Subtitles section Play video Print subtitles BILL MOYERS: Welcome. The 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: a fancy new skyscraper going up two blocks away. When finished, this high rise among high rises will tower a thousand 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 of 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. Simultaneously, the powers-that-be have just awarded Donald Trump -- yes, that Donald Trump -- the right to run a golf course in the Bronx which taxpayers are spending at least $97 million to build. What “amounts to a public subsidy,” says the indignant city comptroller, "for a luxury golf course." Good grief. A handout to the plutocrat's plutocrat. This, in a city where economic inequality rivals that of a third-world country. Of America's 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 one percent of New Yorkers has an average annual income of $2.2 million. Across America, this divide between the superrich and everyone else has become a yawning chasm and studies indicate it may stifle jobs and growth for years to come. At no time in modern history has the top one hundredth of one percent owned more of our wealth or paid so low a tax rate. But in neither of the two presidential debates so far has the vastness of this astounding inequality gap been discussed. Not by Mitt Romney, who is the embodiment of the predatory world of financial capitalism. And not even by Barack Obama, whose party once fought for working men and women against the economic royalists. So just in time, if not too late, comes this definitive examination of inequality: “Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.” Its author is Chrystia Freeland, whose journalism is steeped in years of covering robber barons from Russia to Mexico and India. Once deputy editor of “The Globe and Mail” in Canada and a correspondent for “The Financial Times” and “The Economist,” she is now the editor of “Thomson Reuters Digital.” We're joined by the perceptive and merciless Matt Taibbi, who has made the magazine “Rolling Stone” a go-to source for understanding the financial scandals that roil America. Who can forget his 2009 article on "The Great American Bubble Machine," which described investment bank Goldman Sachs as quote, "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”? Welcome to you both. MATT TAIBBI: Thank you. BILL MOYERS: Income inequality has soared to the highest level since the Great Depression, with the top one percent taking 93 percent of the income earned in the first year after the recovery, the first full year after the recovery. Why are the two candidates not talking about inequality growing at breakneck speed? CHRYSTIA FREELAND: You know, I think because it is still a taboo in American political life and in American cultural life. One of the economists I talk to he works for the World Bank. And he said to me, you know, and he's a specialist in income inequality. And he said, "When you go to think tanks you say you'd like to do a study about poverty, they say, 'That's fine. That's great. We're happy to fund it,' because writing about poverty makes everybody feel good and feel that they're being charitable and beneficent. But if you say, 'Actually, I want to study income inequality,' and even most dangerously, 'I want to study what's happening at the very top of the distribution," what Branko Milanovi said to me is the think tanks immediately pull away because they say, "Our donors won't like it." And that actually challenges the whole economic setup of the United States and of western capitalism. It’s very, very threatening. And I think that that’s why you've had the billionaire class. You know, the minute Barack Obama, I would actually say rather gently suggested that the millionaires and the billionaires should pay a little bit more, you had immediate cries of class warfare from the plutocrats. And very emotional. You know, there was an activist investor who sent an e-mail to his friends. The subject line is, "battered wives." And in the e-mail he compares himself and his fellow multi-millionaires to battered wives who are being beaten by the president. He actually uses those words. MATT TAIBBI: And I thought it was really interesting in your book how you pointed out that Bill Clinton, himself, responded to Obama's criticism by saying, "You know, I would have done it a little bit differently. I think, you know, you can't attack these people for their success." And I think that's very relevant because if you go back in time, it wasn't always this way. 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, we're never going to lose the funding battle again." And they began this sort of imperceptible shift, where they continued to campaign on social issues the same way they had before. They retained their liberalism in that sense. But economically, they began to side more and more with Wall Street and more and more with the very rich. And they've, I think we've now reached the point where neither party really represents the very poor in the way that the Democrats maybe used to. And so, that there's, that's why, you know, you don't see it in the debates, because neither party is really an advocate for that kind of left behind class anymore. CHRYSTIA FREELAND: It is the people at the bottom, as Matt says. But it's also the people in the middle. MATT TAIBBI: Right. CHRYSTIA FREELAND: You know, the middle class is being-- MATT TAIBBI: Decimated, yeah. CHRYSTIA FREELAND: --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 it's great people are being raised up in India and China and now Africa. But let's think about how our society and our politics need to change to accommodate this. And no one is doing that. And 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." BILL MOYERS: Why are we so passive about this? MATT TAIBBI: Well, I think the, first of all the poor in this country have been incredibly demoralized whether it's the relentless attention of, you know, bill collectors. Or if you go to poor neighborhoods, you know, I was out in Queens last night interviewing a kid who's been stopped and frisked 70 times already. He's 22 years old. You have this constant interference by the police if you live in a bad neighborhood. There're all these obstacles to getting up and rising up and having your own voice. And also I think in the media we get these relentless messages that being poor is actually your own fault and that people who are rich deserve to be rich. And a lot of Americans are disillusioned about their situation. They believe, they actually do believe on some level that if they're poor, they deserve to be that way. I think they're, and so they're reluctant to go out and revolt the way maybe Europeans in the last century, early in the last century would have. BILL MOYERS: Left unanswered, left unanswered where does this vast inequality take America? CHRYSTIA FREELAND: 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. BILL MOYERS: Of what? CHRYSTIA FREELAND: Of the political capture. So of the people at the very, very top, capturing the political system. And most crucially, I think something that an economist, a guy called Willem Buiter, who's the chief economist at Citigroup, he calls it cognitive capture. Where he says, look, it's not like this vast conspiracy. It's not as if, you know, everyone is on the payroll of the plutocrats. And this guy, okay, he is now the chief economist of Citigroup. He wrote this when he was an academic economist. But so it's, he's hardly, you know, some kind of Marxist on the barricades. His argument was that part of the reason the financial crisis