May 16, 2021

Some See Two New Gilded Ages, Raising Global Tensions

The party was in honor of the Goldman thinker who had served notice to the Western investment community a decade ago that the world was being transformed by the rise of emerging markets, in particular, the four behemoths that Jim O’Neill, then chief economist at Goldman Sachs, dubbed the BRICs: Brazil, Russia, India and China.

In a new book that Mr. O’Neill has published, “The Growth Map: Economic Opportunity in the BRICs and Beyond,” he argued that the BRIC concept had “become the dominant story of our generation” and described the next 11 emerging markets that are joining the BRICs.

But there is another force that is reshaping the global economy today, and the Goldman executives who toasted Mr. O’Neill are a reflection of that: the rise, in the developed Western economies, of the “1 percent” and the creation of what many are calling a new gilded age. In the 19th century, the Industrial Revolution and the opening of the American frontier created the Gilded Age and the robber barons who ruled it. Today, as the world economy is being reshaped by the technology revolution and globalization, the resulting economic transformation is creating a new gilded age and a new plutocracy.

The two forces are intricately related. Indeed we are living through slightly different gilded ages that are unfolding simultaneously. The West is experiencing a second gilded age, while the emerging markets, as Mr. O’Neill and others have documented, are experiencing their first gilded age.

The resulting economic transformation is even more dramatic than that in the Gilded Age. Now, billions of people are taking part across much of the globe, not just the inhabitants of the West.

“It is structurally much more extreme now in multiple dimensions,” said Michael Spence, a Nobel-winning economist, adviser to the Chinese government’s 12th five-year economic plan and author of “The Next Convergence: The Future of Economic Growth in a Multispeed World.” “Now that the emerging economies are pretty big, this is just a harder problem. It is so different from previous economic change that I think these are issues that we have never wrestled with before.

“In the 200 years from the British Industrial Revolution to World War II there were asymmetries in the world economy, but the entire world wasn’t industrializing and it wasn’t interacting in the same way,” Mr. Spence said. These are complex phenomena, he added, “and we should approach them with humility.”

The gilded age of the emerging markets is the easier to understand. China, India and parts of Latin America and Africa are industrializing and urbanizing, just as the West did in the 19th century, and with the added oomph of the technology revolution and a globalized economy. The countries of the former Soviet Union are not industrializing — Stalin accomplished that — but they have been replacing the failed central planning systems that coordinated their creaky economies with a market system, and many are enjoying a rise in their standard of living as a result. The people at the very top of all of the emerging economies are benefiting most, but the transition is also pulling tens of millions of people into the middle class and lifting hundreds of millions out of absolute poverty.

The collapse of communism is more than a footnote to the double gilded ages of today. Economic historians are still debating the connection between the rise of Western democracy and the Gilded Age. But there can be no question that the gilded ages of today are as much the product of a political revolution — the collapse of communism and the triumph of the liberal idea around the world — as they are of new technology.

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