at the very, very top,
capturing the political system. And most crucially, I think something
that an economist, a guy called Willem Buiter, who's the chief economist
at Citigroup, he calls it cognitive capture. Where he says, look, it's
not like this vast conspiracy. It's not as if, you know, everyone is
on the payroll of the plutocrats.
And this guy, okay, he is now the chief economist of Citigroup. He
wrote this when he was an academic economist. But so it's, he's hardly,
you know, some kind of Marxist on the barricades. His argument was
that part of the reason the financial crisis happened is the entire
intellectual establishment, not just people inside investment banks, but
regulators, academic economists, financial journalists, had all been
captured by the financial sector's vision of how the economy should
work. And in particular, light touch regulation.
And I think there is a broader cognitive capture of, you know, you
might call it the intellectual class, the public intellectuals, around
maybe the inevitability of plutocracy. You know, as Matt was saying,
this notion that if you're poor, it's your own fault. You're part of
this dependent 47 percent. Unions are very bad. All of that sort of
stuff.
So I think that that cognitive capture increases. And I think what
you see increasingly is, you know, elites like to think of themselves as
acting in the collective interest, even as they act in their personal
vested interest. And so what I think you'll end up seeing is social
mobility, which is already decreasing in the United States, being
increasingly squeezed. You see particularly powerful sectors, finance,
oil. I would say the technology sector is going to be next in line,
getting lots of government subsidies.
And meanwhile, I think you see much less money spent on the things
that the middle class and the poor need. That's why have this, you
know, full bore attack on entitlements, right? Why is the plutocracy so
enthusiastic about cutting entitlement spending? Because they don't
need it. But they're very worried about their tax dollars funding it.
MATT TAIBBI:
Right. Where was that outrage when the $5 trillion or $6 trillion in bailouts was coming their way?
CHRYSTIA FREELAND:
Right. So I really worry about that. And then the other thing that I
worry about is you do start actually stifling economic growth. So, you
know, if you want my dystopia scenario for the United States, it is that
America's moving into a more Latin American structure of the economy.
BILL MOYERS:
People at the top, rich. And a lot of people—
CHRYSTIA FREELAND:
A few incredibly rich, you know, having just great lives. And then people at the bottom really struggling.
MATT TAIBBI:
We both lived that. We saw that in Russia and it happened in the mid-'90s. And—
BILL MOYERS:
Yeah, you both cut your teeth in journalism covering Russia. What do you
take away from that that is relevant to what's happening in this
country?
MATT TAIBBI:
You know, I, that experience completely shaped the way I look at the
present situation in the, in America. In the mid-'90s, suddenly when
Russia became a "capitalist society" you suddenly has this instant
division of the entire society into this very, very tiny group of people
at the top who had more money than anybody in the world. And then
there was everybody else who had nothing. And—
BILL MOYERS:
And they got it through privatization, the government sold off the resources of--
CHRYSTIA FREELAND:
"Sold" in quotation marks--
BILL MOYERS:
Yeah. So--
MATT TAIBBI:
But that was, that's the key part that I think people don't understand,
is that what happened in Russian was really a merger of state and
private power that empowered this one tiny little class. There was this
moment in Russia's history called loans-for-shares. The
loans-for-shares privatizations, where a few people, a lot of them were
ex-KGB types, were essentially handed the jewels of Russian industry by
the people in the Yeltsin government. There were companies that were
put in charge of their own auctions. So they--
CHRYSTIA FREELAND:
They were all in charge of their own auctions.
MATT TAIBBI:
They were all in charge of their own auctions. So they, you would have
an auction for an oil company and a bank would be put in charge of that
auction. And the bank magically, you know, would win the auction for
the oil company, which was worth, you know, billions or even hundreds of
billions of dollars. And that's how they instantly created this super
wealthy class of people. And everybody else had nothing.
This one story, for me this image that I'll never forget. I went to a
coal mine up in the Russian arctic north where workers hadn't been paid
their salaries for nine, ten months at a time. And when I went to the
mine, the mine owners, the first thing they wanted to do was to take me
to their bright shiny new lounge that they had built for themselves and
show off their brand new slate pool table that they had built with the
money that they weren't paying to their workers.
And that, to me, perfectly expressed the divide in modern Russian
society. You had these people who were living off nothing on the one
hand. And then you had these super wealthy people who had been enabled
who had just kept the money for themselves. And that's I think, you
know, it's a caricature of what we're experiencing here in America. But
I think that's where the world is drifting toward now.
BILL MOYERS:
You write about some of these super rich, not only with insight, but
with empathy. That is, you've gotten to talk to a lot of them. You
have moved among them as a financial journalist, been to Davos and other
places like that. And I'm wondering, how did you crack what is clearly
a tight knit world?
