This diagnosis, though alarming, was hardly unique: drawing attention
to the divide between the wealthy and everyone else has long been
standard fare on the left. (The idea of “two Americas” was a central
theme of John Edwards’s 2004 and 2008 presidential runs.) What made the
argument striking in this instance was that it was being offered by none
other than the former five-term Federal Reserve Chairman Alan
Greenspan: iconic libertarian, preeminent defender of the free market,
and (at least until recently) the nation’s foremost devotee of Ayn Rand.
When the high priest of capitalism himself is declaring the growth in
economic inequality a national crisis, something has gone very, very
wrong.

This widening gap between the rich and non-rich has been evident for
years. In a 2005 report to investors, for instance, three analysts at
Citigroup advised that “the World is dividing into two blocs—the
Plutonomy and the rest”:

In a plutonomy there is no such animal as “the U.S. consumer” or “the UK
consumer”, or indeed the “Russian consumer”. There are rich consumers,
few in number, but disproportionate in the gigantic slice of income and
consumption they take. There are the rest, the “non-rich”, the
multitudinous many, but only accounting for surprisingly small bites of
the national pie.

Before the recession, it was relatively easy to ignore this
concentration of wealth among an elite few. The wondrous inventions of
the modern economy—Google, Amazon, the iPhone—broadly improved the lives
of middle-class consumers, even as they made a tiny subset of
entrepreneurs hugely wealthy. And the less-wondrous
inventions—particularly the explosion of subprime credit—helped mask the
rise of income inequality for many of those whose earnings were
stagnant.

But the financial crisis and its long, dismal aftermath have changed
all that. A multibillion-dollar bailout and Wall Street’s swift,
subsequent reinstatement of gargantuan bonuses have inspired a narrative
of parasitic bankers and other elites rigging the game for their own
benefit. And this, in turn, has led to wider—and not unreasonable—fears
that we are living in not merely a plutonomy, but a plutocracy, in which
the rich display outsize political influence, narrowly self-interested
motives, and a casual indifference to anyone outside their own rarefied
economic bubble.

Through my work as a business journalist, I’ve spent the better part
of the past decade shadowing the new super-rich: attending the same
exclusive conferences in Europe; conducting interviews over cappuccinos
on Martha’s Vineyard or in Silicon Valley meeting rooms; observing
high-powered dinner parties in Manhattan. Some of what I’ve learned is
entirely predictable: the rich are, as F. Scott Fitzgerald famously
noted, different from you and me.

What is more relevant to our times, though, is that the rich of today
are also different from the rich of yesterday. Our light-speed,
globally connected economy has led to the rise of a new super-elite that
consists, to a notable degree, of first- and second-generation wealth.
Its members are hardworking, highly educated, jet-setting meritocrats
who feel they are the deserving winners of a tough, worldwide economic
competition—and many of them, as a result, have an ambivalent attitude
toward those of us who didn’t succeed so spectacularly. Perhaps most
noteworthy, they are becoming a transglobal community of peers who have
more in common with one another than with their countrymen back home.
Whether they maintain primary residences in New York or Hong Kong,
Moscow or Mumbai, today’s super-rich are increasingly a nation unto
themselves.

The rise of the new plutocracy is inextricably connected to two
phenomena: the revolution in information technology and the
liberalization of global trade. Individual nations have offered their
own contributions to income inequality—financial deregulation and
upper-bracket tax cuts in the United States; insider privatization in
Russia; rent-seeking in regulated industries in India and Mexico. But
the shared narrative is that, thanks to globalization and technological
innovation, people, money, and ideas travel more freely today than ever
before.

Peter Lindert is an economist at the University of California at
Davis and one of the leaders of the “deep history” school of economics, a
movement devoted to thinking about the world economy over the long
term—that is to say, in the context of the entire sweep of human
civilization. Yet he argues that the economic changes we are witnessing
today are unprecedented. “Britain’s classic industrial revolution was
far less impressive than what has been going on in the past 30 years,”
he told me. The current productivity gains are larger, he explained, and
the waves of disruptive innovation much, much faster.

From a global perspective, the impact of these developments has been
overwhelmingly positive, particularly in the poorer parts of the world.
Take India and China, for example: between 1820 and 1950, nearly a
century and a half, per capita income in those two countries was
basically flat. Between 1950 and 1973, it increased by 68 percent. Then,
between 1973 and 2002, it grew by 245 percent, and continues to grow
strongly despite the global financial crisis.

