Independent Production Firm with support from the rt religion foundation. A john and pauley guff charitable fund. The clement foundation. Park foundation,rt dedicated t heightening Public Awareness of critical issues. The herb albert foundation, supporting organizations Whose Mission is to t promote compassn and creativity in our society. The bernard and addry rapportso foundation. The john d. And katherine t. Mcarthur foundation. Committed to building a more just, verdant and peaceful world. More information at mackfound. Org. The bessie and jesse sync foundation. The hkh fodation. Barbara j. Fleischmann, and by our sole corporate sponsor, mutual of america, designing customized individual and Group Retirement products. Thats y were your retirement company. Welcome. Te new gilded age is roaring down on us. An uncaged tiger on a rampage. Walk out to the street in front of our office and turn right, and you can see the symbol of it. Skyscraper, going up two blocks away. When finished, this high rise among high rises will tower 1,000 feet. The tallest residential building in the city. The New York Times has dubbed it the global billionaires club, and for good reason. At least two of the apartments are under contract for more than 90 million each. Others, more modest, range in price from 45 million to more than 50 million. Simuaneously, the powers that be have just awarded donald trump, yes, that donaldan trum the rightto run a golf course in the bronx which taxpayers are spending at least 97 million to build. What amounts to a public indignant cityhe comptroller for a luxury golf course. Good grief. A handout to the pollute contracts. This is a city where economic inequality rivals that of a third world country. Of americas 25 largest cities new york is now the most unequal. The Median Income for the bottom 20 last year was less than 9,000. While the top 1 f new yorkers has an average income of 2. 2 million across america this divide between the super rich and everyone else has become a yawning chasm. At no time in modern history has the top 100th of 1 owned more of our wealth or paid so low a tax rate. But in neither of t two president ial debates so farf ha the vastness of this astounding inequality gap been discussed. Not by mitt romney h who is the embodiment of the mnpredatory world of financial capitalism. And not even by baprck obama, ckose party once fought for women against the economic loyalists. So just in time, if not too late, comes this definitive examination of inequality. Plute contracts, the rise of the new global supervich and the fall of yaef one else. Lu the author is chryia freeman, whose journalism is steeped in years of covering robber barons from mexico andia india. Once Deputy Editor of the globe and mail in canada and the correspondent for the Financial Times and the economists she is now the editor o Thompson Reuters digital. Were joined matt taibbi who has made the magazine Rolling Stone a goto source for understanding the financial scandals in rural america. Who can forget his 2009 article on the Great American bubble machine. Which describes goman sachs as a great vampire squid wrapped around the face of humanroy relentlessly so jabbing its blood funnel into anything that smells like money. Welcome to you both. Income inequality has soared to the highest level since the great depression. With the top 1 taking 93 y of the income earned in the93 firs year after the recovery. The first full yr after the recovery. Why are the two candidatesllot talking about inequality growing at breakneck speed . You know, i think because it is still a taboo in american political life. And in american cultural life. One of the economists i talked to who works for the world bank, and he said to me, you ow, and hes a specialist in income inequality. He said when you go to think tanks and you say youd like to do a study about poverty, they say thats fine, thats reat. Were happy to fund it. Because writing about poverty makes everybody feel good. Re and feel that theyre being charitable. But if you say i want to study income inequality, and even s mt dangerously, i want to study whats happening at the very top of the distribution, what they said to me is the think tanks immediately pull away. Because they say our donors wont like it. And that actually challenges the whole economic setup of the United States. And of western capitalism. Its very, very threatening. And i think that thats why youve had the billionaire class. You know, the minute barack obama i would actually say rather gentlyauggested that the millionaires and the billionaires should pay a little bit more, y had immediate cries of class warfare from the plutocrats, and very emotional. You know, there was an activist investor who sent an email to his friends, the subject line is, battered wives. And in the email, he compares himself and his fellow multimillionaires to battered wives who are being beaten by the predent. He actually uses those words. And i thought it was really interesting, in your book, how you pointed out that bill clinton himself responded to obamas criticism by saying, you know, i would have done it a little bit differently. I think, you know, you cant attack these people for their success. And i think thats very relevant, because if you go back in time it wasnt always this ay, but i think the shift really began with clinton and the new democrats. I think after, you know, Walter Mondale lost in 1984, the democrats decided, you know, were never going to lose the funding battle again. And they began this sort of imperceptible shift where they t continued to campaign on social issues, the same way they had before. Theyetained their liberalism in that sense. But economically, they began to side more and more with wall street, and more and more with the veryth rich, and theyve, i think weve now reached the point where Neither Party really reesents the very po in the way that the democrats maybe used to. Oud so thats why you dont see it in the debates because neher party is really an advocate for that kind of left behind class anymore. It is the people at the bottom. But its also the people in the middle. You know the middle