You Can't Read This Book: Censorship in an Age of Freedom (17 page)

If any opinion is compelled to silence, that opinion may, for aught we can certainly know, be true. To deny this is to assume our own infallibility.

JOHN STUART MILL
, 1869

Stardom isn’t a profession; it’s an accident.

LAUREN BACALL

In 2003, I was trying to find a way of dramatising the widening gap between the broad mass of society and the emerging plutocracy. I hit on the idea of comparing the money the British public raised on Red Nose Day with the wealth of the super-rich. Foreign readers may need me to explain that after much consciousness-raising in the preceding weeks, the BBC devotes a day in March to exhorting the populace to donate to charities dedicated to the relief of poverty at home and abroad. As in every other year, the mandatory ‘fun’ in 2003 took the form of comedians filling the screens and cajoling viewers to help the cause. Tens of thousands of adults pestered their friends to sponsor their stunts – dressing up as a chicken, sitting in a bath filled with cold baked beans, going to work on a unicycle or some other rib-tickling wheeze. Twelve thousand telecom workers gave up their spare time to man phone lines, while a million or so schoolchildren wore red clown noses and extorted money from their parents. The relentless cheeriness ground down all but the most miserly. The organisers estimated that about five million people gave money, if only so the chickens and children would leave them in peace. The appeal raised £35,174,798 in total.

That sum
, I cried in a voice that hit the soprano C of righteous indignation,
those hard-won proceeds
of Britain’s largest exercise in communal altruism, counted for nothing when set against the rewards of the mighty. Red Nose Day’s takings were dwarfed by the £157.7 million pocketed in 2002 by one man: Sir Philip Green, a retail tycoon the British Labour Party knighted even though he vested ownership of chain stores in the name of his wife, a resident of Monaco, so the family could avoid the taxes Labour imposed on the common people it once claimed to represent. The income of one tycoon made the charitable efforts of a large slice of the British public seem pathetic.

How risible my comparison seems now. The incomes of plutocrats have flown far beyond the levels of the early years of the century.

Statistics and anecdote dramatise how much wealth and potential power is now in the hands of a global elite. Between 2002 and 2007, 65 per cent of all income growth in the United States went to the top 1 per cent of the population. The financial crisis interrupted their enrichment, but after American and British governments, by which I mean American and British taxpayers, bailed out the financial system, the super-rich bounced back. The top twenty-five hedge-fund managers received on average more than $1 billion each in 2009, and overtook the records set in the bubble year 2007. They were the beneficiaries of a longer trend that began with the break-up of the post-war social democratic consensus in the 1970s. The pre-tax income of the richest 1 per cent of American earners increased from about 8 per cent of the total in 1974 to more than 18 per cent in 2007. The richest 0.01 per cent (the fifteen thousand richest families in the US) saw their share of pre-tax income rise from 1 per cent in 1974 to 6 per cent in 2007.

In 1997, the year Labour came to power promising to govern for ‘the many, not the few’, the collective wealth of the richest thousand people in Britain stood at £98.99 billion. By the time the tribunes of the masses were preparing to leave office in 2009, it stood at £335.5 billion. In the former Soviet Union, sharp operators moved in to plunder the assets of the defunct communist state by buying them cheaply or for nothing at all. In 1989, there were no Russian billionaires. By 2003, the country had more dollar billionaires in proportion to gross domestic product than any other major economy – thirty-six in all, fourteen more than in Japan, a markedly less corrupt, miserable and unhealthy society. Russia’s wealthiest man was then Mikhail Khodorkovsky, with $15.2 billion. Vladimir Putin had Khodorkovsky jailed for crossing the autocracy, but those oligarchs who stayed out of opposition politics and found ways to – how shall we say? – make the burdens of office easier for the ruling clique to endure, saw their wealth grow and their numbers swell. Despite the crash of 2008, Forbes counted sixty-two Russian billionaires in 2009. In China, the number of billionaires ballooned to 128 in 2009, from seventy-nine in 2008. Only the United States, with four hundred, had more. It is the same in India, Brazil and Mexico … everywhere in the world you look, the ranks of the super-rich are growing.

