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Krugman: The paranoia of plutocrats

Rising inequality has obvious economic costs: stagnant wages despite rising productivity, rising debt that makes us more vulnerable to financial crisis. It also has big social and human costs.

There is, for example, strong evidence that high inequality leads to worse health and higher mortality. But there's more. Extreme inequality, it turns out, creates a class of people who are alarmingly detached from reality — and simultaneously gives these people great power.

The example many are buzzing about right now is the billionaire investor Tom Perkins, a founding member of the venture capital firm Kleiner Perkins Caufield & Byers. In a letter to the editor of the Wall Street Journal, Perkins lamented public criticism of the “one percent” — and compared such criticism to Nazi attacks on the Jews, suggesting that we are on the road to another Kristallnacht.

You may say that this is just one crazy guy and wonder why the Journal would publish such a thing. But Perkins isn't that much of an outlier. He isn't even the first finance titan to compare advocates of progressive taxation to Nazis. Back in 2010 Stephen Schwarzman, chairman and chief executive of the Blackstone Group, declared that proposals to eliminate tax loopholes for hedge fund and private-equity managers were “like when Hitler invaded Poland in 1939.”

And there are a number of other plutocrats who manage to keep Hitler out of their remarks but who nonetheless hold, and loudly express, political and economic views that combine paranoia and megalomania in equal measure. I know that sounds strong. But look at all the speeches and opinion pieces by Wall Streeters accusing President Barack Obama — who has never done anything more than say the obvious, that some bankers behaved badly — of demonizing and persecuting the rich. And look at how many of those making these accusations also made the ludicrously self-centered claim that their hurt feelings (as opposed to things like household debt and premature fiscal austerity) were the main thing holding the economy back.

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