CHRYSTIA FREELAND:
Well, I guess the way journalists do it, just by talking to people,
writing about them. I think you write stories that show people that
actually you're interested in what they're doing. And what I would also
say is, you know, I believe in capitalism. And I also actually believe
in globalization and the technology revolution. If you gave me the
option of turning the clock back to the 1950s, I wouldn't do it. Partly
because I'm a woman and things were not that great for us then.
BILL MOYERS:
Well.
CHRYSTIA FREELAND:
And, you know, it's important, you know, I think a mistake that the left
can make in criticizing income inequality is to behave as if this is
entirely a political confection. It's entirely about political capture.
There are no genuine, legitimate and actually benign economic forces
driving it. Because I think there are. I think the winner take all
economic dynamic is something that is existing separate from the
politics. The politics in the United States are exacerbating that
division rather than mitigating it.
But I do think that when you pull back and look at the global
picture, which is something that was important for me to do in the book,
it becomes a little bit harder to say, "this particular American tax
break," or even, "this particular American financial reform is the only
thing driving income inequality," because the really remarkable thing is
the extent to which this is a global phenomenon.
It's happening across the western industrialized world. I'm
Canadian. So I'm practically born a socialist in the view of many
Americans. But even in Canada, income inequality is increasing. It's
even, you know, for a while in the economic literature the one outlier
was France. And so, insofar as economists make jokes they would say,
"oh, the French. They have to be exceptional even in this area." But
now you're seeing it increase in France too. And you're seeing it
increase in the emerging market economies. So I think we do have to
accept that there are some economic drivers.
Now those economic drivers are partly put in place by the politics.
It was politics that allowed globalization to happen. And in the United
States really crucially, and I think you can't emphasize this too much.
Look at what happened with the tax code. I mean, in the 1950s, this
era when America felt itself to be a very conservative society, and it
was, the top marginal tax rate was above 90 percent.
BILL MOYERS:
Yeah, 91 percent, I believe.
CHRYSTIA FREELAND:
Right, just think about that. Imagine if Barack Obama had said in the
debate this week, "You know what Governor Romney? I think America in
the '50s was a wonderful place. That was the age of the greatest
generation. They, too, faced a real budget deficit they had to pay off.
And the people at the very top were willing to pay a 90 percent top
marginal tax rate. Would you be willing to do that, Governor?" I mean,
imagine if he had said that.
BILL MOYERS:
You cover some of the same crowd that Chrystia's writing about, but you
do so with a, with complete irreverence. Do you still gain access to
them? Or have all the doors been slammed in your face?
MATT TAIBBI:
Well, the very, very top people won't talk to me. You know, I don't
have access to the same people that Chrystia maybe talks to. But I do
talk to a lot of people who work on Wall Street. In fact I got started
down the road of this whole topic, you know, after I wrote a couple of
articles. And then suddenly on this there was this outpouring of people
from Wall Street who suddenly wanted to talk to me because they were
upset about the direction that the financial services industry was
taking.
So I'm hearing a lot from people sort of from the middle on down on
Wall Street. And what they're really upset about is corruption. Is
this merging of state and private power, where the losers don't lose
anymore. I think the people who get really upset are small hedge funds,
small banks. And they see companies like, you know, Citigroup and
Goldman Sachs and J.P. Morgan Chase make mistake after mistake. And
they get rewarded for it what with bailouts and even greater market
share than they had before.
And so, you know, my analysis is informed by those people. And I
think, you know, I think Chrystia and I agree about a lot of things
about, particularly about the growing divide and how extreme it's
become. My analysis just might be a little bit angrier just because
the, you know, from the point of view that I'm particularly looking at
is the corruption and the use of force and state power to keep divide
where it is and increase it.
BILL MOYERS:
You both have pointed out that we tend to talk as if Wall Street and the
plutocracy were a monolith. But it's not. Do you think there is a
civil war within the one percent?
MATT TAIBBI:
There is absolutely a schism developing in this community. Think about
it just on one level, on the level of banking, right? If you have these
too big to fail banks, everybody in the world knows that nobody's going
to l allow the very biggest commercial banks to go out of business. It
will never happen. 2008 proved it, that if they ever get in trouble
the government will come in and rescue them. So what does that mean for
those banks?
It means that it allows them to borrow money more cheaply because
anybody who lends them money knows they're always going to get paid off.
The government if, in the worst case scenario, they're going to get
paid off. So this gives them an inherent financial advantage over the
small, regional commercial bank, which does not have that implied
government guarantee. And so those people are furious.
They're furious that they have to compete against these gigantic
monoliths that have the implicit backing of the U.S. government. Then
there's the other problem of corruption. I mean, I hear all the time
from hedge funds you know, these smaller guys who believe that some of
the big investment banks are selling them out to even bigger hedge
funds, that are, you know, giving away information about their positions
to even bigger clients so that somebody else can trade against them.