happened is the entire intellectual establishment, not just people inside investment banks, but regulators, academic economists, financial journalists, had all been captured by the financial sector's 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. You know, as Matt was saying, this notion that if you're poor, it's your own fault. You're part of this dependent 47 percent. Unions are very bad. All of that sort of stuff. So I think that that cognitive capture increases. And I think what you see increasingly is, you know, elites like to think of themselves as acting in the collective interest, even as they act in their personal vested interest. And so what I think you'll end up seeing is social mobility, which is already decreasing in the United States, being increasingly 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 think you see much less money spent on the things that the middle class and the poor need. That's why have this, you know, full bore attack on entitlements, right? Why is the plutocracy so enthusiastic about cutting entitlement spending? Because they don't need it. But they're very worried about their tax dollars funding it. MATT TAIBBI: Right. Where was that outrage when the $5 trillion or $6 trillion in bailouts was coming their way? CHRYSTIA FREELAND: Right. So I really worry about that. And then the other thing that I worry about is you do start actually stifling economic growth. So, you know, if you want my dystopia scenario for the United States, it is that America's moving into a more Latin American structure of the economy. BILL MOYERS: People at the top, rich. And a lot of people― CHRYSTIA FREELAND: A few incredibly rich, you know, having just great lives. And then people at the bottom really struggling. MATT TAIBBI: We both lived that. We saw that in Russia and it happened in the mid-'90s. And― BILL MOYERS: Yeah, you both cut your teeth in journalism covering Russia. What do you take away from that that is relevant to what's happening in this country? MATT TAIBBI: You know, I, that experience completely shaped the way I look at the present situation in the, in America. In the mid-'90s, suddenly when Russia became a "capitalist society" you suddenly has 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― BILL MOYERS: And they got it through privatization, the government sold off the resources of-- CHRYSTIA FREELAND: "Sold" in quotation marks-- BILL MOYERS: Yeah. So-- MATT TAIBBI: But that was, that's the key part that I think people don't understand, is that what happened in Russian was really a merger of state and private power that empowered this one tiny little class. There was this moment in Russia's history called loans-for-shares. The loans-for-shares privatizations, where a few people, a lot of them were ex-KGB types, were essentially handed the jewels of Russian industry by the people in the Yeltsin government. There were companies that were put in charge of their own auctions. So they-- CHRYSTIA FREELAND: They were all in charge of their own auctions. MATT TAIBBI: They were all in charge of their own auctions. So they, you would 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, you know, billions or even hundreds of billions of dollars. And that's how they instantly created this super wealthy class of people. And everybody else had nothing. This one story, for me this image that I'll never forget. I went to a coal mine up in the Russian arctic north where workers hadn't 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 to take me to their bright shiny new lounge that they had built for themselves and show off their brand new slate pool table that they had built with the money that they weren't paying to their workers. And that, to me, perfectly expressed the divide in modern Russian society. You had these people who were living off nothing on the one hand. And then you had these super wealthy people who had been enabled who had just kept the money for themselves. And that's I think, you know, it's a caricature of what we're experiencing here in America. But I think that's where the world is drifting toward now. BILL MOYERS: You write about some of these super rich, not only with insight, but with empathy. That is, you've gotten 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 I'm wondering, how did you crack what is clearly a tight knit world? CHRYSTIA FREELAND: Well, I guess the way journalists do it, just by talking to people, writing about them. I think you write stories that show people that actually you're interested in what they're doing. And what I would also say is, you know, I believe in capitalism. And I also actually believe in globalization and the technology revolution. If you gave me the option of turning the clock back to the 1950s, I wouldn't do it. Partly because I'm a woman and things were not that great for us then. BILL MOYERS: Well. CHRYSTIA FREELAND: And, you know, it's important, you know, I think a mistake that the left can make in criticizing income inequality is to behave as if this is entirely a political confection. It's 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 economic dynamic is something that is existing separate from the politics. The politics in the United States are exacerbating that division rather than mitigating it. But I do think that when you pull back and look at the global picture, which is something that was important for me to do in the book, it becomes a little bit harder to say, "this particular American tax break," or even, "this particular 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. It's happening across the western industrialized world. I'm Canadian. So I'm practically born a socialist in the view of many Americans. But even in Canada, income inequality is increasing. It's even, you know, for a while in the economic literature the one outlier was France. And so, insofar as economists make jokes they would say, "oh, the French. They have to be exceptional even in this area." But now you're seeing it increase in France too. And you're seeing it increase in the emerging market economies. So I think we do have to accept that there are some economic drivers. Now those economic drivers are partly put in place by the politics. It was politics that allowed globalization to happen. And in the United States really crucially, and I think you can't emphasize this too much. Look at what happened with the tax code. I mean, 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 percent. BILL MOYERS: Yeah, 91 percent, I believe. CHRYSTIA FREELAND: Right, just think about that. Imagine if Barack Obama had said in the debate this week, "You know what Governor Romney? I think America in the '50s was a wonderful place. That was the age of the greatest generation. They, too, faced a real budget deficit they had to pay off. And the people at the very top were willing to pay a 90 percent top marginal tax rate. Would you be willing to do that, Governor?" I mean, imagine if he had said that. BILL MOYERS: You cover some of the same crowd that Chrystia's writing about, but you do so with a, with complete irreverence. Do you still gain access to them? Or have all the doors been slammed in your face? MATT TAIBBI: Well, the very, very top people won't talk to me. You know, I don't have access to the same people that Chrystia maybe talks 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, you know, after I wrote a couple of articles. And then suddenly on this there was this outpouring of people from Wall Street who suddenly wanted to talk to me because they were upset about the direction that the financial services industry was taking.