But within nations, the fruits of this global transformation have
been shared unevenly. Though China’s middle class has grown
exponentially and tens of millions have been lifted out of poverty, the
super-elite in Shanghai and other east-coast cities have steadily pulled
away. Income inequality has also increased in developing markets such
as India and Russia, and across much of the industrialized West, from
the relatively laissez-faire United States to the comfy social
democracies of Canada and Scandinavia. Thomas Friedman is right that in
many ways the world has become flatter; but in others it has grown
spikier.

One reason for the spikes is that the global market and its
associated technologies have enabled the creation of a class of
international business megastars. As companies become bigger, the global
environment more competitive, and the rate of disruptive technological
innovation ever faster, the value to shareholders of attracting the best
possible CEO increases correspondingly. Executive pay has skyrocketed
for many reasons—including the prevalence of overly cozy boards and
changing cultural norms about pay—but increasing scale, competition, and
innovation have all played major roles.

Many corporations have profited from this economic upheaval. Expanded
global access to labor (skilled and unskilled alike), customers, and
capital has lowered traditional barriers to entry and increased the
value of an ahead-of-the-curve insight or innovation. Facebook, whose
founder, Mark Zuckerberg, dropped out of college just six years ago, is
already challenging Google, itself hardly an old-school corporation. But
the biggest winners have been individuals, not institutions. The
hedge-fund manager John Paulson, for instance, single-handedly profited
almost as much from the crisis of 2008 as Goldman Sachs did.

Meanwhile, the vast majority of U.S. workers, however devoted and
skilled at their jobs, have missed out on the windfalls of this
winner-take-most economy—or worse, found their savings, employers, or
professions ravaged by the same forces that have enriched the
plutocratic elite. The result of these divergent trends is a
jaw-dropping surge in U.S. income inequality. According to the
economists Emmanuel Saez of Berkeley and Thomas Piketty of the Paris
School of Economics, between 2002 and 2007, 65 percent of all income
growth in the United States went to the top 1 percent of the population.
The financial crisis interrupted this trend temporarily, as incomes for
the top 1 percent fell more than those of the rest of the population in
2008. But recent evidence suggests that, in the wake of the crisis,
incomes at the summit are rebounding more quickly than those below. One
example: after a down year in 2008, the top 25 hedge-fund managers were
paid, on average, more than $1 billion each in 2009, quickly eclipsing
the record they had set in pre-recession 2007.

If you are looking for the date when America’s plutocracy had its
coming-out party, you could do worse than choose June 21, 2007. On that
day, the private-equity behemoth Blackstone priced the largest initial
public offering in the United States since 2002, raising $4 billion and
creating a publicly held company worth $31 billion at the time. Stephen
Schwarzman, one of the firm’s two co-founders, came away with a personal
stake worth almost $8 billion, along with $677 million in cash; the
other, Peter Peterson, cashed a check for $1.88 billion and retired.

In the sort of coincidence that delights historians, conspiracy
theorists, and book publishers, June 21 also happened to be the day
Peterson threw a party—at Manhattan’s Four Seasons restaurant, of
course—to launch The Manny, the debut novel of his daughter,
Holly, who lightly satirizes the lives and loves of financiers and their
wives on the Upper East Side. The best seller fits neatly into the
genre of modern “mommy lit”—USA Today advised readers to take it
to the beach—but the author told me that she was inspired to write it in
part by her belief that “people have no clue about how much money there
is in this town.”

Holly Peterson and I spoke several times about how the
super-affluence of recent years has changed the meaning of wealth.
“There’s so much money on the Upper East Side right now,” she said. “If
you look at the original movie Wall Street, it was a phenomenon
where there were men in their 30s and 40s making $2 and $3 million a
year, and that was disgusting. But then you had the Internet age, and
then globalization, and you had people in their 30s, through hedge funds
and Goldman Sachs partner jobs, who were making $20, $30, $40 million a
year. And there were a lot of them doing it. I think people making $5
million to $10 million definitely don’t think they are making enough
money.”

As an example, she described a conversation with a couple at a
Manhattan dinner party: “They started saying, ‘If you’re going to buy
all this stuff, life starts getting really expensive. If you’re going to
do the NetJet thing’”—this is a service offering “fractional aircraft
ownership” for those who do not wish to buy outright—“‘and if you’re
going to have four houses, and you’re going to run the four houses, it’s
like you start spending some money.’”

The clincher, Peterson says, came from the wife: “She turns to me and
she goes, ‘You know, the thing about 20’”—by this, she meant $20
million a year—“‘is 20 is only 10 after taxes.’ And everyone at the
table is nodding.”

