Tag Archives: inequality

Deep Recession Produces Decline in Materialism

Hoards of pundits and experts argue over what to call our current recession, which began as a crisis in finance. Arguments will continue because whether the recession is really a depression, cannot be determined until more time has passed.

            When I first heard our current recession referred to as “Great Depression II” and “GP II,” I thought “How apt but unacceptable.”  But today when I Goggled the phrase (in quotes), 56,000 hits appeared. Not surprisingly, the term “recession” appears 100 times more often. I will use the term recession and “deep recession“ even though history may eventually call it “Great Depression II.”

The typical comments on the web about the effects of the recession can best be described as stories of stress, pain, fear and suffering. Their missives are social tragedies because they are stories of parents struggling to find food for hungry children and of breadwinners getting laid off. They are stories of the inability to pay for medical treatment, which lays the pathway to early death, just like the third world.

            Early Americans believed that pain, hunger, and suffering lead to strong character and close communities. But now contemporary Americans seem to view “suffering” as eating at home rather than going out; or as taking a vacation by car instead of jetting to the Caribbean.  

time-the-new-frugality-cover_resize            Time Magazine splashed “The New Frugality” as its cover story this week. The story claimed that the “Great Recession” is transforming how we spend, whom we trust, where we save and what we really value.” Time had just conducted a scientific, nationwide survey that found half of the public admitting to feeling hardship in general. Nearly a quarter had been unemployed not by choice. And, of course, we are spending less, at least on the nonessentials.

   

         The most remarkable finding by the Time survey was that nearly two thirds “predict they’ll continue to spend less than they did before.” Even people earning more than $100,000 a year were talking about how they spent less, especially on luxury items.

            On the basis of all of these types of findings, journalists tend to claim that the recession is affecting everyone. The truth is that the lifestyles of the super-wealthy remain basically unchanged, while the middle and poverty classes are struggling with day to day subsistence.

New national survey findings by the Pew Research Center Trends project were released as Luxury or Necessity? The Public Makes a U-Turn.  Here is a synopsis of their discovery about how American adults are adapting to the economic depression:

·         Over the past few decades, Americans have been increasingly viewing all home appliances as necessities rather than luxuries. All of a sudden in the past 4 months that trend has reversed. Now we are less likely to view microwaves, home air conditioning, dishwashers, and clothes dryers as necessities. Already in 4 months these appliances have lost 10 years worth of growth in their perception as necessities.

·         Eight-in-ten adults have taken specific steps of one kind or another to economize during these bad times. Almost six-in-ten say they are shopping more in discount stores or are passing up name brands in favor of less expensive varieties

·         One-in-five adults say they are following the example of first lady Michelle Obama and are making plans to plant a vegetable garden to save money on food

·         Consumer reaction to the recession is being driven by specific personal economic hardships as well as by a more pervasive new creed of thrift that has taken hold both among those who’ve been personally affected and those who haven’t.

·         Nearly half say they or another household member has lost more than 20% in a retirement account or other investments.

·         About two-in-three American families have faced major economic problems such as loss of a job, major loss of investments, or trouble with mortgage payments in the past year.

·         Children, young adults, women and the less affluent are the most likely to have been troubled or to face tragedy.  

           

Taken as a whole these findings allow us to confirm that small shifts values have occurred within the American public, and perhaps around the world. That change consists of dropping or chipping away at materialistic, consumption values. high-price-of-materialism_resize

For those like Tim Kasser, author of The High Price of Materialism, this must be good news. Although the Pew survey’s discovered a drop in the perceived meaning and value of major consumer items, the small drop may be finicky rather than long lasting, and superficial rather than deep.

            Last month the Archbishop of Canterbury proclaimed that the recession had challenged the common belief that material possessions lead to contentment.  On Easter Sunday, he preached for voluntary limits on “human acquisitiveness and sexual appetite.” I don’t know how sex slipped into hissermon, but let’s not get into psychoanalysis.

            The important point he made is that contemporary society promotes harmful social values of excessive acquisition of a many nonessentials. These values have blinded us from observing the harm we do to the environment and our great insensitivity to the subsistence suffering of millions of people in American and around the world. This is a failing not just of Catholics, but also of people of every form of religion and non-religion.

 

Obama Tackles Executive Greed

Moments ago President Obama announced several new rules for executive compensation for any corporations receiving “exceptional” amounts of public funds. One rule is that executive pay is capped at $500,000 and their stock options cannot be cashed in until every penny of public money has been repaid. Third, he said executive pay and perks would be public

            While the President did not describe the current executive culture as greedy, he did call it shameful in no uncertain terms. He also used the words “culture of narrow self-interest.” Is it not greed when executives pay themselves many millions and even billions while simultaneously their corporations implode financially and thousands of lower level employees are fired?

            The dictionaries generally agree: greed is an excessive desire to acquire or possess more than what one needs or deserves.  Last year’s book Richistan, which I reviewed in a earlier post, describes a greed-driven social class of the newly, ultra-rich. An estimated 10 million Americans belong to this social class, some of whom like Madoff ran billion dollar fraudulent schemes, unable to control addiction to money and ultra rich lifestyles.

