Sympathy For The One Per Cent

The uber-rich have problems, too
by Gordon Campbell

For good reason, we usually treat the differences between rich and poor as a zero/sum game, where the wealth of the few is gained and maintained at the expense of the many. In passing, some compassion may be in order. Being ultra-rich, as A.A. Gill amusingly suggested a few weeks ago in Vanity Fair, can be a source of its own brand of existential…emptiness. In sum:

Being able to afford everything you desire is not, by any means, the worst thing that can happen to you. But…more profoundly, neither is it the best.

In line with that sentiment, some of the uber-rich clearly feel paranoid about how the rest of us perceive them. Earlier this year, one US billionaire publicly complained that things had come to such a pretty pass in America today, that he and his fellow one per centers were being demonised in a similar fashion to how Jews were treated during the 1930s. “I would call attention to the parallels of fascist Nazi Germany to its war on its ‘one percent,’ namely its Jews, to the progressive war on the American one percent, namely the ‘rich..” ultra-wealthy venture capitalist Tom Perkins claimed in the Wall St Journal.

While only a crank like Perkins could liken his comfortable lot to that of the victims of Kristallnacht, his letter to the WSJ did trigger a wider debate, and a sense of curiosity. What would it feel like to be unspeakably rich yet only fleetingly satisfied, envied and resented? Try to see it through the eyes of the overly minted, Gill only half-jokingly suggests. “There is a name for their panicked ennui: Perfection Anxiety.”

There is a terrible dichotomy in extreme wealth. After a bit, the money stops working…..When you have 15 houses, yachts in three oceans, planes, cellars, mistresses, surgery, a library, and a personal charity, new purchases become just a matter of upgrading. And this is where the Perfection Anxiety kicks in. What you need is to have not just the most but the very, very best. The super-rich watch each other like envious owls, to see who’s got a slightly better loafer, a pullover made from some even more absurdly endangered fur…

Apparently, its not merely a case of whether some other gazillionaire has more money than you do. Its about whether they’re found a way of extracting surplus satisfaction from it:

…. There is no relativity to wealth. It’s all absolutes. It’s either impeccable, the best, the rarest, or it might as well be Walmart. The stress of value for money is magnified exponentially when it gets into the billions…. And it’s not just the suspicion that all your stuff isn’t utterly perfect. It’s also the anxiety of maintaining perfection once it’s achieved, and, as a result, constant discontent. A crooked Picasso, an unplumped scatter cushion, a faint mark on the handwoven silk wallpaper can drive them to a frothing distraction.

And when you’ve got the best of everything, when you have your tea flown in from a micro-garden in Darjeeling and it still tastes rather like tea, when you’ve designed your own scent made from the squeezed glands of civets and the petals of rare orchids and that fails to give you the high…. They will set out to visit every World Heritage site or to shoot every large animal on every continent, trying to wring some last buzz of excitement or sense of wonder out of the failed high of money. When all the veins have broken down, when you’ve upped the experience dosage to absurd levels, there’s always Fabergé eggs or overpriced wine.

All of which would seem to indicate that great wealth may deliver its major highs only on the upward climb. That figures. While personal wealth is still spreading out its tender green shoots, it provides a deliverance from worries about the basics of life, and from being humiliatingly beholden to others. Yet if you haven’t quite climbed onto the plateau of unspeakable wealth, it apparently can be really, really tough to keep your grip on the ladder just below it.

In fact, if you can’t find a good tax lawyer and if you don’t move to Florida, the system can treat the mundanely rich quite shabbily. Or so Bloomberg News would have you believe. Reportedly, its all so unfair ! The rich face a high marginal tax rate, yet don’t get anything much in return from the social safety net their taxes serve to maintain. Which means that their nest egg of savings for a rainy day has to be that much bigger. Plus they have high ongoing lifestyle maintenance costs – if only because the US healthcare system has made the preservation of good health and the quest for everlasting life into a very, very expensive bill of goods. Plus the costs of college education mean the mundanely rich have to sock away another small fortune year after year, to ensure that their kids can go to the right sort of colleges where they can meet and mate with people similarly blessed with high quality dental work. Read this Bloomberg article and weep:

Sure, the rich benefit from the court system, national defense and everything else that maintains the society that underpinned their success. But when it comes to their personal finances, wealthy Americans must save a huge portion of their earnings before they are fully protected from future risks and costs. Blame the nation’s financial safety net. It doesn’t meet the needs of the poor, and it largely leaves out the wealthy. Consider a married couple living in New York with newborn twins and earning $450,000 a year. Here’s roughly what they need to save:

So, that comes out to over $2 million in savings, just to keep your head above water. Everyone may think that the US is the citadel of capitalism. Yet being rich in the US, Bloomberg also argues, puts the wealthy at a real purchasing disadvantage, given those health and education costs mentioned earlier :

For example, while university is cheap or free in many parts of the world, full tuition and expenses at a private college in the U.S. can run $60,000 a year or more. For a newborn matriculating in 18 years, the four-year bill could be almost $500,000, assuming a 4 percent annual rise in costs and no financial aid. Double that for two children if neither can get a merit or athletic scholarship. In addition, many high-earning doctors, lawyers and other professionals may still be paying off their own student loans.

