What It Takes (and what it means)
to be Wealthy Today
Richard Todd
[Richard Tood is a contributing editor of Worth.
This article appeared in November 1996]
A look at the top 1 Percent.
I really may take money too seriously. A billionaire told me as much
not long ago when he said that he thought we lived in a "classless
society." His explanation was that all his friends had a lot less
money than he did and yet drove the same cars, went to the same
places, and so on. They were all comfortably well off -- professors,
artists, doctors -- and what, really, did his extra money buy him? The
conversation took sort of a droll turn when the billionaire's lawyer,
a friend of mine, gently reminded him of his airplane, and I asked
what kind it was. "It's a 727." Still, I had a glimpse of
the world through his eyes, and it was a world in which money, after a
point, seemed to have only a marginal utility. I myself dwell on
money. I think a lot about what it does to people and how very much of
it we seem to have in our country these days. I wonder about all these
rich people.
Who are they?
The remington, a condominium building, is the newest addition to the
Bay Colony community in Naples, Florida, on the Gulf of Mexico. A
brochure renders the approach to the place better than I could: "A
gracious perimeter wall encloses the entire development; a
meticulously manicured entry replete with stately palm trees and
luxuriant floral plantings leads to a sentry gate." The Remington
itself rises 21 stories from the edge of the water, across from some
responsibly preserved "wetlands," a mangrove swamp. In its
lobby the building offers another line of defense against something, a
security guard behind a reception desk, and it also offers marble
floors, heavy silk draperies, and a mlange of English and French
reproduction antique furniture. It's a slightly disconcerting
structure to find on a beach.
On the 16th floor an unfinished condominium awaits sale, a vast slab
of cement 250 feet above the flat blue gulf. Its floor plan is in
place: master bedroom overlooking the water, the requisite master-bath
complex with its twin sinks and Jacuzzi, a suite of plumbing large
enough to accommodate a water-polo team. (One wonders about these
bathrooms. Properties like this sell chiefly to buyers of an age when
the mirror becomes an inconstant friend at best, yet everyone seems to
want an Olympic-sized bathroom.) Two guest bedrooms, a large kitchen
and "dining area," a long living room, and a private
utilities and delivery hall complete the ensemble. It is hard to
imagine the life meant to be lived here, so high above the water, in
this urban building sprouting from a mangrove swamp. I ask the price
and am told, "This is one-point-six." If I'm interested I
should hurry because the building is almost sold out. Everything in
Bay Colony sells quickly. The real-estate agent explains, "We
have very good product."
One-point-six seems like a lot of money to me, especially for a
second home, and I have the idea that an expenditure like this ought
to involve sketch pads and site selection and architects. Not to be
heavy about it, but it will likely enough be the house you die in --
at least if you die between Thanksgiving and Easter; no one dies here
after April, because no one lives here then. But I'm wrong; buying is
not a big deal. Plenty of people just take a weekend in Florida to
have a look, they've heard of the Bay Colony and know it's "good
product," and they call back from Dayton on Tuesday and say, "We'll
take it."
Who are these people?
Everyone seems to know, at least anecdotally, as in: "He's a
lawyer, and she's a doctor"..."He made a lot of money in
cell phones"..."He's a businessman, and she's old money from
Cleveland." Around Naples the stereotype is that everyone is from
the Midwest. But what is really behind the question "Who are
they?" is a simple acknowledgment of wonder: There are so many of
"them." So many rich people.
Yes and no. If a couple is buying a vacation-retirement condominium
for $1.6 million, you can be reasonably sure of one thing: They are
one-percenters. That is, they belong to the group you hear more and
more about these days: the top 1 percent of the population, the 2.6
million people (about a million households) who now control some 36
percent of the nation's personal wealth, 16 percent of the total
personal income, and over a third of the dividend and interest income.
It is a briefly amusing dinner-table game, as I've discovered in
recent weeks, to ask people to guess how much money you'd need to be
in the top 1 percent. "Let's see, how low would you have to go,"
mused a successful venture capitalist, revealing his certainty about
his own rank. "I'd say about $25 million." Answers vary
wildly, but not many guess low, and the median answer, in my
unscientific study, is about $20 million.
The correct answer is considerably less -- between $2.5 and $3
million in net worth. As for income, according to the Internal Revenue
Service, the top 1 percent of returns last year were those that listed
adjusted gross incomes in excess of $200,000. (These are what you
might call entry levels. The mean net worth of the 1 percent stands at
about $7.6 million and the mean income at about $675,000.)
