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The very rich in America: “The kind of money you cannot comprehend”
By David Walsh
19 April 2006
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“Let me tell you about the very rich,” F. Scott Fitzgerald famously
wrote in a 1926 story, “They are different from you and me.” But even
Fitzgerald could not have imagined how different “from you and me” the
very rich would become in America eight decades later.
The sums that the very wealthy have at their disposal in the US are
almost unimaginable: Oil executive Lee Raymond receiving some $400
million in a retirement package; the 2005 compensation of bank
chairman Richard Fairbank totaling some $280 million; Omid Korestani,
head of Google’s global sales, exercising stock options providing him
with $288 million last year.
The accumulation is brazen. What once would have been considered a
somewhat discreditable fact of social life, the proliferation of
billionaires, is now hailed as a sign of America’s success. The demise
of the Soviet Union and the supposed absence of any alternative to
capitalism, the putrefaction of the AFL-CIO trade unions, the
ignominious collapse of American liberalism and the lack to this point
of broad-based, organized political opposition to the ruling elite and
its two parties have rendered the American financial aristocracy
“dizzy with success.” These people have lost their heads.
In the face of public outrage over oil company profits and soaring
gasoline prices, Exxon arrogantly defended Raymond’s hundreds of
millions, arguing that they were rewarding the executive’s
“outstanding leadership of the business, continued strengthening of
our worldwide competitive position, and continuing progress toward
achieving long-range strategic goals.” The company added that it
considered Raymond’s compensation package “appropriately positioned.”
In a study published in October 2005, three accounting professors
reported that negative, even occasionally scathing press coverage,
“does not substantively change corporate behaviour with regard to pay
packages.” The American establishment is all but impervious to the
sentiments of the broad masses of the population. In response to a
recent report detailing the immense and growing social gap, a
spokesman for New York state’s Business Council told a reporter that
the incomes earned by his state’s rich were “something that everybody
who cares about New York should be pleased about.”
An insulated world of immense wealth exists as never before, at least
in modern US history. The number of Americans with assets of $1
million or more reached 7.5 million in 2004, according to a survey
conducted by the Spectrem Group. Beyond that, however, are those who
possess “Ultra High Net Worth” (a mellifluous term invented by Merrill
Lynch circa 2001): individuals in households with $5 million or more
in net worth. In a country of 300 million people, the UHNW form a very
small percentage of the population, but a not insignificant number in
absolute terms. Economic, political and cultural life in America is to
an enormous extent organized for their benefit.
This is not simply obscene or unjust, it is socially irrational and
immensely destructive. How is it possible to allocate resources,
repair and renew the infrastructure, carry out any type of long-term
economic planning, cure any social ills, when the official guiding
principle is the ability of an oligarchic elite to accumulate ever-
greater personal wealth? The gravitational pull of such wealth asserts
itself in every aspect of life.
The New York Times reported last year on a relatively new phenomenon,
magazines oriented entirely toward the very wealthy. Absolute
Publishing, the Times noted, had just started up a publication called
Absolute, “for distribution to New Yorkers with an estimated annual
household income of at least $500,000.”
The editor of Absolute, Ernest J, Renzulli, is aiming for an audience
of only 60,000 New York residents. He found his target readership “by
winnowing databases of the most affluent New York ZIP codes with
people who have bought houses for more than $2 million and people who
have registered cars, boats or planes that cost more than $75,000.”
“It’s a small number,” the Times quoted Mr. Renzulli as saying. “But
this is not a magazine that’s about mass reach. It’s about reaching
the tip of the pyramid.”
The Times take note of Michael Silverstein, an executive with the
Boston Consulting Group and co-author of Trading Up: The New American
Luxury. Silverstein estimates that by 2010 Americans will spend $1
trillion on luxury goods. The Times continues: “In an ever more
fragmented media world, the rich are becoming their own niche. They
may be diverse connoisseurs of fashion, yachting or jewelry, but they
share one important trait: a seemingly bottomless supply of disposable
income.”
It must indeed be a predicament to be saddled with tens of millions or
hundreds of millions of dollars, or more—how is one to spend such
sums? Those “awash in cash” (the Times’ phrase) must rack their brains
and devote hours to the problem. How could one ever rest? Would not a
person require a certain degree of inventiveness to come up with ways
of spending such a fortune?
Judging by the results in published reports—no, not particularly. By
and large, the fabulously wealthy have derived their fortunes from
inheritance, the stock market, the real estate bubble, fortunate
investments in technology or, perhaps, American militarism: in short,
from semi-automatic economic and social processes associated with the
lowering of living standards for millions in the US and the super-
exploitation of masses of people in impoverished countries in other
parts of the world. They are not startling or outstanding in any
fashion, except perhaps in the depth of their greed and
shortsightedness.
