technology executive. The American technologist thought he understood the IMF chief’s psychology. The thing was, he told me, when you ascend to a certain level of the super-elite, you come to inhabit a world in which all of your needs are catered to. That, he said, can lead to a dangerous sense of entitlement. As an illustration, he told me that on a recent holiday he had stayed in a Four Seasons hotel. The service was exceptional—at one point, as he was sitting by the pool and dropped the spoon he was using to eat his melon, a waiter instantly appeared with a choice of three differently sized replacement spoons. The Silicon Valley executive said that readjusting to ordinary life had been hard: he had become impatient and rude when confronted by the slightest delay or discomfort. “When you are used to being catered to twenty-four/seven, you start to feel the world should be built around you and your needs. You lose all sense of perspective,” he told me. “I think that is probably what happened to Strauss-Kahn.” His point was that the impact of privilege was unconscious. A few minutes earlier, he had provided another, unintended example. We had struggled for a few minutes to find the car and driver that had been arranged to take him (I was cadging a ride) from the airport to our conference. He had fumed about the wait, berating himself for breaking with his usual practice of having his Mountain View–based assistant be on call no matter what the hour (it was morning at Heathrow Airport) to ensure smooth transfers.
A recent family of academic studies suggests that my acquaintance may have been on to something when he pointed to the coarsening effect of privilege. Paul Piff, a psychologist at UC Berkeley, and four other researchers devised seven different experiments to test the impact of affluence on how we treat others. “Is society’s nobility in fact its most its most noble actors?” the researchers ask. Their answer is a resounding no: “Relative to lower-class individuals, individuals from upper-class backgrounds behaved more unethically.” Their explanation for the behavior of these ignoble nobles was an echo of the Silicon Valley executive’s Heathrow observation: “We reason that increased resources and independence from others cause people to prioritize self-interest over others’ welfare and perceive greed as positive and beneficial, which in turn gives rise to increased unethical behavior.” One of the experiments studied San Francisco intersections. The team found that the drivers of new, expensive cars were twice as likely to cut off other vehicles or pedestrians as the drivers of old, cheap cars. In another test, experimental subjects with higher real-world incomes were more likely to deceive a hypothetical job applicant in order to persuade him or her to accept a lower salary—an accomplishment that earned the manager in the experiment a bonus. Even imagining you were rich changed the way experimental subjects behaved. In another study, participants were prompted to think of themselves as either very rich or very poor, and were then invited to take candy from a jar that afterward would be given to children in a nearby lab. The subjects who had imagined they were very rich took more candy.
THE AMERICAN MIDDLE CLASS NEEDS TO TAKE A PAY CUT
Or consider the view of some Western members of the plutocracy concerning the strains imposed on the American middle class by globalization. In a dinner speech in New York on a gloomy evening in the autumn of 2011, one Greenwich-based hedge fund manager observed that “the low-skilled American worker is the most overpaid worker in the world.” He seemed genuinely worried about the high unemployment and falling wages that were the likely consequences of that circumstance (if you doubt this claim of hedge fund compassion, perhaps the fact that he grew up in Scandinavia will help persuade you), but he said business couldn’t fail to take it into account.
The U.S.-based CEO of one of the world’s largest fund managers told me that his firm’s investment committee often discussed the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.
I heard a similar sentiment from the Taiwanese-born, thirtysomething CFO of a U.S. technology company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So, if you’re going to demand ten times the paycheck, you need to deliver ten times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”
And even those plutocrats who are sympathetic to the plight of the U.S. middle class feel compelled to contribute to it. One private equity investor invited me to lunch at Michael’s, the restaurant that is practically a canteen for the New York media set, to talk about income inequality. When we moved on to other subjects, he told me about a recent deal his firm had done to acquire an Indian outsourcing company. A fringe benefit was that he could now use it to outsource his own company’s research. The result was better work, more motivated employees, and lower costs. “We were paying University of Connecticut BAs $120,000 a year to do dead-end jobs,” he told me. “Now we pay Indian PhDs $60,000 and they are thrilled to work for us.”
You wouldn’t hear comments like these in many middle-class U.S. households. What’s striking, though, is how similar these views are to the perspectives of plutocrats in the emerging markets.
“You know, historically, economic activities tend to migrate because people who don’t have it have a lot more urge to have it, they’re willing to work harder for less money, and that’s part of life,” B. N. Kalyani, the chairman of Bharat Forge, India’s largest exporter of motor parts, told me. “You had your golden period; now, hopefully, we’ll have ours.”
Kris Gopalakrishnan, the cochair of Infosys, told me bluntly that the per capita consumption of the Western middle class would have to decline as the developed and developing worlds “meet somewhere in the middle.”
MY GOLF CADDY CAUSED THE FINANCIAL CRISIS
When I asked one of Wall Street’s most successful investment bank CEOs if he felt guilty for his firm’s role in creating the financial crisis, he told me with evident sincerity that he did not. The real culprit, he explained, was his feckless cousin, who owned three cars and a home he could not afford. One of America’s top hedge fund managers made a near identical case to me, though this time the offenders were his in-laws and their subprime mortgage. And a private equity baron who divides his time between New York and Palm Beach pinned blame for the collapse on a favorite golf caddy in Arizona, who had bought three condos as investment properties at the height of the bubble.
It is this not-our-fault mentality that accounts for the plutocrats’ profound sense of victimization in the Obama era. You might expect that American elites—and particularly those in the financial sector—would be feeling pretty good, and more than a little grateful, right now. Thanks to a $700 billion TARP bailout and trillions of dollars lent nearly free of charge by the Federal Reserve (a policy Soros himself told me was a “hidden gift” to the banks), Wall Street has surged back to precrisis levels of compensation even as Main Street continues to struggle.
But instead, many of the giants of American finance have come to, in the words of a mystified administration economist, “hate” the president and to believe he is fundamentally opposed to them and their well-being. In a much quoted newsletter to investors in the summer of 2010, hedge fund manager—and 2008 Obama fund-raiser—Dan Loeb fumed, “So long as our leaders tell us that we must trust them to regulate and redistribute our way back to prosperity, we will not break out of this economic quagmire.” Two other former Obama backers on Wall Street— both claim to have been on Rahm Emanuel’s speed dial list—recently told me that the president is “antibusiness”; one went so far as to worry that Obama is “a socialist.”
In some cases, this sense of siege is almost literal. In the summer of 2010, for example, Blackstone’s Schwarzman caused an uproar when he said an Obama proposal to raise taxes on private equity firm compensation—by treating carried interest as ordinary income—was “like when Hitler invaded Poland in 1939.”
However histrionic his metaphors, Schwarzman (who later apologized for the remark) is a Republican, so his antipathy for the current administration is no surprise. What is perhaps more surprising is the degree to which even former Obama supporters in the financial industry have turned against the president and his party. A private equity manager who is a passionate Democrat and served in the Clinton administration proudly recounted to me his bitter exchange with a Democratic leader in Congress, who was involved in the tax reform effort. “Screw you,” he told the
