The Return of Inequality
D'SOUZA, DINESH
The Return of Inequality The newest thing about the new economy is how it is transforming the old middle and upper classes. BY DINESH D'SOUZA For some time now we have been hearing about the...
...It's true that whites and Asian Americans are more likely to use the Internet than blacks and Hispanics...
...That takes $100 million in net worth, or $10 million in annual income...
...Now the United States has performed an equally dazzling feat: It has created the first mass affluent class in world history...
...These are the new equivalents of the lords and barons of the Middle Ages—only today's Overclass is so big, and growing so fast, that perhaps one day it will outnumber the peasants...
...Inequality, a topic that seemed to have disappeared with the collapse of socialism, is suddenly a big issue again in America...
...Bill Gates says that, and so do Tim Koogle of Yahoo, Steve Jobs of Apple, Mary Meeker of Morgan Stanley, investment guru Charles Schwab, and Larry Ellison of Oracle...
...So what about the digital divide...
...So what now...
...The concept of the millionaire continues to wield its talismanic power: A show like Who Wants To Be A Millionaire assumes that a million dollars makes you rich...
...To illustrate my point, I recounted an experience at a recent conference sponsored by his own magazine...
...Many Americans have reached a standard of living that, in the words of novelist Tom Wolfe, "would make the Sun King blink...
...Somewhat comically, today's tech tycoons who have made enormous fortunes chant in unison, "We're not doing this for the money...
...What do they care about what I earn...
...During a session devoted to executive salaries, CEO after CEO had stood up to complain about having been personally criticized for making too much money...
...Just about anyone who wants access can have it...
...Karlgaard's point is that a narrow concern with inequality carries the implication that this expansion in the ranks of the affluent is a social tragedy, when in fact it is a magnificent social achievement...
...Call it the Overclass...
...The new rich are terrified of raising a generation of lazy, arrogant, spoiled brats...
...I raised these concerns with Rich Karlgaard, a new-economy enthusiast who is also the publisher of Forbes...
...a Rolls Royce is not...
...In other words, many people who were previously in the lower ranks have ascended rapidly...
...So even as they enjoy their prosperity, they demonstrate an egalitarian social style and an eagerness to see knowledge, skills, and opportunity extended to as many people as possible...
...A mass affluent class is starting to emerge in European countries as well...
...This country has extended to millions of people avenues for personal fulfillment previously open only to the very few...
...A Lexus or a Porsche is socially acceptable in Menlo Park, California, or Medina, Washington...
...A good thing...
...The fact that no one cares what they have to say...
...And in one sense he's right...
...Karlgaard's point is that inequality is necessary for markets to flourish efficiently...
...These people have hired gardeners, pool men, cooks, and nannies, most of them blacks and Mexicans...
...Perhaps their companies have done well, Walzer admits, but have the employees seen their salaries go up fivefold or tenfold...
...It took Rockefeller and Carnegie a lifetime to become billionaires...
...Wouldn't it be great if Ted Waitt had taken up cattle ranching instead of starting Gateway...
...The gap is even more pronounced along class lines: The rich are online in vastly greater numbers than the poor...
...The fact that they have lost power...
...Today to qualify as rich you need $1 million in annual income, or $10 million in net worth...
...In 1980, the vast majority of people in America earned between $12,000 and $55,000...
...It profiled people, including some professors, who for the first time are making six-figure incomes...
...some will not hesitate to wear a cheap Swatch, and others will sport a Patek Philippe with a crumpled shirt and faded jeans...
...I don't begrudge him his arrogance...
...Karlgaard says there's only one viable solution to inequality: a 98 percent capital gains tax...
...But the big story is not the growth of this group...
...It is the explosion in the ranks of the affluent class, the people who make over $100,000 a year and have a net worth in excess of $1 million...
...Gates's net worth is considerably less than 1 percent of the current U.S...
...If you want multiple residences and domestic staff to manage them, if you insist on your own Gulfstream V, if you are determined to own a sports team, then you need to join the ranks of the super rich...