In 2005 Ajay Kapur, global strategist at Citigroup, and his colleagues described societies where a minority controls the majority of the wealth, and where economic growth becomes dependent on the fortunes of that same wealthy minority. The strategists said that it made sense to forget about national divisions and divide the world between the men and women at the top and the rest.

Beneath the obscenely wealthy are the filthy rich. J.P. Morgan, the austere American financier, is reputed to have said that his executives should not earn more than twenty times the wages of workers at the bottom of his firms. How quaint his puritan limits seem a hundred years on. In 2009, the chief executive of the pharmaceutical company Reckitt Benckiser received £37 million – 1,374 times the pay of the average (not the lowest-paid) worker beneath him. The salaries of just two of the chief executives of the companies in the FTSE-100 passed Morgan’s test. In the United States, the ratio of CEO pay to average worker pay rose from 42:1 in 1960 to as high as 531:1 in 2000 during the dotcom bubble, and fell back to 263 times more than the average worker in 2009.

Wealth always has its intellectuals, eager to find high-minded justifications for acquisitiveness. They have filled many books and many pages in the business press with their efforts to explain why fears of a plutocracy are groundless. I will not deny that they have a case. The collapse of Marxism was one of the most beneficial revolutions in history. In China alone, the end of Mao’s terror and the replacement of his command economy with a limited market economy lifted hundreds of millions out of poverty. Globalisation, its defenders argued, inevitably created billionaires, because the global market and new technologies have allowed superstar brands, and with them superstar entrepreneurs, to emerge. Companies needed the best talent to handle disruptive technologies, because the difference between an average and a great manager was the difference between success and bankruptcy. If an Apple laptop delights, if Facebook puts its users in touch with the world, why should the citizen care about the incomes of the companies’ founders? Lives for an increasing proportion of humanity are more comfortable, longer and healthier than they have ever been. In the rich world, the majority of what we used to call the working class is no longer engaged in hard manual labour, and mechanisation has removed the need for a peasantry to toil in the fields. Class hatred of the rich is therefore muted when set against the passions of the socialist era. Even the modern resentment of the bankers is a conservative emotion, comparable to the resentment of trade unionists who demanded state subsidies in the 1970s. Taxpayers loathe bankers not for being capitalists but for being failed capitalists, who picked the public’s pockets. If they had been successes, the public would not despise them. Why worry?

The crash of 2008 showed a reason for not viewing the established order with complacency that is beyond the scope of this book. Financiers make up the bulk of the super-rich – a study of wealth in America in 2004 found that for every one company executive earning over $100 million there were nine Wall Street tycoons. When their speculative gambles pay off, they privatise the profits; when they fail, they nationalise the losses. America and Britain have a parasitic version of financial capitalism that exploits the taxpayer to cover the failings of wealthy and dangerous citizens. Andrew Haldane of the Bank of England estimated that between 2007 and 2009 the average annual subsidy for the top five UK banks was £50 billion – roughly equal to UK banks’ annual profits prior to the crisis. With the understatement the British mandarin deploys when he thinks the world has taken leave of its senses, he added, ‘These are not small sums.’