As with the aristocracies of bygone days, such vast wealth has
created a gulf between the plutocrats and other people, one reinforced
by their withdrawal into gated estates, exclusive academies, and private
planes. We are mesmerized by such extravagances as Microsoft co-founder
Paul Allen’s 414-foot yacht, the Octopus, which is home to two helicopters, a submarine, and a swimming pool.

But while their excesses seem familiar, even archaic, today’s
plutocrats represent a new phenomenon. The wealthy of F. Scott
Fitzgerald’s era were shaped, he wrote, by the fact that they had been
“born rich.” They knew what it was to “possess and enjoy early.”

That’s not the case for much of today’s super-elite. “Fat cats who
owe it to their grandfathers are not getting all of the gains,” Peter
Lindert told me. “A lot of it is going to innovators this time around.
There is more meritocracy in Bill Gates being at the top than the Duke
of Bedford.” Even Emmanuel Saez, who is deeply worried about the social
and political consequences of rising income inequality, concurs that a
defining quality of the current crop of plutocrats is that they are the
“working rich.” He has found that in 1916, the richest 1 percent of
Americans received only one-fifth of their income from paid work; in
2004, that figure had risen threefold, to 60 percent.

Peter Peterson, for example, is the son of a Greek immigrant who
arrived in America at age 17 and worked his way up to owning a diner in
Nebraska; his Blackstone co-founder, Stephen Schwarzman, is the son of a
Philadelphia retailer. And they are hardly the exceptions. Of the top
10 figures on the 2010 Forbes list of the wealthiest Americans,
four are self-made, two (Charles and David Koch) expanded a medium-size
family oil business into a billion-dollar industrial conglomerate, and
the remaining four are all heirs of the self-made billionaire Sam
Walton. Similarly, of the top 10 foreign billionaires, six are
self-made, and the remaining four are vigorously growing their
patrimony, rather than merely living off it. It’s true that few of
today’s plutocrats were born into the sort of abject poverty that can
close off opportunity altogether— a strong early education is pretty
much a precondition—but the bulk of their wealth is generally the fruit
of hustle and intelligence (with, presumably, some luck thrown in). They
are not aristocrats, by and large, but rather economic meritocrats,
preoccupied not merely with consuming wealth but with creating it.

To grasp the difference between today’s plutocrats and the hereditary
elite, who (to use John Stuart Mill’s memorable phrase) “grow rich in
their sleep,” one need merely glance at the events that now fill
high-end social calendars. The debutante balls and hunts and regattas of
yesteryear may not be quite obsolete, but they are headed in that
direction. The real community life of the 21st-century plutocracy occurs
on the international conference circuit.

The best-known of these events is the World Economic Forum’s annual
meeting in Davos, Switzerland, invitation to which marks an aspiring
plutocrat’s arrival on the international scene. The Bilderberg Group,
which meets annually at locations in Europe and North America, is more
exclusive still—and more secretive—though it is more focused on
geopolitics and less on global business and philanthropy. The Boao Forum
for Asia, convened on China’s Hainan Island each spring, offers
evidence of that nation’s growing economic importance and its
understanding of the plutocratic culture. Bill Clinton is pushing hard
to win his Clinton Global Initiative a regular place on the circuit. The
TED conferences (the acronym stands for “Technology, Entertainment, Design”) are an important stop for the digerati; Herb Allen’s*
Sun Valley gathering, for the media moguls; and the Aspen Institute’s
Ideas Festival (co-sponsored by this magazine), for the more
policy-minded.

Recognizing the value of such global conclaves, some corporations
have begun hosting their own. Among these is Google’s Zeitgeist
conference, where I have moderated discussions for several years. One of
the most recent gatherings was held last May at the Grove Hotel, a
former provincial estate in the English countryside, whose 300-acre
grounds have been transformed into a golf course and whose
high-ceilinged rooms are now decorated with a mixture of antique and
contemporary furniture. (Mock Louis XIV chairs—made, with a wink, from
high-end plastic—are much in evidence.) Last year, Cirque du Soleil
offered the 500 guests a private performance in an enormous tent erected
on the grounds; in 2007, to celebrate its acquisition of YouTube,
Google flew in overnight Internet sensations from around the world.

Yet for all its luxury, the mood of the Zeitgeist conference is
hardly sybaritic. Rather, it has the intense, earnest atmosphere of a
gathering of college summa cum laudes. This is not a group that plays
hooky: the conference room is full from 9 a.m. to 6 p.m., and during
coffee breaks the lawns are crowded with executives checking their
BlackBerrys and iPads.

