The Return of Inequality
The newest thing about the new economy is how it is transforming the old middle and upper classes
Jan 1, 2001, Vol. 6, No. 16 • By DINESH D'SOUZA
For some time now we have been hearing about the gargantuan fortunes rapidly accumulated by tech superstars. 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 staggering -- and, to some, alarming. It took Rockefeller and Carnegie a lifetime to become billionaires; Joe Ricketts of Ameritrade, Pierre Omidyar of eBay, and Steve Case of America Online did it in less than five years.
When Rockefeller became a billionaire in 1913, his net worth was approximately 2 percent of America's gross domestic product. Gate's net worth is considerably less than 1 percent of the current U.S. GDP. 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. In the past, though, wealthy people were a tiny minority, both in Europe and America.
What is new is neither affluence nor extravagance, but the sheer number of rich people in America today. 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.
In 1980, anyone with a net worth of $ 1 million was considered wealthy. 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. But recall that the term millionaire became synonymous with wealth and acquired its mystique at a time when the average American was making $ 10,000-$ 12,000 a year. Today to qualify as rich you need $ 1 million in annual income, or $ 10 million in net worth. According to the Federal Reserve Board, some 250,000 households, with around 1 million people, meet this criterion.
Being rich means that you can live very comfortably, but you cannot do whatever you want. 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 takes $ 100 million in net worth, or $ 10 million in annual income. I estimate that 5,000 American households, and perhaps 10,000 households worldwide, fall into the super-rich category.
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. In 1980, fewer than one million American families had this kind of money. Today approximately 5 million do, or more than 15 million people. Some analysts predict that in the next decade these numbers will quadruple. Many Americans have reached a standard of living that, in the words of novelist Tom Wolfe, "would make the Sun King blink."
Let's put this development into perspective. 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. Now the United States has performed an equally dazzling feat: It has created the first mass affluent class in world history. This country has extended to millions of people avenues for personal fulfillment previously open only to the very few. A mass affluent class is starting to emerge in European countries as well.
Call it the Overclass. 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.
All this new wealth has generated some interesting conflicts. Recently the Wall Street Journal published an article under the headline "Even Leftists Have Servants Now." It profiled people, including some professors, who for the first time are making six-figure incomes. These people have hired gardeners, pool men, cooks, and nannies, most of them blacks and Mexicans. The contortions the academics go through to justify their behavior make for amusing reading. 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. Explaining his scruples, Petracca says, "It reeks of a kind of imperial colonialism one can imagine present in Shanghai in 1920."