We could call it Romnesia: the ability of the very rich to forget the context in which they made their money. To forget their education, inheritance, family networks, contacts and introductions. To forget the workers whose labour enriched them. To forget the infrastructure and security, the educated workforce, the contracts, subsidies and bail-outs the government provided.
Every political system requires a justifying myth. The Soviet Union had Alexey Stakhanov, the miner reputed to have extracted 100 tonnes of coal in six hours. The United States had Richard Hunter, the hero of Horatio Alger’s rags-to-riches tales(1).
Both stories contained a germ of truth. Stakhanov worked hard for a cause in which he believed, but his remarkable output was probably faked(2). When Alger wrote his novels, some poor people had become very rich in the United States. But the further from its ideals (productivity in the Soviet Union’s case, opportunity in the US) a system strays, the more fervently its justifying myths are propounded.
As the developed nations succumb to extreme inequality and social immobility, the myth of the self-made man becomes ever more potent. It is used to justify its polar opposite: an unassailable rent-seeking class, deploying its inherited money to finance the seizure of other people’s wealth.
The crudest exponent of Romnesia is the Australian mining magnate Gina Rinehart. “There is no monopoly on becoming a millionaire,” she insists. “If you’re jealous of those with more money, don’t just sit there and complain; do something to make more money yourselves – spend less time drinking, or smoking and socialising and more time working … Remember our roots, and create your own success.”(3)
Remembering her roots is what Rinehart fails to do. She forgot to add that if you want to become a millionaire – in her case a billionaire – it helps to inherit an iron ore mine and a fortune from your father, and to ride a spectacular commodities boom. Had she spent her life lying in bed and throwing darts at the wall, she would still be stupendously rich.
The rich lists are stuffed with people who either inherited their money or who made it through rent-seeking activities: by means other than innovation and productive effort. They’re a catalogue of speculators, property barons, dukes, IT monopolists, loansharks, bank chiefs, oil sheikhs, mining magnates, oligarchs and chief executives paid out of all proportion to any value they generate.
Looters, in short. The richest mining barons are those to whom governments sold natural resources for a song. Russian, Mexican and British oligarchs acquired underpriced public assets through privatisation, and now run a toll-booth economy(4). Bankers use incomprehensible instruments to fleece their clients and the taxpayer. But as rentiers capture the economy, the opposite story must be told.
Scarcely a Republican speech fails to reprise the Richard Hunter narrative, and almost all these rags-to-riches tales turn out to be bunkum. “Everything that Ann and I have,” Mitt Romney claims, “we earned the old-fashioned way”(5). Old-fashioned like Blackbeard perhaps. Two searing exposures in Rolling Stone magazine document the leveraged buyouts which destroyed viable companies, value and jobs(6), and the costly federal bail-out which saved Romney’s political skin(7).
Romney personifies economic parasitism. The financial sector has become a job-destroying, home-breaking, life-crushing machine, which impoverishes other people to enrich itself. The tighter its grip on politics, the more its representatives must tell the opposite story: of life-affirming enterprise, innovation and investment, of brave entrepreneurs making their fortunes out of nothing but grit and wit.
There is an obvious flip-side to this story. “Anyone can make it – I did without help” translates as “I refuse to pay taxes to help other people, as they can help themselves”. Whether or not they inherited an iron ore mine from daddy.
In the article in which she urged the poor to emulate her, Gina Rinehart also proposed that the minimum wage should be reduced. Who needs fair pay if anyone can become a millionaire?
In 2010, the richest 1% in the United States captured an astonishing 93% of that year’s gain in incomes(8). In the same year, corporate chief executives made, on average, 243 times as much as the median worker (in 1965 the ratio was ten times lower, namely 24:1)(9,10). Between 1970 and 2010 the Gini coefficient, which measures inequality, rose in the United States from 0.35 to 0.44: an astonishing leap(11).
As for social mobility, of the rich countries listed by the OECD, the three in which men’s earnings are most likely to resemble their father’s are, in this order, the UK, Italy and the US(12). If you are born poor or born rich in these nations, you are likely to stay that way. It is no coincidence that these three countries all promote themselves as lands of unparalleled opportunity.
Equal opportunity, self-creation, heroic individualism: these are the myths that predatory capitalism requires for its political survival. Romnesia permits the ultra-rich both to deny the role of other people in the creation of their own wealth and to deny help to those less fortunate than themselves. A century ago, entrepreneurs sought to pass themselves off as parasites: they adopted the style and manner of the titled, rentier class. Today the parasites claim to be entrepreneurs.
1. The Ragged Dick series.
4. Mike Lofgren uses this term in this fascinating article: http://www.theamericanconservative.com/articles/revolt-of-the-rich/
8. Emmanuel Saez, 2nd March 2012. Striking it Richer: the Evolution of Top Incomes in the United States (Updated with 2009 and 2010 estimates). http://elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf
9. Joseph Stiglitz, 2012. The Price of Inequality. Allen Lane, London.
10. Lawrence Mishel, Jared Bernstein and Heidi Shierholz. The State of Working America 2008/2009. Economic Policy Institute, cited by Joseph Stiglitz, as above.
12. OECD, 2010. Economic Policy Reforms: Going for Growth. Chapter 5, Figure 5.1. http://www.oecd.org/tax/publicfinanceandfiscalpolicy/45002641.pdf