People reveal their surprise at these facts variously, but often
enough they react with a pleased little downturned smile. "Oh.
Well. Then I guess we qualify!" If you are surprised because it
seems that not only you but many of the people you know qualify, then
you, all unwittingly, are living the one-percenter's life.
Gradations
The top 1 percent of the richest nation in the history of the world
ought to weigh in as a coherent elite of overweening wealth and power,
and so it may--but it doesn't appear to feel that way to its members.
The WorthRoper Starch survey of the 1 percent found that 57 percent of
respondents didn't consider themselves "rich" (and only a
quarter thought themselves "upper class"), even though they
have a median annual income of $330,000.
The United States has long prided itself on being a middle-class
society, an admirable myth in many ways. Also a self-serving one, if
you are trying to disguise your wealth. But there's a sense in which
some one-percenters who resist the idea that they're rich are scarcely
being disingenuous. It is quite possible to be earning around $200,000
a year and think of yourself as "in the middle." James
Atlas, the literary critic and journalist, recently described in The
New Yorker the plight of parents like him who are coping with the
demands their children's New York private day schools put on them. "No
wonder those of us caught in the middle--somewhere between the
privileged and the working classes -- care so much about which nursery
school our kids attend." I don't know the Atlas-household income,
but on the internal evidence of the piece (two kids in Manhattan
private schools, each with a "huge tuition," for starters)
what he is "in the middle" of could not be called American
society. But you know what he means! Urban life is especially good at
making the nominally rich feel somewhere in the middle, though a good
suburb can do the job, too. "Once you buy a Mercedes station
wagon," says a fellow who knows the meaning of debt, "you
seem to set a chain of events in place." (The Mercedes drives a
child to day camp, and a parent at day camp invites you sailing, and
sailing introduces you to the yacht club and all these things you can
surely afford if you can afford the Mercedes.) "Soon you are
balancing on a high wire, with a long way to fall."
Part of the problem is the overhanging presence of those "privileged
classes" who never need to stretch for anything. Highly
publicized fortunes have their effect on the spirit. I mean not only
the Buffett-Gates syndrome ($15 billion each and counting). There is
also the incessant news of lesser lights. The new CEO salaries are
posted this year: the median is $1.9 million. Lou Gerstner checks in
at $10.5 million...Jack Welch at $33 million. ..John Reed of Citicorp
at $46 million...Michael Eisner at $8.7 million, which may seem low
for Michael, until you realize he has more than $180 million in stock
options. The sports pages contain parallel tales, of Tiger's $60
million, of Rick Pitino's 70. And then there are stories about people
who until that moment were utterly unknown and will quickly be again,
except for one's dim awareness that they are out there somewhere in
the night, skinny-dipping in money: "Three at Morgan Stanley
received $10 million last year..." It has become a familiar
story, but familiarity hasn't made it less significant -- on the
contrary, we have read so much about multimillion-dollar "compensation"
that we think the people who receive these sums must now be beyond
counting. (They aren't. According to the IRS, some 70,000 households
filed tax returns reporting incomes in excess of $1 million in 1995.
They represent about one 15th of the 1 percent.) A rich man I know
with a wry sense of humor had this to say about wealth: "All I
know is that it seems to take another digit these days. There are lots
of people around here" (we were talking in Florida) "who
retired a few years ago with two or three million, thinking they were
set. Now they feel poor. Of course, it costs $50,000 to join the golf
club now."
When those on the bottom edge of privilege look upward, they have a
long way to gaze. The distance from the bottom of the 1 percent to the
top is, after all, far, far greater than the distance from the bottom
of the 1 percent to the bottom of society. If you were to build a
ladder of a hundred rungs, with each rung proportionally representing
a percentile of wealth--well, the point is, you couldn't, because even
if the bottom 99 rungs were fused into one, the ladder would stretch
into the sky la Jack and the Beanstalk.
I observe my lawyer friend as he talks to his client the billionaire.
The lawyer is a perfectly anonymous one-percenter, someone who, it's
true, owns three houses (but two of them modest vacation places), two
upmarket cars, whose children have been expensively educated--but not
an ostentatiously rich man. The client has about $2 billion. I reflect
on seeing them together: One has a thousand times more money than the
other. Someone who has a thousand times less money than the lawyer
would be worth about $2,000.