...That, he says, would pretty much take care of the wealth gap...
...What can I do to extend opportunity to others in society...
...Too bad Michael Dell didn't obey his parents and become a doctor...
...Internet access in this country seems about as serious a problem as telephone access or automobile access...
...They don't begrudge Jerry Seinfeld and Michael Jordan their millions...
...Today six-figure incomes are commonplace, and to be in the top 5 percent you need an annual income of at least $150,000...
...Historically, the great achievement of the modern West was the creation of a middle class, allowing the common man to escape poverty and live in relative comfort...
...BY DINESH D'SOUZA For some time now we have been hearing about the gargantuan fortunes rapidly accumulated by tech superstars...
...These are social realities, but do they reflect a problem of "access...
...Finally one corporate titan said, "I don't understand the American people at all...
...And you know why...
...According to the Federal Reserve Board, some 250,000 households, with around 1 million people, meet this criterion...
...Many who have seen an explosion in their net worth have consciously rejected the social style of the old rich...
...What is new is neither affluence nor extravagance, but the sheer number of rich people in America today...
...Meanwhile, successful entrepreneurs and business executives are also acting "against type...
...Inequality is only a problem in the minds of intellectuals...
...The gulf between the wired and the unwired is wide and growing wider...
...Karlgaard laughed...
...Joe Ricketts of Ameritrade, Pierre Omidyar of eBay, and Steve Case of America Online did it in less than five years...
...How do I deal with envy...
...Admittedly, the thought of people like Bill Gates, Larry Ellison, and Michael Dell having a net worth that exceeds the gross national product of small countries is stagger-ing—and, to some, alarming...
...There is, to be sure, a digital divide, but it does not separate those with access to computers and the web from those without it...
...To close the divide would require teaching people the value of knowledge, how to obtain it, and what to do with it...
...If only Jeff Bezos had stayed in his hedge fund job instead of starting Amazon...
...What this behavior suggests is that the baby boomers, who grew up in the 1960s, have finally embraced capitalism and are eager to enjoy its rewards, but they are also anxious to show by their consumption patterns that they have not given up their values...
...How do I use my money to find happiness...
...In times of poverty the problem of wealth creation is in the forefront...
...Explaining his scruples, Petracca says, "It reeks of a kind of imperial colonialism one can imagine present in Shanghai in 1920...
...What we are seeing in America is the moral conundrum of success...
...If you made more than $55,000, you were in the top 5 percent of wage earners...
...The real digital divide is between those who know how to use these tools to acquire knowledge and those who don't...
...it is the natural outcome of a growing economy...
...Because America's doing too damn well, that's why...
...Tech CEOs, in particular, like to be seen in jeans, black T-shirts, and baseball caps worn back-to-front, to show the adjusto-strap to advantage...
...rather, they are eager to present themselves in public as middle class...
...Political scientist Mark Petracca, who teaches at the University of California at Irvine, says he finally agreed to get a nanny, but he absolutely refuses to hire a gardener, even though everybody else in his neighborhood has one...
...Being rich means that you can live very comfortably, but you cannot do whatever you want...
...The newly affluent don't want to be envied, and they don't want to leave their fellow citizens behind...
...In an era of prosperity, however, the issue becomes the use of wealth...
...The ranks of the rich have swelled so greatly that it is necessary to establish a new category, the super rich, to distinguish between people who can afford to live very well and those whose spending is limited only by their imagination...
...I estimate that 5,000 American households, and perhaps 10,000 households worldwide, fall into the super-rich category...
...With a look of dismissive amusement, Karlgaard replied, "I've heard the entire greed, sin, red-in-tooth-and-claw, orphan's-empty-porridge-bowl dreary lecture...
...When a person, or the country, becomes rich, new questions arise: Do I really deserve all this...
...Equally strange, many rich people have announced that they are not going to leave the bulk of their estate to their children...
...Let's put this development into perspective...
