To stay rich, stay open to risk
That was the vibe I got reading Chrystia Freeland's opinion piece in the New York Times this weekend about the paradox facing the world's wealthiest folks, which posits that when the wealthy circle the socioeconomic wagons on access to that money, the money moves elsewhere -- thus dooming the wealthy over the long term.
Simply, you lose human and actual capital when you stymie upward mobility. No one wants to come to your party if the chance to get in is close to nil.
The Reuters veteran writes:
Historically, the United States has enjoyed higher social mobility than Europe, and both left and right have identified this economic openness as an essential source of the nation’s economic vigor. But several recent studies have shown that in America today it is harder to escape the social class of your birth than it is in Europe. The Canadian economist Miles Corak has found that as income inequality increases, social mobility falls — a phenomenon Alan B. Krueger, the chairman of the White House Council of Economic Advisers, has called the Great Gatsby Curve.
Freeland hooks her op/ed into the current Romney-Obama U.S. election season news cycle, but the point will stand long after those votes are counted: if you're on top and want to stay there for generations, you need to place your bets on your business savvy and not tug the regulatory strings you may now have better access to. Doing so is your own demise.
Freeland's opening anecdote recounts a powerful and wealthy Venice that self-destructed after it favored self-interest. I can't help but think of examples of the opposite today: London, New York and other global cities that have managed to stay relevant by promising (and delivering) upward mobility, even as China and others threaten that lead.
In the U.S., there's a big debate over whether economies are best managed by "trickle-down" or "bubble up" approaches. As the global stage shifts to the East, one can only wonder how it will cope.
Photo: Warby Parker