Or maybe the banks themselves are front running their positions and
trading against their own clients. There's this schism developing
between the smaller guy the medium size financial player and the very,
very big too big to fail companies that are perceived as getting a
break, and getting the backing of the government. And also are
perceived as getting away with stuff that they wouldn't get away with.
CHRYSTIA FREELAND:
I agree with Matt. And I think what you’re really seeing , actually,
it's sort of the battle of the millionaires versus the billionaires
because this winner take all dynamic is not just between, you know, the
10 percent and the 90 percent or the one percent and the 99 percent.
What's quite interesting and leads me to really believe that there're
some deep economic forces involved is it's happening just as much
within the top one percent. We saw it in the recovery. You sited those
statistics, Bill, about 93 percent of the recovery going to the one
percent. Thirty-seven percent of the recovery went to the top 0.01
percent.
So even in there, there's, you know, even more of a gap. And the
people one layer down can be very, very aggrieved precisely because, you
know, they see what's going on. They see that unfairness. And it
makes them really, really mad.
You know, one of the things that I found as I was writing my book and
talking to plutocrats was, you know, as Matt says, these are very, very
smart people. And many of them, not all, some—
BILL MOYERS:
They work very hard too, don't they?
CHRYSTIA FREELAND:
This is not Downton Abbey. These are not people, this is not a landed
gentry. These are people who even, and even if they're sort of a Mitt
Romney or a Bill Gates who grew up very affluent, their actual business,
they did build themselves. They built in a society that was very
supportive of that, but they built it. So, you know, they're
hardworking. They have to be thoughtful about the world because they're
making investments.
And what I found was very interesting was they were very keen to
divide the world into the good plutocrats and the bad plutocrats. And
what was very funny was everyone was happy to make that division. But
everyone felt that they themselves and their particular type of business
belonged to good plutocrats, and somebody else belonged to bad ones.
So you talk to the Silicon Valley guys, they love talking about this,
especially after the financial crisis because their view was, "Of course
income inequality is a problem. Of course there has been state capture
by those bad guys in New York.
"We however, are the innovators. We created value ourselves. We are
completely pure and good. And these issues really have nothing to do
with us."
BILL MOYERS:
Do you think they think they're really defending honest capitalism?
MATT TAIBBI:
Oh, absolutely. I, you know, the one thing that's consistent in my
exposure to the financial services industry is that the people who work
within it, and particularly the people you know, at the very, very top,
sincerely believe that they have not done anything wrong. And, you
know, when you bring up things like the mass sale of fraudulent mortgage
backed securities, it's just like you say.
It's always somebody else who made that mistake. You know, "We
didn't know at the time that we were selling billions and billions of
dollars of junk and we were dumping this on pension funds and foreign
trade unions." It was always somebody else who was doing that. And
they also have built up this very, very powerful insulating
psychological justification for their lifestyles. They've adopted this
sort of Randian point of view, where--
BILL MOYERS:
Ayn Rand.
MATT TAIBBI:
Yeah exactly, you know, they genuinely believe that they are the wealth
creators and that they should get every advantage and break whereas
everybody else is a parasite and they're living off of them. So when
you bring up to them, for instance, how is it that nobody, despite this
mass epidemic of fraud that appears to have happened before the 2008
crash, how come nobody of consequence has gone to jail after that?
They always, you know, they always argue against more regulation and
more enforcement because they say, "We need room to, we need air to
breathe, we need room to create jobs. And this is just
counterproductive to put people in jail. It'll cast a pall over
society.
CHRYSTIA FREELAND:
If I may say so Bill, this very sincere, absolutely, absolutely sincere
self-justification, I think, is one of the most dangerous things that's
happening because in our society, and I would say this is particularly
powerful in America. Really since the Reagan era, there has been this
vision of the successful businessperson as really a leader for the whole
society. And there has been a view that the businessperson, what he
thinks, and, by the way, all of my plutocrats are men.
But, you know, what he thinks about how society should be ordered, we
should all listen to because he, after all, is the hero of our time, is
the hero of capitalist narrative. And I think it's so important for us
to really understand that what is good for an individual business,
particularly in this age of very high income inequality and the ways of
thinking, the ideas that are no doubt absolutely the right ones for this
particular business, may very well not be good for society as a whole.
BILL MOYERS:
Both of you write in different ways that, with irony, that they threaten the system that created them.
MATT TAIBBI:
Well this was another thing, another image from Russia that always stuck
in my mind. And I studied in Russia when it was still communist. I
remember going through the countryside. And you had all these villages
and people walked around in the villages.
