Business·Analysis

Plutocrats with their crony capitalism are taking over again in the U.S.: Don Pittis

Can a cabinet full of billionaires make poor people richer? Critics including Canadian Minister of Foreign Affairs Chrystia Freeland once warned of the effects of crony capitalism.

Not since Herbert Hoover in 1929 has there been a cabinet 'this reliant on wealthy people'

U.S. President Donald Trump, surrounded by his family. Today's super-wealthy resemble 'the sons and daughters of privilege of the Roaring Twenties, the plutocrats who were "born rich,"' Chrystia Freeland, writes in Plutocrats. (Shannon Stapleton/Reuters)

Can one of the richest cabinets in White House history since the late-19th-century Gilded Age make the United States equal again?

Many have their doubts. In fact there are signs that instead, the U.S. is moving in the direction of what Chrystia Freeland, Canada's minister of foreign affairs, once decried as "crony capitalism."

Freeland wrote her award-winning book Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else in 2012, long before anyone serious imagined a President Donald Trump.

Back then, Freeland was not a politician but a business journalist who among other things had become a specialist in the rise of the Russian oligarchs, the clique that used political clout to transfer the industrial and mineral wealth of the former Communist state into the hands of a small group of multibillionaires.

Richest since Hoover

The picture she paints In Plutocrats of an extravagantly wealthy elite taking over the reins of government and ruling in their own interest is eerily similar to what may be happening in the United States under Trump.

"You'd have to go back to Herbert Hoover to see a cabinet that was this reliant on wealthy people," presidential historian Robert Dallek told the business news service Bloomberg in an article titled Team Trump's Wealth Tops $12 Billion as Cohn to be Tapped.
President Herbert Hoover's inaugural ball in March 1929; his government was stacked with plutocrats. Before the year was over, the Roaring Twenties would end and the Great Depression would begin. (Library of Congress/Reuters)

Since being confirmed as the president's chief economic adviser, Gary Cohn, a former boss at investment bank Goldman Sachs, has called for loosening the rules on banks.

But Cohn is by no means the richest of the rich rulers.

Trump, who inherited his property tycoon father's fortune, is so far the wealthiest of the group. The Forbes magazine rich list recently put his wealth at $3.7 billion US, though he insists that is an underestimate.

"Trump … has never shied away from his wealth and often pointed to rich friends as 'winners' better suited to running a government than career politicians," reported the Financial Times.

'I am very rich'

"Part of the beauty of me is that I am very rich," the FT wryly quotes Trump as saying.

Estimates of the total wealth of Trump's rich appointees vary depending on how big a circle you draw around the administration but there are several billionaires, and most cabinet members are multimillionaires. 

Commerce secretary Wilbur Ross, who ran a vulture fund, is in the billionaires club. So is education secretary Betsy DeVos, part of the Amway family fortune.
Like Trump, billionaire Secretary of Education Betsy DeVos inherited her wealth, part of the Amway products fortune. (Kevin Lamarque/Reuters)

Todd Ricketts, designated as commerce secretary, though not a billionaire himself, comes from a billionaire family. The same with Elaine Chao, transportation secretary, who Forbes says comes from a family in the Top 40 or so of the richest in the country.

Rex Tillerson at State and Steven Mnuchin at Treasury are worth about $300 million each, says Forbes.

Fast food tycoon Andy Puzder, the labour secretary-designate, withdrew after pressure from Republicans in Congress, but not because he had publicly opposed increased minimum wages for America's poorest. Other blots on his record, including accusations of domestic violence, had made him unpalatable.

Low taxes, light-touch regulation, weak unions, and unlimited campaign donations are certainly in the best interest of the plutocrats.— Chrystia Freeland , Plutocrats

But replacing him in Trump's inner circle of appointees may be another billionaire, Stephen Feinberg. On Friday the New York Times reported he was Trump's choice to head a panel reviewing the country's spy agencies.

There was a billionaire in former president Barack Obama's cabinet, and most people consider Michael Bloomberg, the world's eighth richest human, to have been a success as mayor of New York.

According to Freeland, there is a difference between the clever people like bookkeeper's son Bloomberg, who created his own fortune, and those who inherit it.

"As they pass their fortunes down to their children, today's 'working rich' plutocrats may give way to a rentier elite more similar to the sons and daughters of privilege of the Roaring Twenties, the plutocrats who were 'born rich,'" she wrote in Plutocrats.

Pulling up the ladder

A number of Trump's inner circle, including Trump himself, would fit that profile. The difference between crony capitalists and rich but selfless public servants, Freeland says, is whether they enact laws to "pull the ladder up" and prevent others from joining their exalted state.

"Low taxes, light-touch regulation, weak unions, and unlimited campaign donations are certainly in the best interest of the plutocrats, but that doesn't mean they are the right way to maintain the economic system that created today's super elite," wrote a seemingly prescient Freeland five years ago.

Trump and his supporters say letting the rich get richer will help the entire economy, but government by the rich in the Hoover administration — which governed as the U.S. economy sank into the worst depths of the Great Depression — did not work out that way.

But sharing the wealth is not easy.
In her 2012 book, written when she was a financial journalist, Canada's Foreign Affairs Minister Chrystia Freeland warned about the danger of government by plutocrats transforming into crony capitalism. (Doubleday)

Even for a government that runs on a ticket of greater equality, like Freeland's Liberal Party, transferring money from the rich to the poor faces resistance from the better-off.

In Canada, rumours that the spring budget will include an increase in the tax rate on capital gains resulted in comments from money man David Rosenberg that it would be a "soak-the-rich" budget, "a classic move to make everyone poorer, cloaked under the veil of redressing income inequality." 

Last time round, the ruling plutocrats in the United States did not give up easily, wrote Freeland. 

"The conflicts and inequalities … were ultimately resolved in the West only after a half century of revolution and war."

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More analysis by Don Pittis

About the Author

Don Pittis

Business columnist

Don Pittis was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London. He is currently senior producer at CBC's business unit.

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