So we learn that Microsoft’s Paul Allen owns a $250-million, 414-foot
“gigayacht,” with seven decks, two helicopter landing pads, a swimming
pool, a basketball court, an infirmary, a garage for Land Rovers, a
movie theater, a concert space for 260 and a recording studio. Not to
be outdone, Larry Ellison of software giant Oracle had his giant yacht
built 452 feet long. Ellison’s vessel has five stories, 82 rooms, “a
wine cellar the size of most beach bungalows, a dozen yacht-length
tenders, and a generator capable of providing enough electricity for a
small town in Idaho or Maine... Final cost: $377 million.” (Associated
Press)
The wealthy elite are also purchasing their own widebody airplanes,
reports Business Week—Airbus A340s and Boeing 777s, which list for
over $100 million—as “airborne penthouses.” Customized outfitting may
add $25 to $30 million to the cost.
The “supercar” business is also thriving. Ocean Drive, one of the new
magazines aimed at the affluent, carries a piece on Michael Fux, whose
Sleep Innovations manufactures Memory Foam products. Fux has collected
some 50 luxury cars. He recently took possession of a $2 million
Ferrari FXX, one of only 20 in the world.
USA Today, in a piece describing the new “super-rich supercar
fanatics” who collect Ferraris and Maseratis and Bugattis, cites the
comments of one auto broker in southern California, “There’s a whole
new breed of collector that has emerged in the last three-four years.
Almost all make the kind of money you cannot comprehend.”
Yet great unease persists in these circles. A yacht broker told
Associated Press that “a sea change in attitude among America’s
superrich” has taken place in the wake of September 11. “Clients are
telling me, ‘Hey, I could have been in the Twin Towers. That could
have been me jumping out a window.’ The thinking among wealthy people
now is, you can die anytime. Nobody can protect you. So you might as
well spend your money now and enjoy it.”
Likewise, in its analysis of the trends driving the purchase of jumbo
jets by wealthy individuals, Business Week notes: “Because of
increased concern over security, especially post-September 11, some
businesspeople now use their aircraft as a base of operations on
overseas business trips. Rather than going to a hotel or office after
landing, they just stay onboard... “
The term “conspicuous consumption,” coined by Thorstein Veblen in The
Theory of the Leisure Class (1899), hardly does justice to the current
situation. There is a considerable element of recklessness, even
desperation, in the obsessive spending. Throwing money to the wind
hardly speaks to a sense of historic optimism or confidence among the
elite in its own future or the general health of the American social
order.
At the height of US global economic hegemony, in the 1950s, corporate
directors were expected to lead rather sedate lives, modestly tending
to the nation’s economy. Of course they lined their pockets, but they
were not expected to live like pharaohs.
In 1957, Fortune magazine reported that some 250 or so individuals in
the US were worth $50 million or more. The wealthiest of them, oil
tycoon J. Paul Getty, stood all alone in the $700 million to $1
billion category. The equivalent of $50 million today—some $350 million
—would not place an individual anywhere near the richest 400 people in
the US, according to Forbes’s 2005 list (which begins at $900
million). Getty would find himself somewhere between 31st and 42nd on
the list.
The roll call of the wealthiest Americans a half-century ago included
famous names—Rockefeller, Harriman, Mellon, duPont, Astor, Whitney and
Ford, along with a quartet associated with General Motors, Alfred P.
Sloan Jr., Charles F. Kettering, John L. Pratt and Charles S. Mott.
These were all ruthless capitalists, but their fortunes were based,
directly or indirectly, on the growth of the productive forces.
Today, the list of the super-rich reveals an extraordinary growth of
parasitism. One indication is Forbes’ listing of the “400,” which
includes an extraordinary number of people whose wealth, according to
the publication, is derived from “Investments,” “Hedge Funds,”
“Leveraged buyouts,” “Real estate,” “Fashion,” etc. The “captains of
industry” of old are few and far between.
A perusal of publications such as Ocean Drive, or Gotham, or Los
Angeles Confidential sheds some light on the current tastes and
opinions of these very rich.
Real estate expert Steven Gaines told Gotham in a recent interview,
“where you choose to live [in New York City] defines you more than in
any other city. There’s a right side and a wrong side of the tracks in
every city; but in New York, what floor you live on, which direction
your apartment faces, whether you move one block in either direction,
says a tremendous amount about who you are and your personal sense of
adventure.”
Asked about co-op boards rejecting celebrities, Gaines replied, “I
haven’t heard of any juicy rejections lately. Celebrity rejections are
very 90s; they don’t really happen anymore. People are very impressed
by money; that’s all it takes now. Also—and this is the most important
thing—they’re not building any more [co-ops]. We don’t need any more
because people don’t really care who their neighbors are. [Most
people] figure that if a guy can afford a $12 million apartment in the
Time Warner building, he’s cool enough to live next door.”
This theme—money is absolutely everything—recurs again and again in
studies of the contemporary American elite.