            The lucky rich, as I dubbed them, are not the only greed-driven Americans. Greed appears to have clouded the judgment of millions of Americans who signed for mortgages they could not afford or put tens thousands of dollars on their credit cards.

            So, greed may be the most succinct lens to view the current financial crisis. Not only does it help to explain why it happened, but it suggests a way to get out of it. Continued acquisition of material goods and services that are not essential would stabilize the economy. It would not return us to the previous growth in GDP, but it would be the foundation for a culture and an economic foundation that emphasizes productivity and social well-being. It would be a society oriented toward the future not immediate gratification.

            This model of society is highly compatible with President Obama’s goals for our country. In his Chicago acceptance speech he advocated a society where we “look out for others as well as ourselves.” Now, that is a recipe to avoid falling into the pernicious pit of greed. And it applies equally to bailed out corporate executives as well as the rest of us.  

The “Lucky-Rich,” Emergence of a New Social Class

 

Imagine 12 million super-lottery winners with nothing to do but torment each other and feel superior to the rest of the world. That is pretty much what Robert Frank, Richistan’s author, discovered as a pop sociologist conducting interviews of America’s newly super-rich.  

Frank writes a column for the Wall Street Journal on wealth. Not being a sociologist, he was surprised that the super-rich seemed like a separate society with its own culture, and so he called them “Richistan.” I prefer to call them a new social class and give them the label “lucky-rich”, because they got their wealth by being market-lucky.  

True some of the wealthy got rich by working hard, but the majority of new wealth under our current financial system arises from short-term speculation such as hedge funds. It can even be argued that the entire American financial system, which has borrowed “to the brim” from other countries, is like a reckless, addicted gambler sliding on a streak of luck. Hedge-funds, securitizing, and other forms of questionable, largely-speculative financing have made millions lucky-rich.  

It just so happens that the lucky-rich piled up so much money in the past 20 years of free-market bliss that they also own the media and control much of the global economy. The lucky-rich own 73% of the wealth in America, according to Frank. 

David Rothkofp’s in a new book, Superclass: The Global Power Elite and the World they are Making, confirms that luck propels people into the ranks of the super wealthy and super powerful. He argues that a group of about 6,000 global power elite, analogous to C. Wright Mills’ American power elite, literally rule the world. In the absence of a strong world government, a global superclass is building institutions and making decisions about the global economy. Most of this powerful community not only have great influence but great wealth.

 

Rothkofp estimates that only 6% of the superclass are women. Women, compared to men, have a history of being more peace-loving, more caring about humanitarian issues, and more able to function in partnerships. Our best hope for the future of the world is to get more women into the ranks of the globally powerful. (That’s just a hint of the topic of a forthcoming blog post.) 

The lucky-rich are not about old wealth; almost all are infants at being wealthy. Back in the old days when there were only a few of them, society called them the new rich or Nouveau Riche.  

In the old days the new rich used to aspire to be old rich, but times have changed. According to Frank, they are quite content with their current wealth, their middle class values, and spending money lavishly on themselves without thought of charities, except those who attends charity balls.  

Already America’s rapidly growing lucky-rich constitute a society bigger than many European nations. Since 1980 the number of billionaires in the US rose from 13 to over 500; the millionaire count spiked from a half million to 10 million; and CEO pay skyrocketed from 40 to 300 times that of the average worker. 

In their latest annual report, World Wealth Report 2007, Capgemini estimated that a third of the world’s millionaires reside in the United States. They also found that 40% of the “ultra-high-net-worth” (those with a net worth of $30 million plus) live in the United States. Furthermore, they found that despite the economic slowdown in 2006, the number of lucky-rich increased by 10% that year. So, while the lucky-rich can be found around the globe, they are most likely to be American now and in the foreseeable future. 

One might expect the lucky-rich to put their power and wealth behind campaigns to reduce poverty and improve social well-being. No such luck. Poverty is on the rise and the median income in the United States is falling. 

 “Income inequality within (and among the) feet of Wall Street” Photo by Incendiarymind 

       The lucky-rich are too new to appear in sociology textbooks, but their power and influence, as well as their financial portfolios, are incredible. The lucky-rich have popularized America McMansions, SUVs, personal jets, 500-foot yachts, Vail, and many other avenues of conspicuous consumption.  

Frank tried to be objective and serious in his investigation, but his tale of travails of the wealthy, led me to take up their cause, tongue-in-cheek, to build sympathy for the stressful lives of the super-rich. Forgive me while I indulge in a few paragraphs of satire. 

Pity the lucky-rich for they suffer from “luxury fever,” a malady that can only be fixed by hiding from their friends. Many get weekly psychiatry treatment for either money mania or dot.com dread, mental afflictions that get exponentially worse the higher their net worth spikes. And on top of that suffering, they pay out $50,000 per year for a private school to teach their unhappy children to walk like Paris Hilton. 