Last year’s lineup of Zeitgeist speakers included such notables as
Archbishop Desmond Tutu, London Mayor Boris Johnson, and Starbucks CEO
Howard Schultz (not to mention, of course, Google’s own CEO, Eric
Schmidt). But the most potent currency at this and comparable gatherings
is neither fame nor money. Rather, it’s what author Michael Lewis has
dubbed “the new new thing”—the insight or algorithm or technology with
the potential to change the world, however briefly. Hence the presence
last year of three Nobel laureates, including Daniel Kahneman, a pioneer
in behavioral economics. One of the business stars in attendance was
the 36-year-old entrepreneur Tony Hsieh, who had sold his Zappos online
shoe retailer to Amazon for more than $1 billion the previous summer.
And the most popular session of all was the one in which Google
showcased some of its new inventions, including the Nexus phone.

This geeky enthusiasm for innovation and ideas is evident at
more-intimate gatherings of the global elite as well. Take the elegant
Manhattan dinner parties hosted by Marie-Josée Kravis, the economist
wife of the private-equity billionaire Henry, in their elegant Upper
East Side apartment. Though the china is Sèvres and the paintings are
museum quality (Marie-Josée is, after all, president of the Museum of
Modern Art’s board), the dinner-table conversation would not be out of
place in a graduate seminar. Mrs. Kravis takes pride in bringing
together not only plutocrats such as her husband and Michael Bloomberg,
but also thinkers and policy makers such as Richard Holbrooke, Robert
Zoellick, and Financial Times columnist Martin Wolf, and leading
them in discussion of matters ranging from global financial imbalances
to the war in Afghanistan.

Indeed, in this age of elites who delight in such phrases as outside the box and killer app,
arguably the most coveted status symbol isn’t a yacht, a racehorse, or a
knighthood; it’s a philanthropic foundation—and, more than that, one
actively managed in ways that show its sponsor has big ideas for
reshaping the world.

George Soros, who turned 80 last summer, is a pioneer and role model
for the socially engaged billionaire. Arguably the most successful
investor of the post-war era, he is nonetheless proudest of his Open
Society Foundations, through which he has spent billions of dollars on
issues as diverse as marijuana legalization, civil society in central
and eastern Europe, and rethinking economic assumptions in the wake of
the financial crisis.

Inspired and advised by the liberal Soros, Peter Peterson—himself a
Republican and former member of Nixon’s Cabinet—has spent $1 billion of
his Blackstone windfall on a foundation dedicated to bringing down
America’s deficit and entitlement spending. Bill Gates, likewise,
devotes most of his energy and intellect today to his foundation’s work
on causes ranging from supporting charter schools to combating disease
in Africa. Facebook’s Zuckerberg has yet to reach his 30th birthday, but
last fall he donated $100 million to improving the public schools of
Newark, New Jersey. Insurance and real-estate magnate Eli Broad has
become an influential funder of stem-cell research; Jim Balsillie, a
co-founder of BlackBerry creator Research in Motion, has established his
own international-affairs think tank; and on and on. It is no
coincidence that Bill Clinton has devoted his post-presidency to the
construction of a global philanthropic “brand.”

The super-wealthy have long recognized that philanthropy, in addition
to its moral rewards, can also serve as a pathway to social acceptance
and even immortality: Andrew “The Man Who Dies Rich Dies Disgraced”
Carnegie transformed himself from robber baron to secular saint with his
hospitals, concert halls, libraries, and university; Alfred Nobel
ensured that he would be remembered for something other than the
invention of dynamite. What is notable about today’s plutocrats is that
they tend to bestow their fortunes in much the same way they made them:
entrepreneurially. Rather than merely donate to worthy charities or
endow existing institutions (though they of course do this as well),
they are using their wealth to test new ways to solve big problems. The
journalists Matthew Bishop and Michael Green have dubbed the approach
“philanthrocapitalism” in their book of the same name. “There is a
connection between their ways of thinking as businesspeople and their
ways of giving,” Bishop told me. “They are used to operating on a grand
scale, and so they operate on a grand scale in their philanthropy as
well. And they are doing it at a much earlier age.”

A measure of the importance of public engagement for today’s
super-rich is the zeal with which even emerging-market plutocrats are
developing their own foundations and think tanks. When the oligarchs of
the former Soviet Union first burst out beyond their own borders, they
were Marxist caricatures of the nouveau riche, purchasing yachts and
sports teams, and surrounding themselves with couture-clad supermodels.
Fifteen years later, they are exploring how to buy their way into the
world of ideas.