And then suddenly in the mid to late '90s in Russia you drove through
the Russian countryside. And suddenly there were these big brick
houses that had these huge walls on the outside, these big brick walls
with guards on the outside. It was the rich had sort of built this wall
that insulated them from the rest of society.
They were living, there was one society on one side of those walls,
and then one society on the other side of it. And I think that's where
we're headed now. We have this kind of community of rich people who
sort of live, hop from place to place. And they never have any sort of
intercourse with the rest of the world.
BILL MOYERS:
Disconnected?
MATT TAIBBI:
They're completely disconnected. And so they've built this kind of
nation where inside, it's all, you know, nice and everything works
logically. And it makes sense to them. But they never really see what
goes on on the outside.
BILL MOYERS:
Do they feel entitled?
CHRYSTIA FREELAND:
Yes. Absolutely. And, you--
BILL MOYERS:
For what reason?
CHRYSTIA FREELAND:
Because they are treated so well. So my favorite story about this was
when I was at Heathrow Airport, about to go to a fancy conference. And I
ran into someone also going to a fancy conference, a Silicon Valley
senior technology person. You know, I didn't have a car. But he had a
car coming to picking him up and so he offered to share the ride. So
we're in the car and this technology guy said to me, when you live our
life, you are surrounded by such power and such entitlement, you lose
touch with reality."
And his very personal example was he said, "I was recently staying at
this lovely Four Seasons Hotel. And I was beside the pool. I was
eating a melon. And my spoon fell to the ground. And he said, "Before I
could summon anyone, someone rushed up to me with three spoons of
different sizes on a linen napkin so that, God forbid, you know, I
shouldn't have the wrong size spoon."
And what he said was, "You know, what was amazing to me," he's
talking about himself, "is when I reentered my real life," he said, "I
was kind of a jerk because I like, I expected to live a life where I was
constantly being presented with three spoons of different sizes. And I
just I couldn't deal with the frustrations of everyday life." What
makes this a totally ironic story is here he's telling this kind of
self-aware story about the plutocracy.
But when we had been in the airport waiting for the car, he was on
the phone, screaming at someone about "Where is my car," et cetera, et
cetera.
So this is, you know, morning in Heathrow. Middle of the night, you
know, in San Francisco. And he's yelling at someone there because she
hasn't organized his car and we had to wait for five minutes. And then
he tells me this story about how entitlement can make you not an ideal
person. That kind of says it all, right?
BILL MOYERS:
But political behavior's another thing. And there's no doubt in either
of your minds, is there, that they tilt the rules in their favor through
their influence and power over the politicians.
MATT TAIBBI:
Absolutely. I mean--
BILL MOYERS:
I mean, our own government relaxed the regulations, upended the rules, leveled the laws to make way for them.
MATT TAIBBI:
They have this power and influence over the government to and they've
been continually deregulating the atmosphere to legalize whatever it is
that they want to do, whether it's, you know, merging insurance
companies and investment banks, whatever it is. The derivatives, the
Commodity Futures Modernization Act of 2000, they lobbied heavily to
create a completely deregulated atmosphere for that. And we saw what
happened with that in 2008 with the collapse of companies like AIG.
They've been incredibly successful in creating their own landscape where
they get to do business the way they want to do business.
CHRYSTIA FREELAND:
And what I think is crucial is, this is not framed as, "I want
government to do this so I can get rich and my company can prosper."
This is framed as "We need to do these things for the greater good."
And this is where I think another big problem in America today is a
disempowering and a devaluing of the role of government and of its
authority as an independent, respected arbitrating body in the center of
the ring.
And one of the great contrasts for me in the past decade has been
looking at what happened in bank regulation in the United States and
looking at what happened in Canada. Matt has just spoken about bank
mergers. And with hindsight, you know, one of the great brave decisions
taken by the Canadian government was to not allow the Canadian banks to
merge. They wanted to. Huge lobbying effort.
And they made the same arguments about, "Oh, if we can't merge, we'll
never operate on a global scale. You know, Canada will be left behind.
We'll be a provincial backwater." And the government just said no.
And that decision I think flows directly into the Canadian government's
ability to regulate the financial sector.
Leverage at U.S. levels was not allowed. And the consequence was
Canada didn't have a financial crisis. It's the only G7 country that
didn't have to bail out its banks. So government can actually hold the
line. Government can--
BILL MOYERS:
But not if it's captured, Chrystia.
CHRYSTIA FREELAND:
Not if it's captured. Not if it's captured. And so--
BILL MOYERS:
And it is captured—
MATT TAIBBI:
But now we're completely captured, with the banking example, now we have
these banks that are literally too big to fail in America because we
didn't do the same thing.