The Roper Starch survey reports an intriguing finding: that a
surprising portion (about a third) of the 1 percent thinks the
distribution of wealth in the country is "unfair." The
result seems to suggest a blossoming of egalitarianism at the top,
until one is informed that most of those holding this view are at the
bottom of the 1 percent. Some of them (the "guilty rich, "
as the survey calls them) are looking downward in sympathy, but others
are looking up in resentment. And not a few are doubtless looking both
ways at once, with that collision of feeling well described by a woman
of liberal sentiments: "I don't deserve what I have, and I need
so much more."
I asked a young bond salesman recently what he thought would
constitute not riches but security for himself. "Well, I think if
I had $10 million to put into tax-free municipals, with about a 6
percent yield, I could be sure I'd have enough to withstand inflation
and so on." That is, an annual tax-free income of $600,000 and
you can start to breathe easy, but not before.
When you travel in the world of the 1 percent, just as when you are
immersed in a city, it becomes increasingly hard to remember that the
rest of the world exists. It happens to the one-percenter, too. We
live in a Pentium-chip society, a world of a billion social circuits,
and you can, with the insulation of money, zip around the country and
remain in the same comfortable place, a place of Four Seasons suites,
helicopters, $500 dinner tabs. The rest of the world tends to fall
away, through no fault of your own. It happens to everybody--your
immediate surroundings loom larger and larger until everything else
becomes just a dimly perceived backdrop.
Here are some remarks I have heard in recent weeks, all made by
people I like, all of them musing about things that didn't seem to
them very extraordinary.
A Palm Beach hostess on the cost of living in that
town: "It's outrageous. I sent the butler down for a case of wine
the other day, and it cost $3,500--the same wine I'd paid $2,100 for a
year ago."
A Boston businessman and his wife, talking about the
small family foundation they had just established. Husband: "It's
just a few million dollars." Wife: "You know, we talk about
millions the way we used to talk about hundreds of thousands. It sort
of bothers me."
A CEO's widow: "I've never had a worse case of
withdrawal than I did when I had to give up that airplane."
A member of the "working rich": "I can
retire if I can figure out how to live on $200,000 a year."
Meanwhile, however dimly visible, the rest of the world is out there.
Shares
As a measure of the distance the 1 percent enjoys from society as a
whole, consider some basic facts. The median household income is about
$31,000, and median household net worth (including real estate and
personal property) is about $51,000. About 60 percent of all American
households have liquid assets of less than $10,000. These are the
sorts of numbers one passes over in the newspaper, but it is worth
considering them for a moment. For the 1 percent, $31,000 is an income
so low that it is hard to imagine. (Asked in the Roper survey what
they could "get by" on, the respondents said, on average,
$80,000, but one wonders.) For many people, and not just
one-percenters, $31,000 is a price tag, not a salary. It buys a
low-end Land Rover, a year at Brown, a wedding, a dozen or so Prada
dresses.
It has become a commonplace that the distribution of both wealth and
income has become more lopsided in recent years, and the growing gap
between rich and poor has become an almost ritualistic cause of
concern. That wealth has accreted at the very top is beyond dispute,
though interesting skirmishes are fought over the numbers.
Perhaps the most convincing account of the gilding of the 1 percent
has been written by Edward N. Wolff, an economist at New York
University, in his book Top Heavy and in subsequent research. Wolff
notes a simple set of statistics that serves as a benchmark: Mean
wealth in the country (now more than $212, 000 per household) has
risen steadily, but the median has dropped (to about $51,000). In
other words, more money is going to fewer people. But these numbers
don't reveal how the wealth is distributed. The details are quite
impressive. Between 1983 and 1992 (the last year for which fully
analyzed figures are available from the Federal Reserve Board's
consumer-finances survey), virtually all gains in wealth went to the
top 20 percent. (The next two-fifths stayed about even, and the bottom
two-fifths actually got poorer in constant dollars.) Of those gains,
almost two-thirds went to the 1 percent. The bottom 20 percent of the
population has a negative net worth, and the bottom 60 percent
accounts for about 7 percent of total net worth. Financial wealth
(liquid assets) has grown even more for the 1 percent during recent
years. By 1992, the 1 percent owned 46 percent of all household
financial wealth in the country. (The top 20 percent controls an
astonishing 92 percent of all financial wealth, leaving 8 percent of
that particular pie for 80 percent of the people.)
