We now live, as astute commentators often observe, in a second Gilded Age. Can we learn anything from the first? We contemplate that question in this week's Too Much.
Also in this issue: the story of the mega-millionaire philanthropist sadly missing from the pages of former President Bill Clinton's latest best-seller.
Texas billionaire Jerry Jones, Forbes reports, now owns the most valuable pro sports franchise in the entire world — and Jones can thank the little people for the honor. Their tax dollars are footing a third of the bill for the new $1.1 billion football stadium that will host his Dallas Cowboys starting in 2009. The new stadium, says Forbes, ups the overall value of the Cowboys to $1.5 billion. Meanwhile, over in Seattle, local officials are refusing to bankroll a new arena for the pro basketball SuperSonics. The private equity kingpin who runs the Sonics, Clayton Bennett, is fuming. He’s threatening to move the team to Oklahoma unless Seattle coughs up some serious tax dollars. A possible solution? Sports Illustrated’s David Zirin is talking “municipalization,” a campaign to claim the team, through eminent domain, for the people of Seattle. If the city owned the Sonics, says Zirin, any profits from a future new arena would go into Seattle schools and health care, not “another wing on Bennett Manor.”
The newly refurbished Essex House hotel in midtown Manhattan, right next to Central Park, doesn’t carry a five-star rating. A hotel needs a pool to earn the hospitality industry’s highest ranking. But this luxury “art deco landmark,” says a Toronto Globe & Mail review, has everything else, from a mahogany lounge to complimentary Mercedes limo service. And the facility, now owned by Dubai’s Jumeirah Group, appears to be a bargain to boot. The room rack rates run 15 to 25 percent less than rates at nearby high-end hostelries. Two-room suites reach just $1,027 a night. This price-and-pamper combo is so far attracting both “BlackBerry-transfixed” CEOs and “Burberry babies and their parents.” The hotel’s only discordant note: The room mini-bars come “with motion sensors that detect when you've sneaked a soda and tried to replace it before being charged.”
The largest single shareholder in Citigroup, Saudi Prince Alwaleed bin Talal, apparently isn’t feeling particularly worried about the banking giant’s recent record losses in the U.S. mortgage market. The prince has just become the first private citizen to buy a new Airbus A380, the world’s largest passenger jet. A standard, $320-million A380 stretches seven-stories high and can carry as many as 853 passengers. Prince Alwaleed will now be spending an additional $50 million-plus to have the jet outfitted to serve as his personal plane. He already owns a personal Boeing 747 . . .
You won’t find “wealth fatigue syndrome” in the American Psychiatric Association’s latest catalog of mental disorders. But therapists who work with the super-rich are treating the over-the-top consumption of many awesomely affluent as a dangerous and debilitating addiction. For those with nearly limitless cash, psychoanalyst Manfred Kets de Vries explained last week in the British Daily Telegraph, yachts and planes have become “like new toys that they play with for five minutes and then lose interest in.” Adds de Vries: “Pretty soon, to attain the same buzz they have to spend more money.” Many analysts see loneliness at the root of the boredom and depression in their wealthy clients. Notes Brendan Burchell, an economist and psychologist at Cambridge University: “The poorer everyone else gets, relative to the rich, the more isolated the rich become.”
Scholars can tell us a great deal about poor people. Courses and centers on poverty abound throughout American higher education. Rich people, by contrast, have received nothing close to that level of scrutiny. That will change next fall when the Bill and Melinda Gates Foundation, working with researchers at Boston College, releases what the Wall Street Journal calls “the largest and broadest survey of the American rich ever conducted.” The project is aiming to collect survey responses from at least 1,000 households worth over $25 million, with survey questions that probe both the source of contemporary grand fortunes and the impact of these fortunes on those who hold them. The survey also addresses the eternal how-much question. Among the queries: “What is the minimum level of net worth you would need to feel extremely secure?”
Quote of the Week
“Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy.”
Warren Buffett, world's third-richest man, testifying before the Senate Finance Committee, November 14, 2007
New Wisdom
on Wealth
James Surowiecki, Performance-Pay Perplexes, New Yorker, November 12, 2007. How lush incentives for Wall Street power suits end up incentivizing abominal behaviors.
Charlie Cray and Christopher Hayes, Executive Excess on Capitol Hill, Nation, November 12, 2007. Behind the foot-dragging on closing the private equity fund manager tax loopholes.
Bill Gates Sr. and Chuck Collins, Estate tax is fairest means of building revenue, Politico, November 13, 2007
Julia Isaacs, The Economic Mobility of Families Across Generations, November 13, 2007. One of three new mobility reports from the Pew Charitable Trust. Concludes that the “rags to riches story is more often found in Hollywood than in reality.”
Former President Bill Clinton has a new role. He has emerged this fall as a champion of charitable giving, with a new bestseller that profiles a series of caring Americans — many of them wealthy — whose contributions seem to be making a real difference.
Claude Rosenberg, a millionaire many times over, has been working to make a difference, too. Only his contribution now appears to be ending. The nonprofit Rosenberg set up in 1998 to encourage charitable giving — the NewTithing Group — has just shut down, the San Francisco Business Times reports. Rosenberg, near 80, has become too ill to continue the effort.