class is being hammered. Those jobs are hollowed out. And where are the people pulling back and saying, okay, technology revolution, we love it. Globalization. I love that, too. And i think its great people are being raised up in india and china and now africa. But lets think about how our society and our politics need to change to accommodate this. And no one is doing that. Meanwhile the guys at the top who are making who are doing so, so well, actually are saying, we need to slant the political system even more in our own favor. Why are we so passive about this . Well, i think firs of all, fie poor in this country have been incredibly demoralized. Orether its the relentless attention of, you know, bill collectors, or if you go to poor neighborhoods. I was out in queens last night interviewing a kid whos been stopped and frisked 70 times already. He22 years old. You have this constant interference by the police, if you live in a bad neighborhood. There are all these obstacles to getting up, and rising up, and having your own voice. And also, i think, in the media we get these res all rightless messages that being poor is your owh fault and people who are rich deserve to be rich a lot of americans are disillusioned about their situation. They believe on some level that if theyre poor they deserve to be that way. So theyre reluctant to go out and revolt the way maybe europeans in the last century, early in the last century would have. Left unanswered. Left unanswered, where does this vast inequality take america . Well, i think to a very bad place. And i see two real and present dangers. One is, that you see an increase of the political capture. Of what . Of the political capture. Of so the people at the very, very top capturing the political system, and most usually, i think, smething that an economist who i call william boyter, he calls it cognitive capture, where he says look, its not like this vast conspiracy. Its not as if, you know, everyone is on the paygll of the plutocrats, this guy, okay, hes now the chief economist of citigroup. He wrote this when he was an academic economists, so hes hardly, you know, some kind of markist on a barricade. His argument was that part of the reason the financial crisis happened s the entires intellectual establishment, not just people inside investment banks, but regulators, academic economists, financial journalists, had all been captured by the financial sectors vision of how the economy should work. And in particular light touch regulation. And i think there is a broader cognitive capture of, you know, you might call it the intellectual class. The public intellectuals. Around, maybe the inevitability of plutocracy. As matt was w saying this motio that if youre poor its your own fault. Youre part of this dependent 47 . Unions are very bad. All of thatal sort of stuff. I think that that cognitive capture increases and i think what you see increasingly is, you innow, elites like to think of themselves as acting in the collectivew,interest, even as they act iniv their personal vested interest. And so what i think you end up seeing is social mobility, which is alrea i decreasing in the United States. Inc dasingly squeezed. You see particularly powerful sectors, finance, oil. I would say the Technology Sector is going to be next in line getting lots of government subsidies. And meanwhile i tynk you see much less money spent on the things that middle class and the poor need. Thats why you have this, you know, full bore attack on entitlements. Right . Why is thenk plutocracy so enthusiastic about cuttinghe entitlement spending. Because they dont need it where was the outrage when the 5 trillion or 6 trillion in bailouts was coming their way. I really worry about that. The other thing that i worry about is you do start actually stifling economic growth. So you know, if you want my dystopia scenario of the United States is america is moving into a more latin america style econo. A few incredibly rich having just great lives, and then people at the bottom really. Struggling. We both lived that. We saw that in russia, it happened in the mid 90s. You both cut your teeth in journalism covering russia. What do you take away from that that is relevant to whats happening in this country . That experience completely shaped the way i look at the present situation in the america. In the mid 90s, suddenly when russia became a quote unquote capitalist society, you suddenly had this instant division of the entire society, into this very, very tiny group of people at the top who had more money than anybody in the world. And then there was everybody else who had nothing. And they got it through privatization. The government sold off the is resources. Sold in quotation marks. Thats the key part that i think people dont understand. What happened in russia was really a merger of state and private power that empowered this one inely nil cls. Thereer was this moment in russias history called loans rur shares. Where a few people, a lotf them were exkgb types, were essentially handed the jewels of russian industry by the people in the yetten government. There were companies that were put in charge of theirf own auctions, so they they were all in charge of their own auctions. All in charge of their own auctions. So you wthld have an auction for an oil company, and a bank would be put in charge of that auction, and the bank magically, you know, would win the auction for the oil company. Which was worth billions or even hundreds of billions of dollars. Ldd thats how they instantly created this super wealthy class of people,d and everybody else had nothing. This one story for me, this image that ill never forget. I went to a coal mine up in the Russian Arctic north, where workers hadnt been paid their salaries for nine, ten months at a time. And when i went to the mine, the mine owners, the first thing they wanted to do was take me to their bright, shiny new lounge that they had built for themselves and show off their brandnew slate pool table that they had built with the money that they werent paying to their workers. Nhat to me perfectly haexpress the divide in modern russian society. You have