One of the most determined is the Ukrainian entrepreneur Victor
Pinchuk, whose business empire ranges from pipe manufacturing to TV
stations. With a net worth of $3 billion, Pinchuk is no longer content
merely to acquire modern art: in 2009, he began a global competition for
young artists, run by his art center in Kiev and conceived as a way of
bringing Ukraine into the international cultural mainstream. Pinchuk
hosts a regular lunch on the fringes of Davos and has launched his own
annual “ideas forum,” a gathering devoted to geopolitics that is held,
with suitable modesty, in the same Crimean villa where Stalin,
Roosevelt, and Churchill attended the Yalta Conference. Last September’s
meeting, where I served as a moderator, included Bill Clinton,
International Monetary Fund head Dominique Strauss-Kahn, Polish
President Bronislaw Komorowski, and Russian Deputy Prime Minister Alexei
Kudrin.

As an entrée into the global super-elite, Pinchuk’s efforts seem to
be working: on a visit to the U.S. last spring, the oligarch met with
David Axelrod, President Obama’s top political adviser, in Washington
and schmoozed with Charlie Rose at a New York book party for Time magazine
editor Rick Stengel. On a previous trip, he’d dined with Caroline
Kennedy at the Upper East Side townhouse of HBO’s Richard Plepler. Back
home, he has entertained his fellow art enthusiast Eli Broad at his
palatial estate (which features its own nine-hole golf course) outside
Kiev, and has partnered with Soros to finance Ukrainian civil-society
projects.

Pinchuk’s growing international Rolodex illustrates another defining
characteristic of today’s plutocrats: they are forming a global
community, and their ties to one another are increasingly closer than
their ties to hoi polloi back home. As Glenn Hutchins, co-founder of the
private-equity firm Silver Lake, puts it, “A person in Africa who runs a
big African bank and went to Harvard might have more in common with me
than he does with his neighbors, and I could well share more overlapping
concerns and experiences with him than with my neighbors.” The circles
we move in, Hutchins explains, are defined by “interests” and
“activities” rather than “geography”: “Beijing has a lot in common with
New York, London, or Mumbai. You see the same people, you eat in the
same restaurants, you stay in the same hotels. But most important, we
are engaged as global citizens in crosscutting commercial, political,
and social matters of common concern. We are much less place-based than
we used to be.”

In a similar vein, the wife of one of America’s most successful
hedge-fund managers offered me the small but telling observation that
her husband is better able to navigate the streets of Davos than those
of his native Manhattan. When he’s at home, she explained, he is ferried
around town by a car and driver; the snowy Swiss hamlet, which is too
small and awkward for limos, is the only place where he actually walks.
An American media executive living in London put it more succinctly
still: “We are the people who know airline flight attendants better than
we know our own wives.”

America’s business elite is something of a latecomer to this
transnational community. In a study of British and American CEOs, for
example, Elisabeth Marx, of the headhunting firm Heidrick &
Struggles, found that almost a third of the former were foreign
nationals, compared with just 10 percent of the latter. Similarly, more
than two-thirds of the Brits had worked abroad for at least a year,
whereas just a third of the Americans had done so.

But despite the slow start, American business is catching up: the
younger generation of chief executives has significantly more
international experience than the older generation, and the number of
foreign and foreign-born CEOs, while still relatively small, is rising.
The shift is particularly evident on Wall Street: in 2006, each of
America’s eight biggest banks was run by a native-born CEO; today, five
of those banks remain, and two of the survivors—Citigroup and Morgan
Stanley—are led by men who were born abroad.

Mohamed ElErian, the CEO of Pimco, the world’s largest bond manager,
is typical of the internationalists gradually rising to the top echelons
of U.S. business. The son of an Egyptian father and a French mother,
ElErian had a peripatetic childhood, shuttling between Egypt, France,
the United States, the United Kingdom, and Switzerland. He was educated
at Cambridge and Oxford and now leads a U.S.-based company that is owned
by the German financial conglomerate Allianz SE.

Though ElErian lives in Laguna Beach, California, near where Pimco is
headquartered, he says that he can’t name a single country as his own.
“I have had the privilege of living in many countries,” ElErian told me
on a recent visit to New York. “One consequence is that I am a sort of
global nomad, open to many perspectives.” As he talked, we walked
through Midtown, which ElErian remembered fondly from his childhood,
when he’d take the crosstown bus each day to the United Nations
International School. That evening, ElErian was catching a flight to
London. Later in the week, he was due in St. Petersburg.