Claude Rosenberg doesn’t appear in Bill Clinton’s new book. That may be because he and the former President don’t quite share the same perspective on charity and the wealthy. Bill Clinton enjoys celebrating how much rich people are giving away. Rosenberg has spent his retirement years reminding us how much more they could — and should be — giving.
That reminding began with a 1994 book that looked at the giving of Americans who made over $1 million a year. In 1991, these Americans contributed, on average, a modest $87,000 a year. They 
could have upped their contributions to charity by ten times, Rosenberg noted, and still ended the year with a higher net worth than when the year started.
Rosenberg founded NewTithing to spread his book’s message.
“Our main point is that generosity has been based too much on income,” he would explain at every opportunity. “With capital for many people being so much larger than income, there is enormous untapped capacity to give.”
Rosenberg did everything he could to help affluent families better understand their “untapped capacity” — and expected that these affluent would listen. He had, after all, founded two successful investment companies and authored five books on financial management, including one that sold over half a million copies.
Rosenberg’s ideas would indeed get a hearing, in the Wall Street Journal and a host of other major publications. He also delivered speeches from coast to coast, and NewTithing actively pushed his cause out into cyberspace.
The wealthy, for their part, didn’t push back. They simply, as a group, ignored Rosenberg. Almost completely. The difference between what the wealthy could give to charity and what they actually did give increased over the first decade of Rosenberg’s advocacy.
In 1991, Rosenberg’s data revealed, households that collected over $1 million in income could have easily afforded to give $40 billion more to charity than they did. In 2000, show data NewTithing released in 2002, these top-tier households could have afforded to give $128 billion more.
Last fall, NewTithing updated this charitable giving picture with a look at California, the state with more wealthy households than any other.
In 2004, California households making over $200,000 held $1.04 trillion in financial wealth, not counting the value of their homes, pensions, and investment real estate. These households averaged a mere $19,000 in donations, just 0.74 percent of their financial wealth.
Claude Rosenberg entitled his 1994 book Wealthy and Wise: How You and America Can Get the Most Out of Your Giving. Wealthy Americans, after years of exposure to his proselytizing, certainly may be wiser about their wealth. But they have become, the data suggest, no more generous.
Jack Beatty, Age of Betrayal: The Triumph of Money in America, 1865-1900. Alfred A. Knopf.
Jack Beatty, a senior editor with Atlantic Monthly, starts his sweeping survey of the post-Civil War United States in dramatic fashion, with an 1886 entry from the diary of ex-President Rutherford B. Hayes.
The United States had become, Hayes confided, “a government of the people, by the people, and for the people no longer.” Hayes saw, in the industrializing nation around him, “rottenness” everywhere, “excessive wealth in the hands of the few” side by side with the “extreme poverty, ignorance, vice, and wretchedness of the many.”
Many of his contemporaries saw the same “rottenness.” Supreme Court Justice John Marshall Harlan, years later, would remember the “deep feeling of unrest” that Americans felt in the late 1880s.
“The conviction was universal that the country was in real danger,” Harlan would write, “from the aggregation of capital in the hands of a few individuals controlling, for their profit and advantage exclusively, the entire business of the country.”
In Age of Betrayal, Beatty asks questions that historians — a hundred years from now — will undoubtedly be asking about our own deeply unequal epoch. How could the United States grow so democracy-defying top-heavy? How could that immensely wealthy tiny top, in a free society, ever stay on top?
Beatty, a fine writer with a flair for the revealing anecdote, guides us through decades of largely forgotten history for the answers.
How did wealth ever flow up in such huge quantities? The Civil War primed the pump. So much money flowed into Wall Street during the war, Beatty relates, that the lunch counter had to be invented. Brokers found themselves so busy they didn’t have time to go home for lunch.
Those brokers would stay busy. Over the next generation, a corrupting combination of government subsidies and price-fixing monopoly might would keep wealth concentrating at a volume never before seen.
The “entrepreneurial genius” often credited for that achievement, notes Beatty, usually boiled down to “strategic generosity toward public officials.”
Enron anyone? But why didn’t “the people” object? That answer gets complicated. On the one hand, they did object — repeatedly, in struggles that would lead, at times, to bloodshed at levels unimaginable today.
On the other hand, the top also engaged in “a politics of distraction, based on the manipulation of real hatreds and sham issues,” that could hardly be more 21st century.
“The parties exploited sectional, racial, cultural, and religious cleavages to win office,” as Beatty puts it, “then turned government over to the corporations. Sound familiar?”
Beatty ends his book at the dawn of the 20th century. So you won’t find any happy ending here. But we can add one.
Try this: Over the first half of the 20th century, against all odds, the American people successfully undid the plutocracy the Age of Betrayal brings to such vivid life. They beat their plutocrats. Why can’t we beat ours?
Stat of the Week
The nine highest earners in the United States last year increased their personal net worths by $55 billion. To make the top nine, notes Harvard economist Kenneth Rogoff, you needed “to pull in at least $150 per second, including time spent eating and sleeping.”
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