The Times reporter, Katharine Q. Seelye, in her piece on magazines for
the affluent, described the publications in these words: “Most of the
magazines rely on a similar formula: extravagantly lush photography on
heavy paper stock, flattering feature articles on prominent local
personalities and snapshots of those personalities hobnobbing with
each other... The magazines also make it easy for readers to buy what
they see on the page, whether it appears in an advertisement or an
article—and it is often difficult to tell the difference, as the
magazines have elevated commercial product placement to an art form.”
The magazines appear at first glance to be nothing but expensive
advertisements for clothes, watches, condos and automobiles—hundreds
of pages of them (Los Angeles Confidential runs to 350 pages, Ocean
Drive an astonishing 530!). The table of contents, gossip columns and
articles, such as they are, do little to distinguish themselves. They
humbly give way to the full-color photos of handbags and bracelets and
motorcars.
Such a magazine is merely a scaffolding for the marketing of highly
expensive products. It is a relatively convenient means of making
known to a specific clientele what is available for them to purchase
this month. And this is not something that those involved would be
ashamed to admit. No, we have moved far beyond that.
Gotham appears to specialize in real estate gossip, appropriate in
Manhattan, which has been ruined by the Trumps and their ilk. Tales of
apartment and co-op buying and selling are recounted with relish, with
the sort of sensual zest that others might take in relating stories of
sexual improprieties. In a recent issue, one piece excitedly recounts
that “the penthouse apartment of the late philanthropist Enid Haupt
has sold—at least three times. The nine-room duplex at 740 Park
Avenue, with two principal bedrooms and three-and-a-half baths, has an
accepted offer for its asking price of $27.5 million, with two backup
bids—in case the famously persnickety co-op board decides to reject
the winning bidder.”
In another column, we learn that “Out in the Hamptons [on Long
Island], entrepreneur Linda Wachner is listing her seaside estate [a
summer house] for a sky-high $62.5 million, the highest price ever
asked for a Southampton Village home. The ocean- and bay-front
Southampton estate on Meadow Lane features a 16-room, two-story
shingled traditional mansion measuring nearly 10,000 square feet with
10 bedrooms, 14 bathrooms, several public rooms, a wine cellar, and
staff quarters. The property includes several hundred feet of
beachfront, a rose garden, a putting green, a pool with spa, and a
tennis court with a pavilion. ‘I think it’s an exciting property,’
Wachner told the New York Post. ‘We’ve had a lot of fun here.’”
Unique Homes reports that the Stanhope, on Manhattan’s Fifth Avenue,
is currently being renovated into 26 luxury residences. “The space is
divided into half-floor residences of approximately 4,000 square feet
(starting at $10 million) and full-floor residences measuring 8,000-
plus square feet ($30.5 million and up).” The old Plaza Hotel is also
being transformed by a developer into private residences, 182 of them.
The one- to five-bedroom units will be priced between $2.5 million and
$33 million-plus.
The wealthy pockets of south Florida are targeted in Ocean Drive. The
size of a small telephone book, the magazine seems desperate to please
and impress. It takes the most ridiculously self-serious attitude
toward trivial people and circumstances. Page after page of attractive
but glum models dominate the publication, a cornucopia of expensive
consumerism.
Stiff competition between real estate projects is very much in
evidence here. Three operations, Donald Trump’s “Trump
Hollywood” (i.e., Hollywood, Florida), St. Regis Resort & Residences,
Bal Harbour and Icon Brickell, with “breathtaking views of Biscayne
Bay,” have included their own elaborate, pull-out brochures in the
magazine.
The St. Regis is especially noteworthy for its quite conscious effort
to evoke an imaginary aristocratic past. It employs butlers. Here is
the advertisement for that service, a disgusting passage over which
some wretched soul expended a great deal of effort:
“The St. Regis Butlers are adept at executing your requests while
anticipating your every need with consummate style. Every preference
is committed to memory. Dinner for two on the beach at seven-thirty?
Shirt collars heavily starched? A car to retrieve your business
partner from the airport tomorrow morning? It’s a pleasure. Your St.
Regis Butler, always on call, is your household manager, your link to
St. Regis services and your master of conveniences. All embrace the
authority to go to any lengths to ensure you the utmost in comfort,
down to the most particular request.” A butler...or an indentured
servant, a serf, a slave?
One could go on, but the outlines are clear. A type of aristocracy
rules America, which has more than one feature in common with the
ancien régime that presided over pre-revolutionary France. This vast
accumulation of wealth at one pole of society is incompatible, in the
long run, with even the trappings of democracy. The super-rich own
everything in the US, including the political parties and the
political process. They allow the population to vote at this point,
more or less. But for how long? As resistance to the policies of the
elite mounts and the two-party monopoly threatens to crumble, why
should the riffraff be permitted a say in such important affairs as
elections?
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