CHRYSTIA FREELAND:
But government can act. I mean, I think it's important not to have a
counsel of despair. That you can have a sophisticated, industrialized
western economy. People can live, you know, civilized lives. They can
have bankers. Their bankers even, maybe they're not going to earn $25
million. But they can earn $5 million or $6 million.
They can be perfectly affluent. And government can actually stand up
to its banks and stand up to other sectors of industry and say, "You
know what? I'm sure that would be great for you guys. My judgment is
it's wrong for the country. And you're not going to do it."
BILL MOYERS:
They resent any criticism, despite all the advantages and entitlements
they have. They also exhibit disdain, as Mitt Romney made clear in that
infamous or famous 47 percent video. You know, when he talked about
other people being dependent on government.
MATT TAIBBI:
I've heard that attitude more than once, and not just from Mitt Romney. I
think it's, again, it's consistent with this mindset that there is an
intellectual atmosphere that these people I think have to work within in
order to justify a lot of what they do, because you have to be
completely disconnected from the real world in order to do things like
sell fraudulent mortgages to a state pension fund. If you're actually
thinking about that, you know, you're taking somebody's life savings
away when you do that. But you can't think about that.
BILL MOYERS:
Matt, you quoted the billionaire Charlie Munger of Berkshire Hathaway,
who said that anyone who wants to complain about the Wall Street bailout
should realize they were, "absolutely required to save your
civilization." What did he mean by that?
MATT TAIBBI:
Well, again, this group of people believe that all of civilization
depends on their health and their wellbeing. So when they were
threatened in 2008, when they were all about to collapse, it made
absolute sense to them that the government should immediately intervene
and give them as much money as they needed, to not only to get back on
their feet, but to restore their lifestyles to the level that they had
been accustomed to.
CHRYSTIA FREELAND:
So I'm going to, here, step in as a voice in favor of the bailout. I think that Munger was right. I do actually believe--
BILL MOYERS:
Saving civilization?
CHRYSTIA FREELAND:
Yeah, I think it was. I think that the bailouts were absolutely
essential. I think that, had there not been a bailout, which, by the
way, let's remember, voices on the right as well as the left were
objecting to the bailout at the time. I think had there not been a
bailout, you would've had a much more severe crisis.
You would've had a full financial collapse and a much, much deeper
economic recession. Now, I think where you can and should criticize is
first of all, why was the crisis allowed to happen in the first place
and the regulatory failure beforehand. I think second of all, you know,
where were the strings attached?
And actually Charlie Munger's great business partner, Warren Buffett,
drove a much harder bargain with Goldman Sachs than the U.S. Treasury
did.
You know, 2008 is not so long ago. And already, the anti-regulation
chorus is so strong. You know, I think the re-regulation was not done
well at all.
But the fact that people are already making a very, you know,
powerful and proud argument against government regulation, bankers are
making this argument. I mean, how dare they. How dare they have the
gall to actually argue that too much regulation of American financial
services is what is killing the economy.
MATT TAIBBI:
Right. Right. Just to be clear, I actually agree that the bailouts
were necessary. What I completely disagree with was the way they were
done. They just simply threw a whole bunch of money at this community
and didn't have any conditions at all. They didn't sweep in and change
any rules. You know, and after the S&L crisis, for instance, we
went in and there were massive criminal investigations.
We put 1,000 people in jail. There were no such investigations this
time around. So this was just making everybody well again and restoring
everybody to the status quo, which I think was a major mistake because
it produced precisely the result we're talking about now. It allowed
everybody to think that the previous status quo was okay.
BILL MOYERS:
Let me talk about the CEO class because it seems almost every day now
there's a new story of some CEO, some boss of a big company who's
attempting to tell voters to vote as they say.
CHRYSTIA FREELAND:
If you really see yourself as a job creator, someone who is not just
pursuing their business interest in getting richer, but someone who is
creating jobs, doing great things for America and for your workers, and
you also sincerely believe that Barack Obama is a bad guy, then you feel
you have to help your workers to understand this. You know, you have
to let them know that you, the job creator, believe that this job
creation of which they are the fortunate beneficiaries, you know, that
engine is going to slow down. It's going to grind to a halt.
BILL MOYERS:
Do you see this as different from what unions do in urging their voters
to go out and vote for the candidates of their choice? Do you see it
differently?
MATT TAIBBI:
I think it's a little different just because there's an implied threat.
It's very, very vague, but, you know, if the CEO of your company
suggests to you that you have to vote for Mitt Romney or you have to
give money to the Romney campaign, I think the tendency to, you know, to
not break ranks, is going to be a little stronger than maybe it would
be in a union.
But I think it grows out of this, you know, companies and
corporations, they're not democracies. They're authoritarian
structures. And the people who work in those companies-- they start to
adopt those attitudes after a while. And especially the people at the
very top.