What to make of these facts? For many, they spell the loss of
something vital in our national life, the steady upward progress of
the middle class. As he left his post in January as secretary of
labor, Robert Reich put this argument eloquently: "In the America
of my youth we were growing together.... The remarkable thing about
the first three decades after World War II is that prosperity was
widely shared. Most people in the top fifth of the income ladder saw
their incomes double, and so did most people in the bottom. ...[Today]
all the rungs on the economic ladder are now farther apart than they
were a generation ago and the space between them continues to widen."
It is the implication of Reich's remark that it doesn't really matter
how much richer the rich get if everybody else is getting a little
richer, too. We have staked a lot on the idea of opportunity, and it
is remarkable how upward movement can sustain not only an individual
but a society. Such was the magic--one is tempted to say the mass
delusion--of the postwar years.
I have just had the curious experience of re-reading one of the most
influential American books of the era, whose title embodied our
self-concept, John Kenneth Galbraith's The Affluent Society. According
to Galbraith, by 1958 the age-old problem of production had been
solved in America: Almost everyone had enough of everything, or soon
would, and our social mission was to turn to higher things--creating
good schools, clean streets, improved housing. As late as 1966, it was
possible for Time magazine to predict that "by 2000 machines will
be producing so much that everyone in the U.S. will, in effect, be
independently wealthy." Galbraithism was a classic case of
mistaking the trend for the fact: Because wages for the poor and
middle class were rising, they would continue to do so. Indeed, we
might as well assume that we had arrived where we were headed. We were
an affluent society. (There were startlingly few dissenting voices to
this view. Even Michael Harrington's landmark book, The Other America,
discovered poverty as a nasty exception to the general rule. No one
paid much attention to the 1 percent either. In those days they were
anomalous or vestigial figures--East Coast snobs or Texas
millionaires--in a middle-class society. But it is interesting to note
that in 1958, the year The Affluent Society appeared, the 1 percent
controlled about 34 percent of personal net worth, just a bit less
than it does today.) By 1973, median family income (in
inflation-adjusted dollars) had ceased its long sustained climb and
began to stagnate. It is also true that by this time there had been a
dramatic shift in the percentage of wealth controlled by the 1
percent: from 34 percent to just 20 percent. But the cause of this was
not primarily increases in income at the lower end of the scale. There
was another, far more important economic condition at work--"stagflation."
The stock market was languishing, but many prices, notably housing
prices, were rising, as they had for decades. Few remember those days
with nostalgia, but it's possible that the middle class should think
again. Many a retirement nest egg was secured by the long upward march
of real-estate values. It turns out that over the decades a major
factor in determining the relative wealth of the top and the middle of
society is the ratio of stock prices to housing prices. The apparent
leveling in the early 1970s had a lot to do with the inflated
real-estate market combined with the depressed stock market, and much
of the rise in inequality in recent years is accounted for by the
reversal of those conditions. But the early 1970s were truly an
exception in terms of the relative equality of the classes. It is
important not to forget that for more than 150 years, ever since the
full-fledged industrialization of the country, through boom and bust,
under Republicans, Democrats, or Whigs, the 1 percent accounted for 25
percent or more of the nation's personal wealth. We notice the 1
percent now as it seems to leave everyone else behind, and it is
tempting to think we are living in another Gilded Age, when the 1
percent controlled nearly half of the household wealth. We are about
ten percentage points short of this record, and on our current
trajectory we would arrive there shortly after the turn of the
century. Now, as then, people are famous essentially for being rich,
and huge fortunes seem made out of thin air: The emblematic fortunes,
Buffett-Gates, just like Carnegie, Rockefeller, and Morgan before
them, derive from technology or financial wizardry. And now as then,
money tends to trump all else.