Pity the lucky-rich because they keep seeing their friends, the Joneses, enjoying things they don’t yet have. Unless they keep buying bigger houses, cars, airplanes, and yachts, they may hear an insinuating remark about not keeping up. 

This “little house on the prairie” hints of the loneliness afflicting the new super-rich who build their huge dream house, in this case on the South Dakota prairie, with a wonderful view only to discover that they have no neighbors and no village. Technology replaces their contacts with other people and face-to-face contact requires long commutes in oil-burning carriages.  

   “Little” house on the prairie”     Photo by Peter Baker:

Pity the lucky-rich for their McMansions with dozens of rooms keeping family members apart. Each child has an apartment-like bedroom equipped with TV, video games, and computer, making it needless to get near other family members for days at a time. The undocumented cleaning lady interrupts their lonely computer-game-playing all too often.

Pity the lucky-rich because no one will build a luxury yacht over 500 feet long. Paul Allen of Microsoft fortune solved this problem buying a second giant yacht to follow along behind just to carry the toys, the pets, and the helicopters. It’s called the shadow yacht. Some in this ultra-rich class always fly with a shadow jet to carry the pets and the servants. 

Pity the lucky-rich because good help is truly hard to find now that the population of lucky-rich has mushroomed. New schools now churn out “household management” staff. Still, there are so few butlers, that an experienced one can easily command $100,000 per year. Private jet pilots and yacht crew make even more. Paying the high salaries is not the problem; it is losing them to your friends even after offering to double their salaries. 

Pity the lucky-rich because of their elusive problem of identity. If you identify with the rich and know that many are jerks, your self-esteem will suffer. Acting like jerks is related to the need to get rid of people always asking for money. While it’s easy to become an authentic rich person, it’s very hard to be a rich authentic person. Having to pretend to be non-rich is difficult, but the biggest challenge is keeping life meaningful, once you’ve achieved your main goals.  

My favorite Richistan sob story is the one about the little 11 year old girl who had always gone on trips in the family jet. When asked what she wanted for her birthday, she said “I want to go on a regular jet like all my friends, and I want to see inside an airport.” Life just isn’t fair when a rich kid that has to pretend to be poor. 

      Switching back from satire to sociology, I want to argue for sociology of the lucky-rich, which would include both a research agenda and courses on the subject. The lucky-rich, or super-wealthy if you prefer, will continue to grow exponentially during the next few years, even if the Democratic Party takes control of Congress and the White House in 2008. 

Although Richistan is the only work showing the extremely rapid growth of a new class of the ultra-rich, there are other sociological studies of the affluent. Most notable is Corey Dolgon’s The End of the Hamptons: Scenes from the Class Struggle in American’s Paradise (New York University Press, 2005). Rather than attempt to understand the new rich, Dolgon analyzed the Long Island wealthy and their conflicts with immigrants and other low-wage workers. Of course the life-style of the wealthy depends upon the low-wage worker class. It is an impressive study of social change in the wealth Hampton communities. 

While the new American super-wealthy may be a new phenomenon, sociological focus on the wealthy is not. It has always been a component of social class, but in recent years a number of books have emphasized the addictive nature of wealth. Sociologist Philip Slater wrote Wealth Addiction way back in 1980. Other sociologists’ books on this topic include The Rich Get Richer by Denny Braun and Wealth in America by Lisa Keister. 

Psychologists writing on this topic generally have examined the influence of wealth on culture. They include Tim Kasser, The High Price of Materialism; Madeline Levine, The Price of Privilege; and DeGraaf, Wall and Naylor, Affluenza (1st and 2nd editions). Jessie O’Neill’s book The Golden Ghetto: The Psychology of Affluence is parallel to Richistan in that it describes a clinical psychology practice in a very wealthy Michigan community. 

Of course economists have long been interested on this subject. A decade ago economists Brian Goff and Arthur Fleisher wrote Spoiled Rotten: Affluence Anxiety, and Social Decay in America. Of greater interest to sociologists would be Avner Offer’s recent The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain Since 1950. A 2007 book that I found to be an intriguing explanation of inequality is Falling Behind: How Rising Inequality Harms the Middle Class by Robert H. Frank. (This is Frank the economist not Frank the author of Richistan.) Another recent economic view can be found in the recent The Age of Abundance by Brink Lindsey. 

In my opinion, the most important of all these books is The Real Wealth of Nations – Creating a Caring Economics by Riane Eisler (SF: Berrett-Koehler Publishers, Inc., 2007). Eisler offers many suggestions on how caring and caregiving can be integrated more thoroughly into economics, e.g., gift economies. She proposes cultural and structural changes that would render the accumulation of wealth less important, the emergence of extravagance less likely, and inequality less of a problem. 

Finally, if you are teaching a sociology class, I recommend that you assign both Richistan and The End of the Hamptons as required reading. Your students will quickly learn the difference between journalism and sociology. You will have very stimulating class discussions, especially if you require that they read Eisler’s book as well.