...In his recent book Bobos in Paradise, David Brooks describes well-off Americans who live in "latte towns" where the style is bohemian—Jim Morrison on the radio, Colombian throw rugs and African masks for sale, Left Bank-style cafes—but the talk, even among pony-tailed men with beards, is of start-ups and stock prices...
...Today a secondhand computer costs no more than a TV set, and prices are likely to plummet even further...
...When Rockefeller became a billionaire in 1913, his net worth was approximately 2 percent of America's gross domestic product...
...And maybe he's right...
...As they have become well-off, they have increased the gap between themselves and the rest of the population...
...Apparently the largest wealth-creation scheme on the planet is being driven by non-profit motives...
...But if it does, it will prove that the age-old animus against the rich is no longer justified, and that there can be virtue in prosperity...
...In 1980, fewer than one million American families had this kind of money...
...Whether the Overclass will succeed in implementing its ideals remains to be seen...
...But recall that the term millionaire Dinesh D'Souza, a research scholar at the American Enterprise Institute, is the author of The Virtue of Prosperity: Finding Values in an Age of Techno-Affluence, just published by the Free Press...
...Today approximately 5 million do, or more than 15 million people...
...Internet use ranges in cost from $20 a month to free...
...became synonymous with wealth and acquired its mystique at a time when the average American was making $10,000-$12,000 a year...
...As physicist and tech visionary Freeman Dyson puts it, "People who are not wired are in danger of becoming the new servant class...
...I told Karlgaard that while I agreed with him about the broad reach of affluence, I did not agree that inequality was a non-issue...
...How can I raise my children well in an atmosphere of plenty...
...In the past, though, wealthy people were a tiny minority, both in Europe and America...
...Questions like these are on the minds of the Overclass...
...To this, one of his colleagues retorted, "When the average Joe turns on his TV, he sees Jerry Seinfeld do his comedy routine and Michael Jordan hit those baskets, and he says, 'I can't do that.' But he thinks he can do what you do...
...Members of the Overclass are concerned with these issues because they aspire not only to get rich but also to lead meaningful lives and to integrate their personal success with the improvement of society...
...These are the complaints of journalists and academics, but many in the tech world have expressed similar concern about the "digital divide...
...Some rich people who speak of the need to "give back to society" or to "find meaning in work" are even beginning to sound like social activists or spiritual gurus...
...The contortions the academics go through to justify their behavior make for amusing reading...
...Studs Terkel, the author of Working, gripes it is not right that millions of Americans are struggling to make ends meet, and millions around the world are starving, while "some guys have more money than God...
...Maybe Steve Jobs shouldn't have popularized the personal computer...
...Leaving children wealth is like leaving them a case of psychological cancer," says broadcasting magnate Jim Rogers...
...You know what is really galling these intellectuals...
...In 1980, anyone with a net worth of $1 million was considered wealthy...
...Social critic Michael Walzer points out that while CEOs of public companies as late as 1990 made an average salary of $2 million a year, today's average is $11 million...
...Recently the Wall Street Journal published an article under the headline "Even Leftists Have Servants Now...
...Don't tell me how smart you are...
...Moreover, the "starter castles" of today's tycoons cannot compare with William Randolph Hearst's San Simeon, let alone the royal palaces of Blenheim or Versailles...
...All this new wealth has generated some interesting conflicts...
...Affluent people today are not likely to go in for the diamond-studded Rolex...
...Because people are all at the mall, shopping...
...Stop whining about the wealth gap, because when you think about it, the wealth gap is a good thing...
...Unfortunately these things didn't happen, because, if they had, America's wealth gap would be a trifle instead of a cancer...
...I know how we could have solved the problem of inequality in America," Karlgaard says...
...Some analysts predict that in the next decade these numbers will quadruple...
...But he's got to go out and prove it...
...And if you factor in stock options, it is not uncommon for top CEOs to take in $100 million a year...
...Go out and start a company...
Vol. 6 • January 2001 • No. 16