Although individual fortunes may have been more spectacular in the
Gilded Age, as a group the rich have gotten richer. They have also, of
course, gotten more numerous. The Mass Elite I awake one morning in
the Delano Hotel, in Miami Beach, and all around me see nothing but
white: It is the style of the hotel. White floors and walls and
furniture. The strange, austere bathroom, with no place to put
anything, is all in white, too. I am thinking, in a kind of abstract
way, about suicide. I don't mean that I really want to kill myself,
just that the first image in my mind is of hurtling to the beach 14
stories below. It is only several hours later, when I tell a Miami
friend where I'm staying, that I understand why. The Delano is high
fashion, a creation of the brilliant designer-entrepreneur Ian
Schrager. The rooms cost about $300 a night, and the white-jacketed
doormen love to tell you which stars have just checked out. My friend
is not impressed. "It's kind of like an asylum, isn't it?"
she says. And that's it; that's why I was thinking about suicide: It
just seemed the appropriate thing to do. So many rich people, and the
Delano is a cozy home for some of them, for guys in sandals and black
T-shirts, their gray hair drawn into ponytails, women with proudly
ungovernable frizzes, wearing black dresses from some Moroccan
marketplace. Record producers, agents, hippies who got rich selling
carrot juice. Whatever. One-percenters all. So many rich people, and
those who understand how to sell things to them realize it's not
enough to target the affluent anymore.
It is now a matter of niche-marketing to the rich. Ian Schrager
understands perfectly. With the Delano, he has created an anti-hotel
for people who disdain conventional luxury. It could not exist without
the existence of the Ritz. (The ultimate Schrager experience will be
called the Bellevue, and you will sleep in beautifully lacquered metal
beds on wards, and muscular men will hose you down in shower rooms.)
My problem with the Delano is, as they say, my problem: I am out of my
niche. In Naples, my warm real-estate agent had tucked a breast into
my arm and confided, "You're Naples people," and God help
me, she may have been right. The tent of the 1 percent is a big tent,
and there is room for all sorts inside. One percent is a small part of
anything, but absolute numbers count, and 2.6 million people take up a
lot of space, especially when many of them can afford to maintain two
or three houses.
If you have not yet gotten your solicitation for the new magazine
Golf Course Living, that may be because you are known to be a
yachtsman or you spend too much time on international fly-fishing
trips. The two and a half million richest Americans make up a diverse
enough group so that, to one another, they do not look much
alike--indeed, they give a fair amount of emotional energy to the
distinctions among themselves.
Not long ago, Martha's Vineyard and Nantucket were two bucolic little
islands that in summer attracted a laid-back assortment of the Eastern
rich. Today they are fiercely desirable ground, but different:
Nantucket heavily corporate, the Vineyard more literary and liberal.
In the eyes of anyone who has read Marx, these distinctions are
ludicrous. In summer, the average net worth on either island is well
into 1 percent range, yet residents of each have disdainful views of
the other island. Each thinks the other is full of elitists.
In a lighthearted book a few years ago, called Class, Paul Fussell
set out to delineate the social structure of the country, and--taking
issue with the usual three-tier system--he proposed nine levels, from
"bottom out-of-sight" to "top out-of-sight."
Writing today, Fussell would, I expect, want to complicate things
considerably. The old markers--school, parentage, accent, manners,
taste--still count, but they are confounded by the new amounts of
money involved. The waning of a cozy, homogeneous upper-class life
only fuels people's acquisitive desires. A billionaire lights up the
room in a way that the fairest-haired Groton old boy no longer can. At
the end of the Palm Beach winter season, I met an old-money clubman
who lamented that "many of the nicest people can no longer pay
the dues." We are witnessing, according to David Frum, a
conservative thinker at the Manhattan Institute, "history's first
mass upper class....Nothing like this immense crowd of wealthy people,"
he says, "has been seen in the history of the planet."
Frum's larger point is that this "mass upper class" is a
triumph of American capitalism and that those who mock the new rich
fail to see that they are viewing an economic miracle. Perhaps in the
end wealth is in the eyes of the beholder, but in the eyes of those
who are earning and spending this new money, what appears to be
happening is a constant upward redefinition of the middle class. Large
numbers of people living in apparent luxury no longer seem so
rarefied, and their presence stimulates restlessness and desire among
a middle class that used to think of its own life as the norm. This is
perhaps the real meaning of "the mass elite."
If the 1 percent cut a fairly wide swath, the top 10 percent are
themselves disproportionately visible--and we are now talking about a
truly substantial number of people, some 26 million of them. Many of
the things the rich do at will--fly to Europe--the prosperous do less
frequently. But the impression to the onlooker--the true middle class,
which can't afford the trip--is of an awful lot of people who can fly
to Europe. Thus is ambition, upward-longing, stimulated. Seen from
high atop Marketing Mountain, this is a truly glorious system,
breeding constant, self-replenishing appetite.