Indeed, there is a growing sense that American businesses that don’t
internationalize aggressively risk being left behind. For all its global
reach, Pimco is still based in the United States. But the flows of
goods and capital upon which the super-elite surf are bypassing America
more often than they used to. Take, for example, Stephen Jennings, the
50-year-old New Zealander who co-founded the investment bank Renaissance
Capital. Renaissance’s roots are in Moscow, where Jennings maintains
his primary residence, and his business strategy involves positioning
the firm to capture the investment flows between the emerging markets,
particularly Russia, Africa, and Asia. For his purposes, New York is
increasingly irrelevant. In a 2009 speech in Wellington, New Zealand, he
offered his vision of this post-unipolar business reality: “The largest
metals group in the world is Indian. The largest aluminum group in the
world is Russian … The fastest-growing and largest banks in China,
Russia, and Nigeria are all domestic.”

As it happens, a fellow tenant in Jennings’s high-tech, high-rise
Moscow office building recently put together a deal that exemplifies
just this kind of intra-emerging-market trade. Last year, Digital Sky
Technologies, Russia’s largest technology investment firm, entered into a
partnership with the South African media corporation Naspers and the
Chinese technology company Tencent. All three are fast-growing firms
with global vision—last fall, a DST spin-off called Mail.ru went public
and immediately became Europe’s most highly valued Internet company—yet
none is primarily focused on the United States. A similar harbinger of
the intra-emerging-market economy was the acquisition by Bharti
Enterprises, the Indian telecom giant, of the African properties of the
Kuwait-based telecom firm Zain. A California technology executive
explained to me that a company like Bharti has a competitive advantage
in what he believes will be the exploding African market: “They know how
to provide mobile phones so much more cheaply than we do. In a place
like Africa, how can Western firms compete?”

The good news—and the bad news—for America is that the nation’s own
super-elite is rapidly adjusting to this more global perspective. The
U.S.-based CEO of one of the world’s largest hedge funds told me that
his firm’s investment committee often discusses 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 means 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, 30-something CFO
of a U.S. Internet 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 10 times the paycheck, you need to deliver 10 times the value.
It sounds harsh, but maybe people in the middle class need to decide to
take a pay cut.”

At last summer’s Aspen Ideas Festival, Michael Splinter, CEO of the
Silicon Valley green-tech firm Applied Materials, said that if he were
starting from scratch, only 20 percent of his workforce would be
domestic. “This year, almost 90 percent of our sales will be outside the
U.S.,” he explained. “The pull to be close to the customers—most of
them in Asia—is enormous.” Speaking at the same conference, Thomas
Wilson, CEO of Allstate, also lamented this global reality: “I can get
[workers] anywhere in the world. It is a problem for America, but it is
not necessarily a problem for American business … American businesses
will adapt.”

Wilson’s distinction helps explain why many of America’s other
business elites appear so removed from the continuing travails of the
U.S. workforce and economy: the global “nation” in which they
increasingly live and work is doing fine—indeed, it’s thriving. As a
consequence of this disconnect, when business titans talk about the
economy and their role in it, the notes they strike are often
discordant: for example, Goldman Sachs CEO Lloyd Blankfein waving away
public outrage in 2009 by saying he was “doing God’s work”; or the
insistence by several top bankers after the immediate threat of the
financial crisis receded that their institutions could have survived
without TARP funding and
that they had accepted it only because they had been strong-armed by
Treasury Secretary Henry Paulson. Nor does this aloof disposition end at
the water’s edge: think of BP CEO Tony Hayward, who complained of
wanting to get his life back after the Gulf oil spill and then proceeded
to do so by watching his yacht compete in a race off the Isle of Wight.

It is perhaps telling that Blankfein is the son of a Brooklyn postal
worker and that Hayward—despite his U.S. caricature as an upper-class
English twit—got his start at BP as a rig geologist in the North Sea.
They are both, in other words, working-class boys made good. And while
you might imagine that such backgrounds would make plutocrats especially
sympathetic to those who are struggling, the opposite is often true.
For the super-elite, a sense of meritocratic achievement can inspire
high self-regard, and that self-regard—especially when compounded by
their isolation among like-minded peers—can lead to obliviousness and
indifference to the suffering of others.

Unsurprisingly, Russian oligarchs have been among the most fearless
in expressing this attitude. A little more than a decade ago, for
instance, I spoke to Mikhail Khodorkovsky, at that moment the richest
man in Russia. “If a man is not an oligarch, something is not right with
him,” Khodorkovsky told me. “Everyone had the same starting conditions,
everyone could have done it.” (Khodorkovsky’s subsequent political
travails—his oil company was appropriated by the state in 2004 and he is
currently in prison—have tempered this Darwinian outlook: in a
jail-cell correspondence last year, he admitted that he had “treated
business exclusively as a game” and “did not care much about social
responsibility.”)

