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The New 'Superclass' – Hype -vs- Reality

Iqbal Latif - 6/1/2008

David Rothkopf’s book, Superclass: The Global Power Elite and The World They Are Making, is an interesting read but contains much that I disagree with the author about.

It provoked me into thinking that there is this huge kind of hype created around the new “Superclass” of 6,000 people in today’s world, the mega rich and powerful players in the global elite, who evoke such vitriol and criticism for their perceived crime of “wealth creation” and life of luxury. I read several posts on Financial Times and Washington Post commenting on the superclass, and out of 200, 199 of them were focused on bashing the members of the super list and considered them to be a “threat” to the underprivileged, with most tending to overlook the contributions made to humanity at large which are unparalleled in human history. It seems to me that people generally have a very short-term memory. When was the last time someone gave away their wealth with selfless generosity? Warren Buffett and the Gates’ donated to the Bill and Melinda Gates Foundation, one of the best and largest charities conceived by anyone. Prince Waleed bin Talal donates $100 million every year on charity across Middle East, Asia and Africa.

According to Rothkopf, the four key elements of success are: geography, pedigree, networking and luck, which apparently would secure one a seat on the superclass podium, a dynamic ever-changing list depending on how much wealth you create or political power you yield. However, to counter Rothkopf’s argument, it is not about rich megalomaniacs working merely for their self-interest. Self-interest in today’s world leads to collective interest and removes all cultural boundaries that catapult the world into the lap of tangible and intangible prosperity. What we are witnessing today is the evolution of super-consciousness as a result of global connectivity and “death of distance.” Today, when Formula One races which I was watching in Barcelona, or a final between Manchester United and Chelsea, played at the Luzhniki Stadium in Moscow no less, are televised, a billion people watch them live sharing the excitement together in real-time. This is the evolution of super-consciousness. Had it not been for the wealthy, we would not see the kind of athletes and sportsmen emerging from all parts of the world; new African soccer talents playing for wealthy leagues and getting their asking price; some of the best track-and-field athletes hail from Ethiopia. And we would not see the likes of Schumacher, or Tiger Woods, or such iconic names in the absence of expensive sports tournaments. These athletes then become the gladiators of peace; matches between rival countries serve as a playing field to defuse tension and vent out simmering emotions. And this is what social need is all about.

I would say that the superclass are the “business icons” of today and as benign as say the Hollywood icons or the sports icons. These are the global citizens without frontiers. They are not a threat to society. Superclass in one way or the other has always existed; but now, it is completely universal and far more benign.

This super breed is the new version of Huntington’s “Davos Man” who defines it as those “who have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing, and see national governments as residues from the past whose only useful function is to facilitate the elite’s global operations.” As Rothkopf points out, they are the “new leadership class for our era,” or as he puts it, “a class without a country.”

The general consensus towards this new breed of superclass is very negative, and I find this extremely disturbing and short-sighted. It really is a question of a glass half-full or half-empty. I was listening to a speech at Stanford University outlining the power structure of the world that comprises of at least 50 corporations which controls one-third of the world’s wealth, holds $50 trillion worth of assets and employs 70 million people and, as a result, support 400 million dependents, assuming a family of five per person. This power structure is supported by an additional 500 million in terms of suppliers, traders, contractors. And to think such a whopping number has been created by one in one million, which is without geography and boundaries, limitless in wealth and exposure to power, is in itself creditworthy. It also speaks volumes on the spread of global prosperity.

The superclass list has always existed but was represented by dictators and tyrannical emperors. In times of the Spanish Inquisition, this class was represented by one man, King Ferdinand of Aragon with his Queen, Isabella of Castile; 2,000 years ago it was represented by Emperor Qin with his army of terracotta warriors; or the Mughal emperors who subjugated and ruled the Asian subcontinent for 700 years, and over 50 years ago it was Lord Mountbatten who ceded to the wishes of the unwilling colonies. Today’s “super 6,000” is a flexible group and the list is varied. The Pope is a member as is caveman, Osama Bin Laden (For the destructive influence OBL has, by that definition, every tormentor would be a prospective member). It continues to include the likes of Sarkozy, Putin, Muhammad Yunus, Blankfein, Bill Gates, Warren Buffett, and on the other side of the spectrum, great philosophers and Nobel Laureates who wield great influence on the philosophy of economics and intellectualism.

The very recognition of the fact that there are 6,000 super rich and philanthropic individuals, instead of despots and tyrants, is in itself a fact to consider. According to the author, David Rothkopf’s assumptions, they have an impact on 1.1 billion of the entire population. But the impact they make are on the middle-class who get to avail from the trickle-down effects of indirectly shared wealth; they help to uplift one-sixth of the entire population! So where is the threat?? The minority population, from year 180 to present times, has seen far fewer tyrants and despots. There was a time when humanity was ruled by Mongol terror and tyrannical emperors; all of Europe was ruled by them. Times have changed and we have come out of tyranny. What we have is the benevolence of 6,000 individuals who are responsible for removing the restrictions on emergence of a new rich middle class.

