Even Warren Buffett says the US is moving toward plutocracy
The United States is moving toward plutocracy – government of the rich, not by the people, says Warren Buffett (80) in an exclusive interview with TheMarker in South Korea, while on a stop there during his tour of the Far East.
May will mark five years since Buffett carried out his first deal outside the United States, buying 80% of blade-technology company Iscar for $4 billion, from the Wertheimer family. He paid in cash. The plant has developed enormously since then, as have most of Iscar’s businesses. After a difficult year in 2009, for 2010 the company reported record sales that grew 40% year over year. Its business was driven mainly by the enormous emerging markets – China, India and Brazil. Iscar remains a well-oiled machine grinding out profits amounting to hundreds of millions of dollars a year for its owners.
Following are excerpts of Warren Buffett’s interview with TheMarker:
Q: What do we need to do to improve the system and its shortcomings?
“When times are good, it is kind of like Cinderella at the ball. She knew at midnight that everything was going to turn into pumpkins and mice, but it was just so much damn fun, dancing there, the guys looked better and the drinks got more frequent and there were no clocks on the wall.
“And that’s what happened with capitalism. We have a lot of fun as the bubble blows up, and we all think we are going to get out five minutes before midnight, but there are no clocks on the wall.”
Q: Jeffrey Sachs from Harvard was saying that the United States is turning into a plutocracy. And this is a feeling you get throughout the world, that the politicians are not powerful and the power is in the hands of a few strong players in the business sector. Do you feel that way?
“We are still a democracy, but we have moved in my lifetime towards a plutocracy. We do not have a plutocracy, I want to emphasize that, but the distribution of wealth and the influence of wealth have moved in that direction.
“If you look at the 1992 top-400 tax returns in the United States, the average income for those 400 people was $45 million per person. The last available figures show $340 million per person – that is eight for one in a period when the average worker went no place.
“We have had a system where as people have gotten richer and richer, they have been favored by taxation and have gotten richer to a greater degree. To my mind that is a bad trend, and it will probably get corrected in time. The rich have more influence in politics than they did 50 years ago.”