Though typically more guarded in their choice of words, many American
plutocrats suggest, as Khodorkovsky did, that the trials faced by the
working and middle classes are generally their own fault. 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 hundreds of billions 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 pre-crisis levels of
compensation even as Main Street continues to struggle. Yet many of
America’s financial giants consider themselves under siege from the
Obama administration—in some cases almost literally. Last summer, 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 imagery, Schwarzman (who subsequently
apologized for the remark) is a Republican, so his antipathy toward the
current administration is no surprise. What is more striking is the
degree to which even former Obama supporters in the financial industry
have turned against the president and his party. A Wall Street investor
who is a passionate Democrat recounted to me his bitter exchange with a
Democratic leader in Congress who is involved in the tax-reform effort.
“Screw you,” he told the lawmaker. “Even if you change the legislation,
the government won’t get a single penny more from me in taxes. I’ll put
my money into my foundation and spend it on good causes. My money isn’t
going to be wasted in your deficit sinkhole.”

He is not alone in his fury. In a much-quoted newsletter to investors
last summer, the 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—told me
that the president is “anti-business”; one went so far as to worry that
Obama is “a socialist.”

Much of this pique stems from simple self-interest: in addition to
the proposed tax hikes, the financial reforms that Obama signed into law
last summer have made regulations on American finance more stringent.
But as the Democratic investor’s angry references to his philanthropic
work suggest, the rage in the C-suites is driven not merely by greed but
by a perceived affront to the plutocrats’ amour propre, a wounded
incredulity that anyone could think of them as villains rather than
heroes. Aren’t they, after all, the ones whose financial and
technological innovations represent the future of the American economy?
Aren’t they “doing God’s work”?

You might say that the American plutocracy is experiencing its John
Galt moment. Libertarians (and run-of-the-mill high-school nerds) will
recall that Galt is the plutocratic hero of Ayn Rand’s 1957 novel, Atlas Shrugged.
Tired of being dragged down by the parasitic, envious, and less
talented lower classes, Galt and his fellow capitalists revolted,
retreating to “Galt’s Gulch,” a refuge in the Rocky Mountains. There,
they passed their days in secluded natural splendor, while the rest of
the world, bereft of their genius and hard work, collapsed. (G. K.
Chesterton suggested a similar idea, though more gently, in his novel The Man Who Was Thursday: “The poor man really has a stake in the country. The rich man hasn’t; he can go away to New Guinea in a yacht.”)

This plutocratic fantasy is, of course, just that: no matter how
smart and innovative and industrious the super-elite may be, they can’t
exist without the wider community. Even setting aside the financial
bailouts recently supplied by the governments of the world, the rich
need the rest of us as workers, clients, and consumers. Yet, as a
metaphor, Galt’s Gulch has an ominous ring at a time when the business
elite view themselves increasingly as a global community, distinguished
by their unique talents and above such parochial concerns as national
identity, or devoting “their” taxes to paying down “our” budget deficit.
They may not be isolating themselves geographically, as Rand
fantasized. But they appear to be isolating themselves ideologically,
which in the end may be of greater consequence.

The cultural ties that bind the super-rich to everyone else are
fraying from both ends at once. Since World War II, the United States in
particular has had an ethos of aspirational capitalism. As Soros told
me, “It is easier to be rich in America than in Europe, because
Europeans envy the billionaire, but Americans hope to emulate him.” But
as the wealth gap has grown wider, and the rich have appeared to benefit
disproportionately from government bailouts, that admiration has begun
to sour.

One measure of the pricklier mood is how risky it has become for
politicians to champion Big Business publicly. Defending Big Oil and
railing against government interference used to be part of the job
description of Texas Republicans. But when Congressman Joe Barton tried
to take the White House to task for its post-spill “shakedown” of BP, he
was immediately silenced by party elders. New York’s Charles Schumer is
sometimes described as “the senator from Wall Street.” Yet when the
financial-reform bill came to the Senate last spring—a political tussle
in which each side furiously accused the other of carrying water for the
banks—on Wall Street, Schumer was called the “invisible man” for his
uncharacteristic silence on the issue.

In June, when I asked Larry Summers, then the president’s chief
economic adviser, about hedge funds’ objections to the carried-interest
tax reform, he was quick to disassociate himself from Wall Street’s
concerns. “If that’s been the largest public-policy issue you’ve
encountered,” he told me, “you’ve been traveling in different circles
than I have been over the last several months.” I reminded him that he
had in fact worked for a hedge fund, D. E. Shaw, as recently as 2008,
and he emphasized his use of the qualifier over the last several months.

