Insightful article from Chrystia Freeland in the Atlantic entitled the Rise of the New Global Elite. As Freeland writes a major reason for the rise of the new super rich is globalization and technology. These two mega forces are what is flattening the economy and transforming the economy for everyone. Elites have benefited enormously, but for far too many Americans it has led to a declining standard of living.
The article is worth reading. It covers a range of topics. Some quite worrisome, particularly the political implications. For this post I want to focus on the attitudes these global elites have about America and American workers. What these elites think matters since they are making decisions that will influence the future of jobs for many of us.
First for many of the elites America is not that important. They – and their enterprises – can make more money outside of America – largely in emerging markets. For those who are here if you are an American worker there is a lot to be worried about.
For example Freeland’s reporting on a hedge fund CEO:
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.
A CFO reflecting on the new reality that lots of work can be done everywhere has concluded that middle class Americans are over paid and to be competitive likely will need to take pay cuts:
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.”
Two CEOs summed up the new realities this way:
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.”
This may be the most fundamental new reality: American companies positioned to do well in a global economy, American workers not positioned well. Unless that changes we are going to see both more jobs go elsewhere and more of those that remain here pay less.