From the top of Philosophy Mountain the view is less happy--a land of
continual discontent. A rough narrative of the progress of American
life, one that we all carry around in our heads, tells of the
insistent democratizing of the society. In many ways it is true. Think
of the class barriers that have fallen--barriers of accent, of dress,
of all sorts of permissible behavior among people of different social
stations. Society has grown less formal, less self-evidently
hierarchical in the time that anyone now adult has been alive. Nobody
is immune from being first-named by a stranger on the telephone, and
the guy sitting next to you in business class may be wearing a
T-shirt--you may be wearing a T-shirt. Our richest man and our
president are two guys who would just as soon have you call them "Bill."
In these and countless other ways our society has become more
egalitarian. Yet a strange thing has happened to relations between the
economic classes. As everyone aggressively asserts his equality, we
lose the ability to talk about our inequality, that is, to identify
our class interests.
In the Gilded Age, benighted as it may have been, populist sentiment
flourished. William Jennings Bryan wasn't going to be intimidated from
giving his Cross of Gold speech by a rival's accusing him of fomenting
class warfare. But that charge awaits any politician today who even
speaks of raising taxes on the wealthy. As late as the 1940s it was
possible to talk without irony of "soaking the rich"; today
we are all, in effect, trickle-down economists. In 1954, the highest
marginal tax rate was 91 percent, for incomes over $200, 000. Writing
a few years later in that decade, Galbraith noted that a significant
reduction in this rate was simply not politically supportable. Shortly
after that John Kennedy began the long process of disassembling the
progressive income tax that continues, with lurches back and forth, to
this day.
One can argue about the effectiveness of the high tax rates of
mid-century, one can even accept that they served only to spawn
loophole navigators, and yet one can still feel an odd wistfulness for
this system--not for what it accomplished but for what it expressed in
terms of society's sense of the seemliness of high incomes. With the
depression still in mind, the tax code seemed to say that there was a
social limit to inequalities of reward. And even if a dozen ways, like
the notorious oil-depletion allowance, were found to circumvent the
law, the law nonetheless surely had a restraining effect on what was
paid. In 1954, a board could plausibly say to its president that
compensation in excess of a million dollars was rather pointless,
since the government was just going to take 91 percent. It seems
reasonable to think that with similar rates in place we would now see
fewer $8 million point guards and $12 million CEOs. But maybe this
argument is purely circular.
Current law reflects popular ideas. Little enthusiasm appears to
exist for higher taxes for the very rich. Edward Wolff, the NYU
economist, has advanced the notion of a wealth tax, modeled on similar
taxes in some European countries, such as Switzerland. The tax would
assess a small percentage, starting at 0.05 percent for household
wealth between $100,000 and $200,000, graduating to a maximum of 0. 3
percent for wealth above $1,000,000. At these painless levels (about
two-thirds of American households would pay nothing; a family with a
net worth of $500,000 would pay $1,000) it would raise $40 billion
annually. Such a tax presents all sorts of practical problems (chiefly
having to do with assessing wealth), but the real hurdles are
political. Wolff says he found a supporter for his plan in
Congress--Bernie Sanders, the former "socialist mayor" of
Burlington, Vermont. It is hard to imagine that Trent Lott will get on
board.
Why is there so little sense of resentment toward the imbalance of
our society? Is it possible that we, or some significant part of us,
may want a world of outlandish compensation at the top? Do we, in an
important part of our heart, think the rich deserve their money? The
New Snobbery Dining alone one evening at the folksily elegant Alexis
Hotel in Seattle, I find myself becoming aware of a conversation at
the table next to me. The tone reaches me before the words, and a
glance at the participants reveals the essential dramatic situation.
The players: a middle-aged couple and two boys, or young men. One is
clearly their son, the other a friend of his. The friend is getting
special, respectful attention from the parents. They are oddly
deferential to him. It would seem odd even if the boy were not wearing
a baseball cap during his $300 dinner. The son, discomfited, is
cracking jokes. If you are old enough, you have probably acted each
part in this play at one time or another. I turn to the Pacific Coast
creation on my plate: quail with a mango sauce--good restaurant. Words
float over to my table. The young guest speaks of his new apartment,
his new car, his travel, and finally of the company that provides all
this: Microsoft. It is a little later, when the son has briefly left
the table, that the parents ask the question they have clearly been
dying to ask from the start: Do you get your stock options right away?