these pe le who are living off nothing on the one hand. Andlehen you had these super wealthy people who had bann enabled who just kept the money for themselves. Nhats, i think, you know, its aha caricature of what were experiencing here in america b i think thats where the world is drifting toward now. You write about some of these super norich, not only with insight, but with empathy. That is youve got to talk to a lot of them. You have moved among them as a financial journalist, been to davos and other places like that. And im won ring, how did you crack what is clearly a tightlipped world . Well, i guess the way journalists do it. Ri just by talking to people, writing about them. I think you write stories that show people that actually youre interested in what theyre doing. And what i would also say is, you know, i believe in capitalism. And i also actually believe in globalization and Technology Ref lulgs. If you gave me the option of turning the clock back to the 1950s i wouldnt do it. Partly because im a woman and things were not that great for us then. You know, its important, i think a mistake that the left an make, in criticizing income inequalitys toit behave as if this is entirely a political confection, its entirely about political capture, there are no genuine, legitimate and actually benign economic forces driving it. Because i think there are. I think the winner take all economica dynamic is something thatis existing separate from the politics. The politics in the United States are exacerbating that division. Rather than mitigating it. But i do think when youthull back and look at the global picture that was something important for me to do in the book it becomes a little bit harder t a say this particular american tax break, or even this American Financial reform is the only thing driving income inequality. Because the really remarkable thing is the extent to which this is a global phenomenon. Itsappening across thes western industrialized world. Im canadian. So im practically born a socialist in the view of many americans. But even in canada, income inequality is increasing. Its even, you know, for awhile in economic literature the one outlyer was france, so far as economists make jokes, they ould say oh, the french they have to be exceptional even in this area. Now youre seeing it increase in france, too. And youre seoung it increase in emerging market economies. So i thinkng we do have to acce that there are some economic drivers. Those economic drivers are partly put in place by the politics. Allowed litics that globalization to happen. And in thenited states really crucially, and i think you cant emphasize this too much, look at ohat happened with the tax code. In the 1950s, this era when america felt itself to be a very conservative society, and it was. The top marginal tax rate was above 90 . 91 . I believe. Just think about that. Imagine if barack obama had said, in the debate, this wk, you know what governor g romneyi think america in the fiftys was a wonderful place. They, too, faced a real budgete deficit they had to pay off and the people at the very top were willing to pay a 90 top marginal tax rate. Would you be willing to do that governor . Imagine if he had said that. You cover some of the same crowd chrystia is writing about but you do with complete irremember advance. Do you still gain access to them . Or have all the doors been slammed in your face . Well, the very, very top people wont talk to me. Y know, i dont have access to tthe same people that chrystia may be talking to. But i do talk to a lot of people who work on wall street. In fact, i got started down the road of this whole topic, youho know, after i wrote a couple of articles and suddenlythere was this outpouring of people from wall street who suddenly wanted to talk to me because they werey upset about the direction that the financial serces industry was taking. So im hearing a lot from pople sort of from the middle on downm and on wall street, and what theyre really upset about is corruption, is this this merging of state and private power where the losers dont lose anymore. I think the people who get really upset are small hedge funds, small banks, and they see companies like, you know, oup and Goldman Sachs and Jpmorgan Chase make mistake after mistake, and they get ou rewarded for it, but with bailouts, and even greater market shares than they had before. And so you know, my analysis is informed by those people, and i think, you know, i think chrystia andut i agree about a t of things about particularly about the growing divide, and how extreme its become. My analysis, which might be a little bit angrier, just because, you knogs from the point of view that im particularly looking at is the corruption, and the use of force and state power to people the divide where it is and increase it. You both had pointed out that we tend to talk as if wall street and the plutocracy were a monolith. But its not. Do you think there is a civil war within the 1 . There is absutely aab schism developing in this community. Think about it just on one level on the level of banking. All right . You have ese too big to fail banks. Everybody in the world knows that nobody is going to allow the very biggest commercial banks to go out of business. It will neoor. 2008 proved it. That if they ever get r. Trouble the governmentmell come in and rescue them. What does that mean for those banks . It means it allows them to borrow money more cheaply. Anybody who lends themll money knows theyre always going to get paid off. In the worst casecenario ctheyre going to get paid off. This gives them an inherent financial thvantage over the small, regional commercialal ba. Which does not have that implied government guarantee. So those people are furious. Theyre furious that they have to compete against these gigantic monoliths tat have the implicit backing of the u. S. Government. Then theres the other problem of corruption. I hear all the time from hedge funds, you know, these smaller guys who beeve that some of the big investment banks are selling them out to even bigger hedge funds that are giving away information about their positions to