The superclass has emerged due to the “death of distance.” Communication, modern aviation and technology have bridged the chasms between countries and people to connect them in real-time, transcending all time zones and cultural barriers. Davos is a recent phenomenon and it helped bring Third World and the First World together; the intercourse of ideas in zero lag time kills decades of bureaucratic and political snags and helps everyone move faster. It is not by chance that BRICS have emerged or N12 are coming around the corner. The rise of a new billion strong middle class from what used to be the basket cases of previous decades is the success of the Davos Man.

Rothkopf contends that “members of the global elite have more in common with one another than they do with the men and women of their countries of origin, reflecting a growing cultural disconnect between this global community and counterparts back home.” But, this commonality of interests is what has broken the barriers that created wars and disagreements of the past. Today, Davos helps solve a lot of political disputes. The realization that economic betterment of masses is the key ingredient for the future is helping leaderships of backward countries, like Afghanistan, and opens new doors for poverty afflicted nations. Who would have thought Karzai would interact with leaders of the Fortune 500 to promote investments in Afghanistan? The book highlights the point that the “most dangerous mind-altering substance on earth is oil.” It edifies the role played by the Saudi and OPEC superclass, but Zaki Yemeni had this role since the ‘70s, now, with terror, oil and ideological tensions combined, the role of these people have transformed.

Such a superclass would not evolve in a socialist vacuum or under tyranny. Freedom bestows new vistas and opens new horizons. According to Rothkopf, economic clout as a result of explosive expansion of international trade, travel and communication has diminished the power of nation states. He criticizes market-oriented philosophy of Milton Friedman and the politics of Reagan and Thatcher, but fails to acknowledge that the new wealth creation is a result of free markets. The communist Russians and Chinese were totally detached from the world with their central governments nearly bankrupt. Today tells us a different story; China and Russia both hold combined foreign exchange reserves totaling nearly US$2 trillion.

Rothkopf highlights the disparity by suggesting that “only 30 years ago, the richest nation in the world had 88 times the wealth of the poorest; today it has more than 270 times the wealth. In the US, nearly all the benefits of growth in the past decade have accrued to the top 10 percent of society; while the top .01 percent has seen incomes grow 112 percent, the incomes of the bottom 90 percent grew by only 2 percent. The benefits of global growth accrue to fewer people. The richest 1,100 people in the world today have a net worth that’s almost double that of the 2.5 billion people earning the least.”

My argument to this would be that the total market capitalization of all publicly traded companies in the world was US$51 trillion in March 2007. According to global stock market statistics from the World Federation of Exchanges, the world stock market capitalization reached an all-time record of $59.74 trillion in September 2007.

Compared to last September, world stock markets have increased in value by 31% over the last year, adding $14 trillion of new stock market wealth to the world economy in just the last 12 months. Over the last five years, almost $40 trillion of stock market wealth has been created, as the global market capitalization rose from about $20 trillion in September of 2002 to almost $60 trillion in September 2007. In other words, more global wealth (measured by stock market value) was created in the last five years ($40 trillion in total, or almost $6,000 for every person on the planet) than was created during the thousands of years it took to create the first $35 trillion of stock market value, a level reached in 2000. Not a bad record for globalization and the significant amount of wealth created in its wake. And this kind of unseen prosperity has been created by the successful elite class. See how many shareholders increased over the years or the real estate price boom that helped everyone.

One can succeed or fail, become big or dwindle into nothingness overnight. It is the sheer hard work and determination of these people that sets them apart from average men. Joseph Lewis lost a billion dollars in Bear Stearns overnight, and recovered from the debilitating blow. This is the difference between extraordinary and ordinary men. We try to browbeat them and trivialize their achievements and forget that these are men who burn the candle 24 hours; striving and working towards success. These men work round the clock, risk strokes, never sleep, are always on the go. Their very ability to function under stressful times, benefit their shareholders and employees, justifies the wealth they accumulate. It is their hard work that helps economic activity. Jack Welch of GE, or Lee Iacocca of Chrysler, are men who turned their companies around. Certainly there is the invisible hand of greed that motivates these protagonists but the bottomline truth is that they create a free flow of prospects for the middle class to prosper and elevate their standards of living. Had it not been for global prosperity, opportunities would not have been created for the poor.

Rothkopf acknowledges that there is no grand scheme to take over the world, rather, it is the self-interest of everyone that helps create an interest for collective benefit; to quote him, “the individuals who take part in these institutions and who participate in certain elite events, clubs and conferences and casual dinners, probably do not have secret designs for world domination, but most likely do have common interests.” So what is wrong with that? It is the interest of a few to control the lot that would jolt me.

