Economy > The rich
Thursday January 2, 2003
By Garry Trudeau
August 21 2011
the better off
the seriously affluent
Poor Little Rich
By WEDNESDAY MARTIN NYT
MAY 16, 2015
rich people / the rich
UK / USA
the 1 percent / the
the 1 percent / the
the world’s richest
Just eight men
the same wealth
as 3.6 billion people
living in poverty
— that's half the
of the planet. USA
tax the rich
Taxing the Rich, New York Style
USA December 2011
life expectancy gap
between rich and poor
people in England UK
rich people > life
the very rich
the rich and powerful
Yours for $250m:
most expensive house in America UK
the 'pencil towers'
of New York's super-rich UK
USA > richest
list of the 400 richest Americans
the richest 10% of the population
Ben Jennings on
the latest UK rich list – cartoon
Sun 13 May 2018 18.36 BST
The richest people in Britain
Britain has world's most billionaires per capita
11 May 2014
Sunday Times Rich List
reveals 104 billionaires sharing fortune of £301bn,
but few pay tax as they are not domiciled in UK
The 1,000 wealthiest
people in the UK
are now worth £547bn,
not counting what’s
in their bank accounts,
according to the
latest Sunday Times Rich List UK
26 April 2015
Forbes 400: the world's wealthiest people
Forbes rich list:
the world's wealthiest people
NYT - 2 October 2018
UK / USA > billionaire
the luxury bunkers
making holes in London
streets UK 2012
A new billionaires' craze
for building elaborate
is making swiss cheese of London's
– but at what cost?
expensive homes – in pictures UK 27 April 2016
Homes for £1m –
in pictures UK 13 April 2016
From a Shropshire
to a Greek mansion,
are fit for a millionaire
jammy job (sl)
The Rise of the New Global Super Rich
by Chrystia Freeland – review
Outrageous fortunes abound
in this absorbing study
of the world's wealthiest men
the money-laden elite
income sgregation USA
income and wealth inequality
economic inequality in the United States
the top 20 percent > self-segregation of a privileged fifth of
the population USA
money-based caste system
guys in white linen suits" UK
expensive places to rent a home UK
Esher, Surrey, is most expensive place
to rent two-bedroom home outside
with average monthly cost of
But London rents beat this figure
Bill and Melinda Gates Foundation
UK > A divided nation
Rank / Place / Postcode / Average income
1 / Kings Hill, West Malling, Kent / ME19 4 / £62,000
2 / Elvetham Heath, Fleet, Surrey / GU51 1 / £61,000
3 / Hammersmith, London / SW13 8 / £59,000
4 / City of London / EC2Y 8 / £58,000
5 / Epsom, Surrey / KT19 7 / £58,000
6 / Grange Park, Northampton / NN4 5 / £58,000
7 / Sevenoaks, Kent / TN15 9 / £57,000
8 / Wokingham, Berkshire / RG40 5 / £57,000
9 / Leatherhead, Surrey / KT22 0 / £57,000
10 / Bracknell, Berkshire / RG42 7 / £56,000
and the poorest...
Rank / Place / Postcode / Average income
1 / Newport Road, Middlesbrough / TS1 5 / £12,000
2 / St Matthews, Leicester / LE1 2 / £13,000
3 / Middlesbrough / TS1 2 / £14,000
4 / Possil Park, Glasgow / G22 5 / £14,000
5 / Trafford Way, Doncaster / DN1 3 / £14,000
6 / Haswell Drive, Knowsley, Merseyside / L28 5 / £14,000
7 / Everton, Liverpool / L5 0 / £14,000
8 / Birkenhead, Merseyside / CH41 3 / £14,000
9 / Parkhead, Glasgow / G40 3 / £14,000
10 / Lawrence Street, Sunderland / SR1 2 / £14,000
The Observer, 20.6.2004
The Rich Get Even Richer
March 25, 2012
The New York Times
By STEVEN RATTNER
NEW statistics show an ever-more-startling divergence between
the fortunes of the wealthy and everybody else — and the desperate need to
address this wrenching problem. Even in a country that sometimes seems inured to
income inequality, these takeaways are truly stunning.
In 2010, as the nation continued to recover from the recession, a dizzying 93
percent of the additional income created in the country that year, compared to
2009 — $288 billion — went to the top 1 percent of taxpayers, those with at
least $352,000 in income. That delivered an average single-year pay increase of
11.6 percent to each of these households.
Still more astonishing was the extent to which the super rich got rich faster
than the merely rich. In 2010, 37 percent of these additional earnings went to
just the top 0.01 percent, a teaspoon-size collection of about 15,000 households
with average incomes of $23.8 million. These fortunate few saw their incomes
rise by 21.5 percent.
The bottom 99 percent received a microscopic $80 increase in pay per person in
2010, after adjusting for inflation. The top 1 percent, whose average income is
$1,019,089, had an 11.6 percent increase in income.