And if you’re rich, and doing your bit for national and personal savings …watch out for the unpredicted downturn or the unexpected restructuring or the gamble on the market that inexplicably doesn’t pay off. Because then, as the Bloomberg crew also gloomily point out, the welfare safety net won’t be able to sustain life as you’ve known it :

U.S. unemployment benefits are little help to high earners. They’re capped at $405 a week in New York, for example, the annual equivalent of $21,060. [Therefore] If one or both top earners lose a job, the chart [above] shows, they’ll need an emergency fund that covers at least three months’ salary.

To its credit, Bloomberg does fleetingly concede that ordinary un-rich people (aka “ the poor” or “the vanishing middle class”) also need to worry about paying for healthcare and providing for their kids.

So far, so alarming. It seems that (a) the uber-rich find that their money delivers a declining ratio of satisfaction to input while (b) the mundanely rich face a crippling level of outputs to maintain their position on the slippery pole. Here’s another problem : a few weeks ago, the Economist reported that over the course of the past few decades or more, the rich also have had steadily less and less leisure time to enjoy their loot.

Higher wages make leisure more expensive: if people take time off they give up more money. Since the 1980s the salaries of those at the top have risen strongly, while those below the median have stagnated or fallen. Thus rising inequality encourages the rich to work more and the poor to work less.

[That last sentence is remarkable. Only the Economist could conclude that rising inequality & job insecurity encourage the poor to work less, rather than forcing them to work their butts off in under-paid, under-employed conditions to keep a roof over the heads of their families. But I digress.] Lets hear the Economist make their case about how the recent conditions of market clearance are now making the rich work harder for their rewards:

The “winner-takes-all” nature of modern economies may amplify the substitution effect. The scale of the global market means businesses that innovate tend to reap huge gains (think of YouTube, Apple and Goldman Sachs). The returns for beating your competitors can be enormous. Research from Peter Kuhn of the University of California, Santa Barbara, and Fernando Lozano of Pomona College shows that the same is true for highly skilled workers. Although they do not immediately get overtime pay for “extra” hours, the most successful workers, often the ones putting in the most hours, may reap gains from winner-takes-all markets. Whereas in the early 1980s a man working 55 hours a week earned 11% more than a man putting in 40 hours in the same type of occupation, that gap had increased to 25% by the turn of the millennium.

Interestingly in this account, the Economist never mentions the role of choice, or the responsibilities that all but determine those choices. As usual, its market heroes are atomised individuals striving to maximise purely income-related rewards. Since the 1980s, we’ve assumed these narrow theories are descriptive of how real people (and real societies) work, or can be made to work. What I’m suggesting is that even on those willfully narrow terms, the outlook is less than rosy. Psychologically, the aspirational goal of uber-wealth readily leads to an endpoint marked by anxiety and boredom, whereby expanding resources deliver ever-declining rates of emotional return – or so it would seem, once the basic creature comforts have been lavishly seen to.

So why do the uber-rich do it? Gill has an explanation that sounds convincing. Surprisingly, it comes down to a form of altruism:

The only super-rich person I know said that, actually, after you’ve bought, consumed, collected, donated, and holidayed yourself into triple-ply boredom, the thing that actually keeps you spending is the expectations of others: your family and friends, and their friends, and the servants. No one ever writes about the terrible anticipation of wealth that comes from people who are merely solvent. You are the focus of so much wishful thinking, so much smiling avarice, you feel responsible to live a life of steepling extravagance. Particularly the young. That’s why they have $20 million weddings and hire a pop star to sing “Happy Birthday” to them. The pressure to live the dream is intense. Because, if you say, Look, actually, spending a lot of money is a diminishing return, it’s an effortful bore, it doesn’t deliver the rush—well, where does that leave the ever expanding universe of capitalism and consumption?

Where indeed does it leave capitalism and consumption? Given the reality of winner-take-all markets, a guaranteed pool of losers will no doubt keep on chasing the dream, willingly or otherwise. Crucially, many of the uber-rich came about their money the old fashioned way: they inherited it, which can be a blessing in ways other than the obvious. For current purposes, it means that those responsibilities to kin and clan referred to above have already been bedded in within a network of obligations, trusts and the like. It appears to work out better that way, psychologically speaking.

“So it would seem,” Gill concludes, “ that the best we can hope for is to be wealthy, but to be without cash.” But watch out ; the psychic consequences en route can be considerable. As Gill suggests, if you want to know what God thinks of money, take a look at the people He gives it to.