The author does give credit to super-elites’ disproportionate influence over national policy as often constructive, but always self-interested. In the corporate world, self-interest is the interest of everyone at large. Most of the listed companies are aimed towards shareholders’ interests, that is one of the main criticisms, but as I said, collective interest of so many leads to a lot more good than bad. Self-interest and motivation is the collective sin but without this, where will the incentive come from? I see disguised leftist tendencies wanting to coin socialism out of the fruits of successful capitalism. The very reason Rothkopf could not identify all members of the list is because of the potency of the system for the system allows new entrants. It is not about being born with a silver spoon, or in the Royal family of Windsor, or being a Harvard or Yale graduate; Latin America turned the page. It is intelligence, networking and hard work that takes one to the top. Many of the super 6,000 began with very modest beginnings, Bill Gates, or Steve Jobs, or Arnold Schwarzenegger. Take Lakshmi Mittal for example. In today’s world, penniless Mittal can become the richest man in three decades and run most of the ex-bankrupt steel mills far better. MT under Mittal has been a great corporate leader for millions of shareholders. To be a member of this superclass, networking is in and meritocracy is out, but Bill Gates or Steve Jobs show how much role luck and perseverance play too.

Rothkopf argues that the world is possibly more unequal than ever before. I disagree. He reinforces his point by saying that, “in today’s world, for example, the top 250 companies have annual sales equivalent to about a third of global GDP. More than 100 companies report annual sales in excess of $50 billion, whereas only 60 or so countries report an annual GDP in excess of $50 billion. Exxon Mobil, for example, had profits last year that were greater than the GDP of Bahrain and Yemen combined.”

With all due respect, the world was far more unequal when Mao, Stalin and Socialism reigned supreme in China, Russia and India. With new one billion-strong consumers that have emerged and the demand-based commodity boom where scarcity is caused by rising expectations, today, higher wheat or oil prices are based on higher level of calorie intake and better levels of living. How can that reality be broad-brushed under inequality? Even the living standards of living in sub-Saharan Africa are improving; scarcity-based famines have not struck us for some time. Generally, sub-Saharan Africa is the poorest region and contains many of the least developed countries in the world, suffering from the effects of colonialism, economic mismanagement, local corruption, and inter-ethnic conflict. But recent data suggest some parts of the continent are experiencing faster growth.

The World Bank reports the economy of Sub-Saharan African countries grew at rates that match global rates. The economies of the fastest growing African nations experienced growth significantly above the global average rates. The top nations in 2007 include Mauritania with growth at 19.8%, Angola at 17.6%, Mozambique at 7.9% and Malawi at 7.8%. Africa regressed in terms of foreign trade, investment, per capita income, and other economic growth measures but recent data suggests that GDP (PPP) from (2003) equal to US$ 1.635 trillion has increased to US$ 2.572 trillion in2007. GDP/capita (PPP): $1,968 (2003) $2,975 (2007) IMF.

Rothkopf himself is a part of that elite superclass; they may not be the best and the brightest but they coin global conscience and articulate global debate. Al Gore single-handedly has changed that course of global warming debate. An ex-politician, with the help of superclass intellectual status achieved a rainbow coalition that has brought the debate to a new level. Politicians are minority power brokers but global pundits like Bill Clinton who, while no longer commander-in-chief of the world’s remaining superpower, nevertheless heads the Clinton Global Initiative, a brand new dynamo in the area of international philanthropy.

Super class is not about money alone; it is about power that money gives and about the ability to use that power. But most of these entrepreneurs use this power beneficial to their corporate interests. The top 1,000 rich own as much or earn as much as the bottom 2.5 billion poor. "Cost is simply not caring." Stephen Schwarzman, CEO of the Blackstone Group, and Rupert Murdoch are the paradigm, both in one way or the other have redefined global frontiers of private equity by harnessing Chinese in and a global power house of information

It is a very arbitrary approach towards the powerful rising new elite and most of them are competitors rather than collaborators. Black Rock or Goldman Sachs would not or did not blink an eye to take another member of the superclass, Bear Stearns, to bankruptcy. There is no love lost in wiping the competition out. Only when it comes to the meltdown of the entire system they, like in the case of LTCM or any other major crisis, make decisions behind closed doors to find solutions that may be ideal for the overall wellbeing of nations. Such was the case in the case of the Treaty of Versailles that ended the First World War. But faced with total global anarchy decisions, based on self-interest, were taken that led to the Second World War.

The world and nations have divided into higher echelons and lower echelons; it has always been populated with the haves and have-nots. But global unity and prosperity of today cannot be compared to the past. The overall shape of the world has improved by leaps and bounds. Of course nobody is going to report that billions are sleeping and waking up peacefully everyday; that does not make news. It is the one million incidents that are highlighted and reported, when natural disaster strikes, which reflects a fraction of humanity. Basically, for the unprivileged portion of the world’s population that lacks basic necessities, countries that can dispense 5 billion metric tons in CO2 emissions would be considered as successful and belonging to the superclass.