This new data, derived by the French economists Thomas Piketty and Emmanuel Saez
from American tax returns, also suggests that those at the top were more likely
to earn than inherit their riches. That’s not completely surprising: the rapid
growth of new American industries — from technology to financial services — has
increased the need for highly educated and skilled workers. At the same time,
old industries like manufacturing are employing fewer blue-collar workers.
The result? Pay for college graduates has risen by 15.7 percent over the past 32
years (after adjustment for inflation) while the income of a worker without a
high school diploma has plummeted by 25.7 percent over the same period.
Government has also played a role, particularly the George W. Bush tax cuts,
which, among other things, gave the wealthy a 15 percent tax on capital gains
and dividends. That’s the provision that caused Warren E. Buffett’s secretary to
have a higher tax rate than he does.
As a result, the top 1 percent has done progressively better in each economic
recovery of the past two decades. In the Clinton era expansion, 45 percent of
the total income gains went to the top 1 percent; in the Bush recovery, the
figure was 65 percent; now it is 93 percent.
Just as the causes of the growing inequality are becoming better known, so have
the contours of solving the problem: better education and training, a fairer tax
system, more aid programs for the disadvantaged to encourage the social mobility
needed for them escape the bottom rung, and so on.
Government, of course, can’t fully address some of the challenges, like
globalization, but it can help.
By the end of the year, deadlines built into several pieces of complex
legislation will force a gridlocked Congress’s hand. Most significantly, all of
the Bush tax cuts will expire. If Congress does not act, tax rates will return
to the higher, pre-2000, Clinton-era levels. In addition, $1.2 trillion of
automatic spending cuts that were set in motion by the failure of the last
attempt at a deficit reduction deal will take effect.
So far, the prospects for progress are at best worrisome, at worst terrifying.
Earlier this week, House Republicans unveiled an unsavory stew of highly
regressive tax cuts, large but unspecified reductions in discretionary spending
(a category that importantly includes education, infrastructure and research and
development), and an evisceration of programs devoted to lifting those at the
bottom, including unemployment insurance, food stamps, earned income tax credits
and many more.
Policies of this sort would exacerbate the very problem of income inequality
that most needs fixing. Next week’s package from House Democrats will almost
certainly be more appealing. And to his credit, President Obama has spoken
eloquently about the need to address this problem. But with Democrats in the
minority in the House and an election looming, passage is unlikely.
The only way to redress the income imbalance is by implementing policies that
are oriented toward reversing the forces that caused it. That means letting the
Bush tax cuts expire for the wealthy and adding money to some of the programs
that House Republicans seek to cut. Allowing this disparity to continue is both
bad economic policy and bad social policy. We owe those at the bottom a fairer
shot at moving up.
Steven Rattner is a contributing writer for Op-Ed
and a longtime
Wall Street executive.
This article has been revised
to reflect the following correction:
Correction: March 26, 2012
Due to a typo, an earlier version referred incorrectly
to the distribution of
income gains made
during the Clinton expansion.
Forty-five percent of the total
went to the top 1 percent,
not to the top 11 percent.
The Rich Get Even Richer,
Inequality Undermines Democracy
March 20, 2012
The New York Times
By EDUARDO PORTER
Americans have never been too worried about the income gap.
The gap between the rich and the rest has been much wider in the United States
than in other developed nations for decades. Still, polls show we are much less
concerned about it than people in those other nations are.
Policy makers haven’t cared much either. The United States does less than other
rich countries to transfer income from the affluent to the less fortunate. Even
as the income gap has grown enormously over the last 30 years, government has
done little to curb the trend.
Our tolerance for a widening income gap may be ebbing, however. Since Occupy
Wall Street and kindred movements highlighted the issue, the chasm between the
rich and ordinary workers has become a crucial talking point in the Democratic
Party’s arsenal. In a speech in Osawatomie, Kan., last December, President Obama
underscored how “the rungs of the ladder of opportunity had grown farther and
farther apart, and the middle class has shrunk.”
There are signs that the political strategy has traction. Inequality isn’t quite
the top priority of voters: only 17 percent of Americans think it is extremely
important for the government to try to reduce income and wealth inequality,
according to a Gallup survey last November. That is about half the share that
said reigniting economic growth was crucial.
But a slightly different question indicates views have changed: 29 percent said
it was extremely important for the government to increase equality of
opportunity. More significant, 41 percent said that there was not much
opportunity in America, up from 17 percent in 1998.
Americans have been less willing to take from the rich and give to the poor in
part because of a belief that each of us has a decent shot at prosperity. In
1952, 87 percent of Americans thought there was plenty of opportunity for
progress; only 8 percent disagreed. As income inequality has grown, though, many
have changed their minds.
From 1993 to 2010, the incomes of the richest 1 percent of Americans grew 58
percent while the rest had a 6.4 percent bump. There is little reason to think
the trend will go into reverse any time soon, given globalization and
technological change, which have weighed heavily on the wages of less educated
workers who compete against machines and cheap foreign labor while increasing
the returns of top executives and financiers.