For the purposes of this book, there is a further harm. I can think of few more important subjects for democratic citizens than the influence of the rich over politics, the damage business can do to the atmosphere and the environment, and the risks high finance brings to economic stability. Yet extreme wealth is creating societies in which it is harder to hold economic power to account. Writers in the Anglosphere concentrate on the failings and corruptions of our own elites – who, to give them their due, provide us with an abundance of material – and fail to see the wider corruption. In the rich world, the crash of 2008 hit democratic countries and public limited companies hardest. However useless they proved to be, they remained institutions whose structures allowed accountability, albeit imperfect. Citizens who questioned their behaviour did not run a personal risk. The new concentrations of wealth are not in democratic Europe or North America. Oligarchies with no traditions of freedom of speech or democratic government now hold much of the world’s wealth, and those who try to hold them to account run considerable risks. In China, Russia and the Middle East, sovereign wealth funds or oligarchs who have paid off the local elites own the biggest banks and oil companies. Government-run energy companies in Saudi Arabia, Iran, Venezuela, Russia, China, India and Brazil control 80 per cent of the world’s oil and gas supplies. India and Brazil are the only real democracies on that list, and the populations of both have to live with astonishing levels of inequality and corruption. It is not hysterical leftism to see a link between the two. In democratic India and America, and maybe soon in Britain and Europe too, corrupting the political system is the natural strategy for oligarchs to follow. It is a statement of the obvious to say that as inequality increases, ‘the rich are likely to both have greater motivation and opportunities to engage in bribery and fraud to preserve and advance their own interests while the poor are more vulnerable to extortion’. But after making it, the American economists Jong-sung You and Sanjeev Khagram went on to demonstrate that while countries with authoritarian regimes are likely to have greater levels of corruption, the effect of greater inequality on levels of corruption will be higher in democracies. In free societies, the wealthy cannot employ direct repression by hiring private armies. They have to act covertly. One only has to look at how Wall Street’s contributions to American presidential campaigns have prevented effective bank reform to see You and Khagram’s theory operating in practice.

Contrary to all who believed that liberalism’s triumph in 1989 was permanent, oligarchic countries did not suffer from the Great Recession of 2008. China boomed, and overtook Japan to become the world’s second largest economy. It began to boast that it had nothing to learn from the Western model, and that the West should learn from China, which in the worst of ways we may do. For believers in liberal economics and for social democrats, who wanted to regulate market economies to produce the funds for welfare, 2008 was an ominous year. Vince Cable, now Britain’s Business Secretary, saw an alignment of state and private interests across the world that ‘promises all the worst features of capitalist economies – unfettered greed, corruption and inequalities of wealth and power – without the benefits of competitive markets’. The crimes and excesses of the age that has passed notwithstanding, we may look back fondly on the liberal supremacy of 1989–2008, and see the merits of its naïve belief that the world was destined to witness a victory of the free market and free societies.

I am not pretending that there is a clear division. The oligarchic world and the Western world are not separate entities, as NATO and the Warsaw Pact were in the Cold War. They are interlaced. At the level of the plutocracy there is no ‘us’ and ‘them’, and most certainly no ‘other’. Of the fifty-three billionaires resident in London and the south-east of England for all or part of the year in 2010, twenty-four were foreign-born. Banks in New York handle the money made by ‘high net-worth individuals’, from whichever corner of the globe they come. German social democrat politicians promote the interests of the Russian gas giant Gazprom while they are in office, and take jobs from it when they retire. Libel lawyers in London protect the reputation of Saudi petro-billionaires and post-Soviet oligarchs.

Beyond the intermingling of their finances and interests, the Western rich and the oligarchic rich share an ideological affinity that is worth worrying about too: they are unshakeable in their belief that they are entitled to their wealth, and have every moral right to resist attempts to reduce it. It never occurs to them that they are lucky; that if they are Western speculators, they are lucky to have lived during a time when the negligent governments of America and Britain failed to regulate finance and allowed them to take incredible risks at no personal cost; that if they are post-communist oligarchs, they were lucky to be in place when the Soviet Union collapsed, and to have the connections and muscle to take control of the old empire’s raw materials. To outsiders their luck seems self-evident. Yet nowhere in the recorded utterances of the plutocracy does one find a glimmer of an understanding that time and chance played a part in their good fortune.

Chrystia Freeland, a business journalist who works for Reuters, provided an archive of attitudes when she published interviews with the super-rich. As one might expect, the ‘new men’ of Putin’s Russia were the most brazenly self-aggrandising. While he was still the richest man in Russia, Mikhail Khodorkovsky told her, ‘If a man is not an oligarch, something is not right with him. Everyone had the same starting conditions, everyone could have done it.’ American financiers were more careful in their choice of words, but their self-justifications were no different. They could accept no blame for the financial crisis, even though the public had bailed out the banks and lent hundreds of billions of dollars nearly free of charge to the financial system. The real culprits were the plebs who had bought homes they could not afford, or small-time investors who had over-extended their property portfolios. After hearing much more in this vein, Freeland ended on a portentous note: ‘The lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth.’