Critiques of the super-elite are becoming more common even at gatherings of the super-elite. At a Wall Street Journal conference
in December 2009, Paul Volcker, the legendary former head of the
Federal Reserve, argued that Wall Street’s claims of wealth creation
were without any real basis. “I wish someone,” he said, “would give me
one shred of neutral evidence that financial innovation has led to
economic growth—one shred of evidence.”

At Google’s May Zeitgeist gathering, Desmond Tutu, the opening
speaker, took direct aim at executive compensation. “I do have a very
real concern about capitalism,” he lectured the gathered executives.
“The Goldman Sachs thing. I read that one of the directors
general—whatever they are called, CEO—took away one year as his salary
$64 million. Sixty-four million dollars.” He sputtered to a stop,
momentarily stunned by this sum (though, by the standards of Wall
Street and Silicon Valley compensation, it’s not actually that much
money). In an op-ed in TheWall Street Journal last year,
even the economist Klaus Schwab—founder of the World Economic Forum and
its iconic Davos meeting—warned that “the entrepreneurial system is
being perverted,” and businesses that “fall back into old habits and
excesses” could “undermin[e] social peace.”

Not all plutocrats, of course, are created equal. Apple’s visionary
Steve Jobs is neither the moral nor the economic equivalent of the
Russian oligarchs who made their fortunes by brazenly seizing their
country’s natural resources. And while the benefits of the past decade’s
financial “innovations” are, as Volcker noted, very much in question,
many plutocratic fortunes—especially in the technology sector—have been
built on advances that have broadly benefited the nation and the world.
That is why, even as the TARP-recipient bankers have become objects of widespread anger, figures such as Jobs, Bill Gates, and Warren Buffett remain heroes.

And, ultimately, that is the dilemma: America really does need many
of its plutocrats. We benefit from the goods they produce and the jobs
they create. And even if a growing portion of those jobs are overseas,
it is better to be the home of these innovators—native and immigrant
alike—than not. In today’s hypercompetitive global environment, we need a
creative, dynamic super-elite more than ever.

There is also the simple fact that someone will have to pay for the
improved public education and social safety net the American middle
class will need in order to navigate the wrenching transformations of
the global economy. (That’s not to mention the small matter of the
budget deficit.) Inevitably, a lot of that money will have to come from
the wealthy—after all, as the bank robbers say, that’s where the money
is.

It is not much of a surprise that the plutocrats themselves oppose
such analysis and consider themselves singled out, unfairly maligned, or
even punished for their success. Self-interest, after all, is the
mother of rationalization, and—as we have seen—many of the plutocracy’s
rationalizations have more than a bit of truth to them: as a class, they
are generally more hardworking and meritocratic than their forebears;
their philanthropic efforts are innovative and important; and the recent
losses of the American middle class have in many cases entailed gains
for the rest of the world.

But if the plutocrats’ opposition to increases in their taxes and
tighter regulation of their economic activities is understandable, it is
also a mistake. The real threat facing the super-elite, at home and
abroad, isn’t modestly higher taxes, but rather the possibility that
inchoate public rage could cohere into a more concrete populist
agenda—that, for instance, middle-class Americans could conclude that
the world economy isn’t working for them and decide that protectionism
or truly punitive taxation is preferable to incremental measures such as
the eventual repeal of the upper-bracket Bush tax cuts.

Mohamed El-Erian, the Pimco CEO, is a model member of the
super-elite. But he is also a man whose father grew up in rural Egypt,
and he has studied nations where the gaps between the rich and the poor
have had violent resolutions. “For successful people to say the
challenges faced by the lower end of the income distribution aren’t
relevant to them is shortsighted,” he told me. Noting that “global labor
and capital are doing better than their strictly national counterparts”
in most Western industrialized nations, ElErian added, “I think this
will lead to increasingly inward-looking social and political
conditions. I worry that we risk ending up with very insular policies
that will not do well in a global world. One of the big surprises of
2010 is that the protectionist dog didn’t bark. But that will come under
pressure.”

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. It
is obvious which of these would be the better outcome for America, and
the world. Let us hope the plutocrats aren’t already too isolated to
recognize this. Because, in the end, there can never be a place like
Galt’s Gulch.

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*Originally, the article mistakenly referred to the sponsor of the Sun Valley conference as Paul Allen. We regret the error.

This article available online at:

http://www.theatlantic.com/magazine/archive/2011/01/the-rise-of-the-new-global-elite/8343/