Wednesday, October 17, 2007

Pity the Rich

A few days ago George Will, presumably speaking for himself, let out a long, pitiful whine about how hard it is to be rich.
Citigroup's Ajay Kapur applies the term "plutonomy" to, primarily, the United States, although Britain, Canada and Australia also qualify. He notes that America's richest 1 percent of households own more than half of the nation's stocks and control more wealth ($16 trillion) than the bottom 90 percent. When the richest 20 percent account for almost 60 percent of consumption, you see why rising oil prices have had so little effect on consumption.
My sympathy is already starting to... er... percolate in my throat.

Will argues that high-end brand names are becoming too democratized. As if there's a deficit of "even higher-end" brand names eager to take their place. He also complains,
But it is increasingly expensive to be rich. The Forbes CLEW index (the Cost of Living Extremely Well) -- yes, there is such a thing -- has been rising much faster than the banal CPI (consumer price index). ...

This is the outer symptom of a fascinating psychological phenomenon: Envy increases while -- and perhaps even faster than -- wealth does. When affluence in the material economy guarantees that a large majority can take for granted things that a few generations ago were luxuries for a small minority (a nice home, nice vacations, a second home, college education, comfortable retirement), the "positional economy" becomes more important.
Wait... is George Will arguing "relative prosperity" to make fun of those who speak of "relative poverty"? No... he really seems to mean this. (Inadvertent self-parody?)
There is some good news lurking amid the vulgarity. Americans' saving habits are better than they seem because the very rich, consuming more than their current earnings, have a negative savings rate.
Note that Will is careful not to use the word "wages" or "income". So the return from your trust fund, taxed at the low capital gains rate, isn't enough to sustain your extravagent lifestyle? Well then, let me be the first to shed bitter tears for you, as you have to sell a few shares of stock in order to maintain your three mansions, yacht and private jet.
Furthermore, because the merely affluent are diminishing the ability of the very rich to derive pleasure from positional goods, philanthropy might become the final form of positional competition. Perhaps that is why so many colleges and universities (more than 20, according to Twitchell) are currently conducting multi billion-dollar pledge campaigns.
Yes, George. Colleges are trying to raise money not because they need it, or because state contributions toward universities is in a downward spiral, but because they hope to kick off a new era where rich people would rather have their name on a tile in a wall of donors than own one of those $200,000 bottles of Hennessy you describe. How astute of you to notice. [Insert eyeroll here.]

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