I think they've begun to actually believe that their authority
extends beyond that. And I just think that people– it’s a little bit
different when it’s something your boss tells you to do something than
when your union brothers tell you something.
BILL MOYERS:
Matt, you have written a lot about the tax code and these plutocrats. Exactly how do they work the tax system?
MATT TAIBBI:
Well the plainest example is Mitt Romney. I mean, you know, if you look
at his tax returns, he paid, you know, rates of 14, 13 percent. That's
totally normal in this world if you work in a private equity fund.
Your income is—
BILL MOYERS:
Again, he's not an exception, he's an embodiment.
MATT TAIBBI:
He's an embodiment. In the financial services industry for sure, the
very, very rich mostly receive income as capital gains or if they're
private equity people, as carried interest.
In both of those, the max rate is 15 percent. So people who make $20
million, $30 million, $50 million a year like Mitt Romney and like, you
know, Steve Schwarzman of whoever it is, they pay half the tax rate of,
you know, a nurse or a doctor or a fireman or a teacher. And it's
considered totally normal in that world.
BILL MOYERS:
So they really do consider tax reform a threat?
MATT TAIBBI:
Absolutely. I mean every time that there's been any discussion about
rolling back the carried interest tax break in particular, there's
suddenly been this intense, you know, hurricane of lobbying. And it
never seems to get rolled back. Barack Obama promised to repeal that
tax break and didn't do it.
BILL MOYERS:
Give us a working definition in the vernacular of carried interest.
CHRYSTIA FREELAND:
So basically, what this means is that if you're in, if you work in a
private equity firm, the money that you earn– so, you invest a little
bit of your own money. And the gains that you make on that investment
would be treated under any definition as a capital gain taxed at 15
percent. But you also earn money because you are investing on behalf of
all of your investors.
That money that you earn, it's called carried interest. And it is
treated as a capital gain in the same ways that the gains to the
investors are treated.
The economic arguments in favor of the carried interest tax break are so weak. I mean, even Mike Bloomberg, who is, you know—
BILL MOYERS:
The tenth richest man—
CHRYSTIA FREELAND:
--very far from being a socialist. He has come out and said he doesn't
support it. And it says something to you about the power of a very well
heeled, very focused lobby group. That, you know, Barack Obama is
president. He is opposed to this. He says he's opposed to it. Even
Mike Bloomberg is opposed to it. So there's a body of Wall Street
opinion that thinks it should go away. It's still there.
BILL MOYERS:
But when there was an effort, when the Obama White House and others made
an effort to revoke carried interest, the fight was led by people like
Democrat Senator Chuck Schumer, representing Wall Street--
MATT TAIBBI:
It’s always the New Yorkers.
BILL MOYERS:
Yes, the New Yorkers. Of course, that's their constituency, they would
say if they were sitting here. But the Democratic Party didn't come to
the aid and relief of working people at that time.
MATT TAIBBI:
Well right, because again, it's because you have a small, very, very
concentrated lobby that is very, very noisy and is very, very specific
in what it wants and what it needs. And then there's the rest of us
who, how many people are really thinking about the carried interest tax
break? So the advocacy against the carried interest tax break is
dispersed. It's sort of random. It's not focused, whereas the advocacy
for it is incredibly organized. It's disciplined. And it has a ton of
money.
CHRYSTIA FREELAND:
And it is bipartisan.
BILL MOYERS:
Who's looking out for the rest of us?
MATT TAIBBI:
Well, there are, I mean, there definitely are good people in Washington.
You know, I meet and talk to a lot of them. There are a lot of honest
politicians who are trying to do the right thing. But the-- my
experience, the money issue is so overwhelming to people in Congress
that--
BILL MOYERS:
Raising money for their campaign?
MATT TAIBBI:
Raising money for their campaigns. It's so central to their daily
lives, really. And especially in the House, where you have to
essentially start raising money the instant you get elected because the
reelection campaign is only a couple years away that -- it's just too
overwhelming for most legislators to get past that issue.
BILL MOYERS:
Despite how the plutocrats have reacted to Barack Obama, he does not
seem to be like FDR, taking on the economic royalists or like Theodore
Roosevelt, fighting the guys he says are taking the country down. How
do you explain Obama's attitude toward these plutocrats?
CHRYSTIA FREELAND:
Barack Obama in many ways is one of them. He is educated the way a
plutocrat is educated. He had an opportunity to join the plutocracy.
He could very easily right now be a top corporate lawyer. And they know
that.
He thinks the way they do. He's a technocrat in the accepted manner
of the current plutocracy. And I think they like that. I think that's
why he had such a strong reception in 2008. So I think that's one
element. Another element though, and I think that this is something
that sort of bothers them, is he isn't over-awed by them. And that kind
of bugs them too, because they do think they’re pretty great.