A perverse genius is built into our culture. At the small price of
making ourselves a little bit insane, we maintain social order and
make our economic engine work very well. The genius part is
self-blame.
In a land of opportunity--and who, looking around at the bizarre
successes that sprout up everywhere, can deny that it is a land of
opportunity?--if you are not rich it's your own fault. If there is a
consensus in our country about what constitutes fairness it would go
under the currently fashionable name "meritocracy." This is
the condition that supposedly results when the barriers to success
that have marred our system--prejudice against race, religion, gender,
reliance on old-boy networks--are removed. It is the triumph of innate
worth, talent and intelligence, and, of course, their earnest little
brother, hard work. In our sunnier moments, we congratulate ourselves
on having gotten closer to this ideal state of things. Meritocracy is
the ideology of the technological West Coast, of Silicon Valley and
the new Northwest. It is increasingly the ideology of all major
corporations, as business becomes ever more "knowledge based,"
"information driven." It is the ideology of our colleges and
universities, which ironically have only made the credential they
offer that much more a dividing line between haves and have-nots.
Never before have smart and rich been so nearly synonymous in the
public imagination. (In Douglas Coupland's entertaining novel
Microserfs, we learn that "in the Silicon Valley the IQ baseline
(as at Microsoft) starts at 130, and bell-curves quickly, plateauing
near 155, and only then does it decrease.") It is a belief in the
power of meritocracy that allows a middle-aged couple to devalue the
wisdom of a lifetime and defer to a kid in a baseball cap with a high
IQ and stock options. And it's this ethic that helps the very rich to
feel deserving.
The history of the word "meritocracy" deserves mention.
Most words begin life simply and take on whatever ironic connotations
they may acquire with use. With "meritocracy" it's just the
opposite. The British sociologist Michael Young coined the term in
1958 in a spirit of mordant satire. First Americans, then the British,
adopted it as a virtue. Young's book, The Rise of the Meritocracy,
18702033, depicts a dystopian world of the future in which society is
in fact sorted out according to intelligence, level of schooling, and
training. At length a rebellion occurs--but the bright and obtuse
narrator goes to his death not able to understand why. What the rebels
want, according to their "manifesto," is a world in which, "were
we to evaluate people, not only according to their intelligence and
their education, their occupation and their power, but according to
their kindliness and their courage, their imagination and sensitivity,
their sympathy and generosity, there could be no classes." The
book is forgotten; the word lives on, stripped of its irony.
It seems that we move closer and closer to a market-economy world, in
which people are judged--in which we judge ourselves--on a single
axis. The simplest way to describe the axis is, of course, money--the
pursuit of which never seems to cease, not even at the top. Ted
Turner's famous diatribe about billionaires afraid to slip down a
notch on the Forbes 400 list plainly drew blood. Lawrence Ellison,
head of Oracle, is notoriously rivalrous with Bill Gates. Asked what
it is Ellison feels, exactly, toward Gates, a friend of Ellison's in
the industry replies, "Well, I don't know that there's a word for
it. I mean, how many times in history has somebody with $7 billion
been unhappy because he doesn't have 18 billion?" Something has
changed about the way we think of money. It is hard to define, but to
try to get at it, imagine a woman on a yawl at anchor in Pulpit
Harbor, in Maine, on an August morning. Call her Phoebe. She is having
her morning coffee on deck, her legs stretched out on the cockpit
cushions. Her beauty, which is considerable, suggests another era--her
thin lips, her prominent nose--but she's just barely 40. She grew up
on the Massachusetts coast, the 14th generation of her father's family
to do so. He's a (now retired) classics professor, and the guardian of
an old China-trade fortune, which did very well on his watch. Phoebe
has had a Boston education, a Boston life: Winsor School, Harvard,
Harvard Law, married at Trinity Church. Her biography qualifies her as
one of that class many people claim does not exist: an American
aristocrat. There is one other fact about her: She left her law firm
after just two years to work with (and bankroll) a little company
founded by three guys from MIT. They now produce a cloying, but
extremely successful, computer game for children. She has turned her
$5 million trust fund into nearly $100 million, and the end is not
yet.
