Saturday, October 29, 2011

The news from Richistan, 2004 (Robert Frank)

Via Brad DeLong:
"By 2004, the richest 1 percent of Americans were earning about $1.35 trillion a year—greater than the total national incomes of France, Italy or Canada."

—Robert Frank, Richistan: A Journey Through the American Wealth Boom [2007]
Of course, as a commenter on Brad's blog pointed out, the term "earning" shouldn't necessarily be taken at face value here. It's just the conventional way of saying that they were "getting" about $1.35 trillion a year. We could also say that most of them were actively "making" money one way or another, since Frank emphasizes that few of the current rich are living on inherited wealth or simply clipping coupons. But the extent to which they had all "earned" such a huge slice of the national income is a more tricky issue. (Bernie Madoff was out hustling, too.)

But anyway, that was in 2004. Since then, as we know, the total income of the top 1% has gone up considerably, both in absolute terms and as a proportion of the overall national income. Not so for the bottom 80%. For some details, see here.

And over the past three decades the social distance between the lives of rich and everyone else has been increasing significantly. (When the merely rich want to assess their situation, they compare themselves, not to the non-rich, but to the very rich, while the very rich compare themselves to the super-rich. Most people worth $5 million, a tiny proportion of the US population, don't think they're rich. This helps explain how the rich, on the whole, can sincerely consider themselves hard-pressed, hard-working "middle-class" families who couldn't possibly afford the burdens of Clinton-era taxes.) To an increasing extent, as Frank shows, the rich live in a different country from everyone else, Richistan. And at the same time, they have an increasingly disproportionate influence in shaping politics and public policy in the country they share with other Americans, the United States.

Those of you who haven't read Richistan should consider doing so. It's witty and engaging as well as informative and illuminating. If you read it, it will probably tell you some significant things you didn't already know about the economic sociology of America over the past 3 decades.

=> By the way, Frank has suggested elsewhere that, despite everything, distinctions of class in America (as opposed to income inequalities per se) are still more "blurred" than they were in some previous eras—largely because so much of current mega-wealth is new money.
Yes, it’s true that today’s rich have become financially removed from the rest of American society. Yet culturally, today’s rich resemble the middle class more than they do the old elite. The vast majority of today’s rich didn’t inherit their money, but made it themselves. So they retain their working-world values, even if they look more like plutocrats in their spending and daily lives. [....] As far as I can tell, the separations today that have created Richistan are far more about money than they are about class.
Well, yes and no. If one examines that disclaimer carefully, it actually says less than it might appear to—and is probably drawing on an overly narrow and misleading sense of the word "class".

And even this equivocal reinterpretation by Frank of the sociological implications of his reporting is hard to square with what Frank himself said in the passage from the Introduction to Richistan from which Brad DeLong was quoting. As Frank did his ethnographic reporting on the New Rich, he says, the following realization began to dawn on him:
Today's rich had formed their own virtual country. They were, in fact, wealthier than most nations. By 2004, the richest 1 percent of Americans were earning about $1.35 trillion a year—greater than the total national incomes of France, Italy or Canada.

And with their huge numbers, they had build a self-contained world unto themselves, complete with their own health-care system (concierge doctors), travel network (Net Jets, destination clubs), separate economy (double-digit income gains and double-digit inflation), and language ("Who's your household manager?"). [....] The rich weren't just getting richer; they were becoming financial foreigners, creating their own country within a country, their own society within a society, and their economy within an economy.

They were creating Richistan.
QED. For some further explanation of what this erosion of common experience actually means in terms of class divisions, one might consult T.H. Marshall's still-classic essay on "Citizenship and Social Class" (1949).

—Jeff Weintraub

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