MATT TAIBBI:
To answer your question about, you know, why doesn't he take the sort of
fist shaking attitude of an FDR or a Teddy Roosevelt, I just think
Barack Obama has surrounded himself with people, like Larry Summers,
like Bob Rubin. And I think he's accepted a lot of the justifications
and the arguments that come from Wall Street and the business community.
So I don't think he feels genuine class based rage towards this
community. I just don't think that's in him. You know, I think the--
if you listen to Rush Limbaugh and Sean Hannity and the likes, they
really believe that somewhere under there, there's this raging
socialist. And, you know, there's Lenin ready to break out and put them
all up against the wall in a firing squad. That guy just isn't there.
He really is more one of them than they think.
BILL MOYERS:
So you don't think he's fighting a class warfare as the right says he is?
MATT TAIBBI:
Definitely not. No. No, I think he's very emotionally and culturally much closer to those people than he is to the rest of us.
CHRYSTIA FREELAND:
No, but he is moving-- he is and I don't think he says this as directly
as perhaps, you know, some of his supporters would like. He is
challenging this notion of the successful businessman as the hero and
the driver of the American narrative. And that actually is a big-- if
you think it through to its logical conclusion, that is a big challenge.
And I think that accounts for this hurt. This seemingly completely
disproportionate emotional reaction.
MATT TAIBBI:
He's made a rhetorical mistake in the way he's occasionally described
this community. And that's what's inspiring this whole reaction against
him, this feeling that we are like battered wives because they've
occasionally been described as rich.
CHRYSTIA FREELAND:
So it's easy to laugh about this, and we should. But this hurt
feelings, the fact that this is really playing out in the emotional
space as well as in the balance sheet space, I think is really an
important point.
I think it's hard for us civilians to get it because it seems so absurd.
You know, really? That would hurt your feelings? Are you so thin
skinned? But it is real. And I think that it's real for a reason,
which is I think that Barack Obama, the Democratic party, but also the
political discourse more generally is posing an existential threat, or
certainly an existential question to the plutocrats, which makes them
very, very anxious.
BILL MOYERS:
I haven't heard that, Chrystia.
CHRYSTIA FREELAND:
Well, I'll tell—
BILL MOYERS:
Barack Obama said—
CHRYSTIA FREELAND:
--I'll tell you what it is--
BILL MOYERS:
--in the debate this week that--
CHRYSTIA FREELAND:
No, but I'll tell you—
BILL MOYERS:
--he sounded like, he said, "I'm for free enterprise, I'm for--"
CHRYSTIA FREELAND:
And I'm for free enterprise too. But what he had started to say—
BILL MOYERS:
That sounds very tough on them.
CHRYSTIA FREELAND:
No, but there is an underlying point that he does make. I think he
should make it more explicitly which is to say that American capitalism
is not working the way it was in the '50s. That we are not living in a
time when a rising tide is lifting all boats. That we are seeing the
people at the very top take off. Their economic fortunes actually
disconnect from those and from --
BILL MOYERS:
Stratospherically leaving earth.
CHRYSTIA FREELAND:
--most everybody else. And they're not dependent. You know, that old
Henry Ford model, where you needed the middle class to be well paid to
buy Henry Ford's stuff, that that has broken down. And we can argue a
lot, and we should, about the reasons. But the facts are that it has.
And to say that, to actually state that, is profoundly threatening
because it starts to break down this equation of my wealth equals my
virtue.
The size of my bank account doesn't-- it isn't just good for me. It
is a manifestation of my civic contribution. And that, in some ways, is
Mitt Romney's campaign. He's saying, "I'm a successful businessman.
So I will make a good president." And Barack Obama, he is actually
saying, "You know what? I don't think that that equation works and is
automatic." And actually, in saying that, the plutocrats are not wrong
to detect there a very powerful ideological challenge.
BILL MOYERS:
If plutocrats keep on winning, if they manage to avoid tax reform, if
they keep low regulation, if they get a president who is sympathetic to
them or even enables them, what's ahead for us?
MATT TAIBBI:
Well, I mean, I fear that what's ahead is just a continual worsening of
the situation. You know, what we've seen in our lifetime even since
we've come back from Russia is this decimation of the middle class in
America.
If we continue on this path, what we'll end up with is, you know, is
Russia or some other third world country where, again, you have this
handful of people who are protected and who have expanding wealth. And
then there's this sort of massive population of everybody else. And
that's what I worry about.
CHRYSTIA FREELAND:
I would like to really issue a clarion call to progressives because I
think the sort of the progressive public intellectuals are to blame as
well. I think a big reason people aren't protesting is no one is
offering sufficiently compelling alternatives and solutions.
And when you think back to the history of the Industrial Revolution,
the Progressive Era, the New Deal, these were brand new ideas and brand
new institutions designed to cope with changed economic circumstances.