How you think about this life suggests something about your attitudes
toward money and class. Once, many people would have disapproved of
Phoebe's turn to commerce: The point of having money was to free
yourself for other things, a life of art, service, pleasure, perhaps
work in a profession. Why should this elegant woman contribute to the
national glut of junk? But this Jamesian view of life, which implies
an upper class, even an unapologetic leisure class, has few current
advocates. I think that for most of us now, Phoebe's new fortune
enhances her, makes her more interesting, even redeems her. She "did
it on her own." The entrepreneurial virtues dominate our culture,
and it is hard to resist them, hard even to see sometimes how
completely they have permeated life. Indeed, even those most cosseted
of people, CEOs, perhaps the most secure people in the history of the
world, like to style themselves as "risk takers" and justify
their pay accordingly.
It is fashionable now among entrepreneurs to take the position that
they will leave little or nothing to their children. This always seems
kind of virtuous and bracing, until you realize they're really saying
that they can imagine no higher calling for the next generation than
doing it all over: making it again.
The American Dream
I was sitting at a Washington, D.C., dinner party in the middle of a
conversation (a conversation I had initiated) about the rich. As is
customary, everyone around the table was pretending that he or she
wasn't rich. A nice woman to my left was lamenting the excesses of
somebody and then of somebody else, and I was matching her, and we
were just generally on the side of fairness. A fellow to her left, an
entrepreneur, intervened with a burst of what I took to be candor. "Let's
face it," he said. "In this country the destructive behavior
is done by the bottom 5 percent. The productive behavior comes from
the top 5 percent. Everybody in the middle just eats the food."
Stark and ghastly a vision as this may be, it had the virtue of
explicitness, of saying something that one often senses at the top
ranks of our country but seldom hears: a true abhorrence of the people
in the middle. The entrepreneur went on to say that in the end he
couldn't take inequality very seriously because of the great saving
grace of our society: mobility. The ability of the "productive"
to rise to the top. It is an argument, living where and as we do, that
has to be taken seriously.
The Wall Street Journal recently proclaimed the american dream lives
above a piece about a longitudinal study of economic class over some
15 years. Between 1975 and 1991, the story said, almost 30 percent of
those in the bottom fifth had risen to the top fifth. About half of
the billionaires on the 1996 Forbes 400 list are there by virtue of
money they have made, not inherited, and virtually all the very
largest fortunes are "first generation. " (To be sure, many
on the list came from comfortable upper-middle-class upbringings.)
This sort of data, and the rags-to-riches anecdotes we encounter
almost daily, are seductive. It is important to remember that figures
on income inequality are not static, that when you speak of the poor
you are speaking about some people, anyway, who one day will be rich.
Net worth typically rises over the course of a lifetime, but the
median household net worth of those for whom the mobility game is
over--people at retirement age--is just $92,000. But debates like
these--the American dream is dead; no, the American dream
lives--leave something out. Why does one wince a bit at the very
phrase--only because it has become such a clich? I did not fully
know what I found so unsatisfying about this argument until I
encountered a passage by the late Christopher Lasch, in his book The
Revolt of the Elites and the Betrayal of Democracy, reminding me
that, once, the American dream had meant something nobler, the
belief that in a democratic society equality refers to more than
opportunity. Lasch refers to the most important choice a democratic
society has to make: "Whether to raise the general level of
competence, energy, and devotion--'virtue,' as it was called in an
older political tradition--or merely to promote a broader
recruitment of elites.
Our society has clearly chosen the second course... generating
social conditions in which ordinary people are not expected to know
anything at all." In many ways we live in a thrilling society.
On a day in spring, I have lunch at a club in San Jose, California,
with a man who embodies American opportunity--a Korean-born software
entrepreneur just months from taking his fledgling company public.
He speaks of the hopeful engineers who came to the valley willing to
work for stock options. It is another heartening story of wealth
being created by intelligence, initiative, energy. Later, driving to
San Francisco, I stop on a ridgetop and look out over Silicon
Valley, the bright green hills torn by new construction--a
sensuality in that sullied landscape, like a mussed silk blouse--and
though the agents of change are technology and money, they seem here
as irresistible as nature itself. But the fragile idea that there is
an equality based on worth that transcends net worth, the original
American dream--what place does it have here? How much success, how
many billionaires, how large and prosperous a "mass elite"
can it survive? When it disappears entirely, we will all suffer
equal loss--the 1 percent no less than the rest of us.
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