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Dissecting the New Gilded Age in America
Emily Gertz, 28 Aug 07

I don't hear many voices raised against the market economy as a concept these days, but I do detect a lot of anxiety about how much harder it's getting to simply earn a comfortable living. Maybe it's all about who your friends are. There is a new Gilded Age in America, with wealth concentrating in ways not seen since before the Great Depression, and it has implications for creating a sustainable society as well as more economically just one.

In These Times points us at three new books that examine wealth and the wealthy in America. In "Richistan," Robert Frank, a reporter for The Wall Street Journal, explores the lives of America's extremely rich -- a population nearly invisible to many of us, but who control increasingly disproportionate amounts of capital. Not the Hollywood celebrity rich or the occasional media-hungry money mogul like Donald Trump, but the 9 million-plus and growing US households whose net worth exceeds $1 million -- including 400 or so who hold billions. "By Frank’s reckoning, they’re a diverse lot, who are not always happy with their wealth nor respected by their peers. Some continue pursuing wealth and power; others promote novel charitable initiatives or even progressive political goals. (Billionaires, he reports, vote more Democratic than mere millionaires.)"

The review is not a complete rave: the book is a bit shallow, says the reviewer, but still a "welcome, highly readable glimpse over the walls surrounding Richistan, combined with warnings about the troubling gap between the very rich and everyone else. That gap is likely to widen as the global rich further detach themselves from national roots and identify more with each other."

The idea of the super-rich becoming a networked, extra-national constituency (novelist Neal Stephenson's "The Diamond Age" is a vivid extrapolation of what this could look like) is an interesting twist on more utopian predictions of a trans-national constituency using networks to rise up for justice and peace -- "plutocrats of the world, unite!" -- but I wonder how realistic it really is. Even without the boost from government policy, regulatory blind eyes, and global trade treaties that the New Rich are enjoying, wealth tends to aggrandize in the hands of self-aggrandizers. Not the most collaborative of individuals.

"In Age of Betrayal: The Triumph of Money in America, 1865-1900," by Jack Beatty, and "Falling Behind: How Rising Inequality Harms the Middle Class," by Robert H. Frank, also covered in the review, apparently takes on the darker implications of "Richistan" more fully. According to ITT, Frank's main argument is "that people make many judgments about their needs within a social context,"

Whether it’s a hard-wired product of evolution (as Frank thinks) or simply a truism about human social behavior, people everywhere tend to evaluate their needs for housing, food, clothing and other goods in terms of what people around them have. When we have less of these “positional” goods than others, we feel deprived.

For example, many economists believe that people should prefer a 4,000-square-foot home in a world where most people have 6,000-square-foot homes, rather than a smaller 3,000-square-foot home where most other people have a 2,000-square-foot home. But given the choice, most people prefer the house that is bigger than their neighbors’ houses, even if it means having less space. Yet when faced with a similar choice about leisure time, people tend to pick the longer vacation, regardless of what other people have. Leisure is less a “positional” good, that is, judged less by comparison with what others have.

When there’s great inequality of positional goods, like monetary incomes or house sizes, people engage in an “arms race” that ultimately is not only a futile treadmill for most people, but also a distraction from the pursuit of non-positional goods like clean air, a pleasant work environment or leisure.

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Comments

Thanks for this post, I'm especially glad to see WC paying attention to this last point, which I think is crucial. Judging by previous comments on this site, the worldchanging crowd is firmly behind the 'educational' model of creating change: educate people and they will make different choices. But as this points out, there are deeper drivers than ignorance in human behavior.

Robert Frank is certainly not the only one who believes that status - which is really what is being referenced - has strong evolutionary roots. Steven Pinker, in his book 'The Blank Slate' discusses the evolutionary basis of status, and particularly one of its byproducts - waste. Waste is a sign that you have so much wealth - such high status - that you can afford to not care whether you use your resources efficiently.

Which is just to point out that whether you are attempting to influence households or nations, it pays to be clear about how truly difficult it will be to change the ways people behave. Equality, like sustainability, is a mighty goal... education alone won't get us there.


Posted by: justus on 28 Aug 07

In general, I think this is worthy inquiry, however does $1 million net worth include house? Doesn't that make almost EVERYONE in the greater Boston area (or NYC area...or any large coastal city) fit into the "extremely rich" category...which seems to defy common sense [not to mention the actuality on the ground]...


Posted by: Garth on 29 Aug 07

I'm not sure how cultural status really is. It seems like in most places there's a socio-economic elite concerned with the size of their house, the kind of car they drive, etc. Even in Third World peasant communities outward signs of wealth and prosperity are favored, and it's relative to general economic well-being. A villager with a taxi and a house made of bricks can be considered wealthy compared to everyone else in town using oxen and living in mud huts.

The question thoughtful people are now asking themselves: At what point do status symbols and material gains become synonymous with mass suicide? One doesn't have to spend an inordinate amount of time in the United States to notice our unshakable obsession with money and consumption. In order for humanity to progress, our concept of status must evolve beyond the material.


Posted by: Agroblogger on 29 Aug 07



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