What I think is the challenge for everyone who is worried about this,
and I think all of us should be worried about it. We should be
terrified. But I think we need to start taking the next step. And we
need to realize the 1950s are not coming back. What angers me sometimes
about these debates is people talking about manufacturing jobs coming
back.
That-- it's just not going to happen. So let's really face the facts
of how the world economy works. And really come up with what needs to
be the political and social response.
And frankly, you know, I see the right not interested in addressing
this issue at all. And I see the left not offering enough new thinking.
And people know that. And that's why people aren't on the barricades.
There's no manifesto to be waving.
MATT TAIBBI:
One caveat I would like to just throw anytime you propose anything that
has any kind of government, you know, component to it, there's this
automatic criticism that it's communist and socialist. So, when you
come up with a solution, the boundaries are let's come with a solution
that doesn't have-- that can't be criticized as being communist or
socialist. And that is incredibly difficult for people to work around.
CHRYSTIA FREELAND:
Okay, but let’s at least see the new ideas. I mean, my argument is we
are living through equally profound economic transformations. And we're
just trying to rehash and re-tinker with the twentieth century
institutions. I don't think it's enough.
BILL MOYERS:
Matt Taibbi, Chrystia Freeland, thank you very much for being with me.
MATT TAIBBI:
Thank you.
CHRYSTIA FREELAND:
Thank you, Bill.
BILL MOYERS:
Here’s a significant revelation of which you may not be aware. The
plutocrats know it and love it, and the rest of us should be forewarned.
When the Supreme Court made its infamous Citizens United decision,
liberating plutocrats to buy our elections fair and square, the justices
may have effectively overturned rules that kept bosses from ordering
employees to do political work on company time. Election law expert
Trevor Potter told us that now “corporations argue that it is a
constitutionally protected use of corporate ‘resources’ to order
employees to do political work or attend campaign events—even if the
employee opposes the candidate, or is threatened with being fired for
failure to do what the corporation asks.”
Reporter Mike Elk at In These Times magazine came across a
recording of Governor Mitt Romney on a conference call in June with some
business executives. The Governor told them there is quote, “nothing
illegal about you talking to your employees about what you believe is
best for the business, because I think that will figure into their
election decision, their voting decision and of course doing that with
your family and your kids as well.”
And here’s Governor Romney two months later, campaigning at an Ohio coal mine:
MITT ROMNEY:
This is a time for truth. I listened to an ad on the way here. I’ll tell
you, you got a great boss. He runs a great operation here. And he—Bob?
Where are you Bob? There he is.
BILL MOYERS:
Look at all those miners around him, steadfastly standing in support,
right? They work for a company called Murray Energy and attendance at
the rally, without pay, was mandatory. Murray Energy is notorious for
violating safety regulations, sometimes resulting in injuries and
deaths. And the company has paid millions in fines. The CEO, Bob
Murray, a well-known climate change denier and cutthroat businessman,
insists that his employees contribute to his favorite anti-regulatory
candidates, or else. In one letter uncovered by “The New Republic”
magazine, Murray wrote quote, “We have been insulted by every salaried
employee who does not support our efforts.” So much for voting rights
and the secret ballot at Murray Energy.
Mike Elk discovered that the Koch Brothers, David and Charles – who
have pledged to spend $60 million defeating President Obama – have sent a
“voter information packet” to the employees of Georgia Pacific, one of
their subsidiaries. It includes a list of recommended candidates,
pro-Romney and anti-Obama editorials written by the Koch’s and a cover
letter from the company president. If we elect the wrong people, Dave
Robertson writes, “Many of our more than 50,000 US employees and
contractors may suffer the consequences, including higher gasoline
prices, runaway inflation, and other ills.” Other ills? Like losing your
job?
This is snowballing. Timeshare king David Siegel of Westgate Resorts
reportedly has threatened to fire employees if Barack Obama is
re-elected and Arthur Allen, who runs ASG Software Solutions, e-mailed
his employees, “If we fail as a nation to make the right choice on
November 6th, and we lose our independence as a company, I don’t want to
hear any complaints regarding the fallout that will most likely come.”
Back in the first Gilded Age, in the 19th century, bosses and company
towns lined up their workers and marched them to vote as a block. As we
said at the beginning of this broadcast, the Gilded Age is back with a
vengeance. Welcome to the plutocracy. The remains of the ol’ USA.
That’s it for this week. On our website, BillMoyers.com, at your
request, we’re starting a book club. Our first is Chrystia Freeland’s
“Plutocrats.” Read the book, ask questions, share your thoughts. Then
let’s have a lively conversation.
That’s at BillMoyers.com. I’ll see you there and I’ll see you here, next time.