The income gap narrowed briefly during the Great Recession, as plummeting stock
prices shrunk the portfolios of the rich. But in 2010, the first year of
recovery, the top 1 percent of Americans captured 93 percent of the income
Under these conditions, perhaps it is unsurprising that a growing share of
Americans have lost faith in their ability to get ahead.
We have accepted income inequality in the past partly because of the belief that
capitalism can’t work without it. If entrepreneurs invest and workers improve
their skills to improve their lot in life, a government that heavily taxed the
rich to give to the poor could destroy that incentive and stymie economic growth
that benefits everybody.
The nation’s relatively fast growth over the last three decades appeared to
support this view. The United States grew faster than advanced economies with a
more egalitarian distribution of income, like the European Union and Japan, so
keeping redistribution to a minimum while allowing markets to function unimpeded
was considered the best fuel.
Meanwhile, skeptics of income redistribution pointed out that inequality doesn’t
look so dire when it is viewed over a lifetime rather than at a single point in
time. One study found that about half the households in the poorest fifth of the
population moved to a higher quintile within a decade.
Even though the wealthy reaped most of growth’s rewards, critics of
redistribution noted that incomes grew over the last 30 years for all but the
poorest American families. And in the 1990s, a decade of soaring inequality,
even families in the bottom fifth saw their incomes rise.
Some economists have argued that inequality is not the right social ill to focus
on. “What matters is how the poor and middle class are doing and how much
opportunity they have,” said Scott Winship, an economist at the Brookings
Institution. “Until there is stronger evidence that inequality has a negative
effect on the life of the average person, I’m inclined to accept it.”
Perhaps Americans’ newfound concerns about their lack of opportunity are a
reaction to our economic doldrums, with high unemployment and stagnant incomes,
and have little to do with inequality. Perhaps these concerns will dissipate
when jobs become more plentiful.
Perhaps. Evidence is mounting, however, that inequality itself is obstructing
Americans’ shot at a better life.
Alan Krueger, Mr. Obama’s top economic adviser, offers a telling illustration of
the changing views on income inequality. In the 1990s he preferred to call it
“dispersion,” which stripped it of a negative connotation.
In 2003, in an essay called “Inequality, Too Much of a Good Thing” Mr. Krueger
proposed that “societies must strike a balance between the beneficial incentive
effects of inequality and the harmful welfare-decreasing effects of inequality.”
Last January he took another step: “the rise in income dispersion — along so
many dimensions — has gotten to be so high, that I now think that inequality is
a more appropriate term.”
Progress still happens, but there is less of it. Two-thirds of American families
— including four of five in the poorest fifth of the population — earn more than
their parents did 30 years earlier. But they don’t advance much. Four out of 10
children whose family is in the bottom fifth will end up there as adults. Only 6
percent of them will rise to the top fifth.
It is difficult to measure changes in income mobility over time. But some
studies suggest it is declining: the share of families that manage to rise out
of the bottom fifth of earnings has fallen since the early 1980s. So has the
share of people that fall from the top.
And on this count too, the United States seems to be trailing other developed
nations. Comparisons across countries suggest a fairly strong, negative link
between the level of inequality and the odds of advancement across the
generations. And the United States appears at extreme ends along both of these
dimensions — with some of the highest inequality and lowest mobility in the
The link makes sense: a big income gap is likely to open up other social
breaches that make it tougher for those lower down the rungs to get ahead. And
that is exactly what appears to be happening in the United States, where a
narrow elite is peeling off from the rest of society by a chasm of wealth, power
The sharp rise in the cost of college is making it harder for lower-income and
middle-class families to progress, feeding education inequality.
Inequality is also fueling geographical segregation — pushing the homes of the
rich and poor further apart. Brides and grooms increasingly seek out mates with
similar levels of income and education. Marriages among less-educated people
have become much more likely to fail.
And a growing income gap has bred a gap in political clout that could entrench
inequality for a very long time. One study found that public spending on
education was lower in countries like Britain and the United States where the
rich participate more in the political process than the poor, and higher in
countries like Sweden and Denmark, where levels of political participation are
approximately similar across the income scale. If the very rich can use the
political system to slow or stop the ascent of the rest, the United States could
become a hereditary plutocracy under the trappings of liberal democracy.
One doesn’t have to believe in equality to be concerned about these trends. Once
inequality becomes very acute, it breeds resentment and political instability,
eroding the legitimacy of democratic institutions. It can produce political
polarization and gridlock, splitting the political system between haves and
have-nots, making it more difficult for governments to address imbalances and
respond to brewing crises. That too can undermine economic growth, let alone
Inequality Undermines Democracy,
Education Gap Grows
Between Rich and Poor,
February 9, 2012
The New York Times
By SABRINA TAVERNISE
WASHINGTON — Education was historically considered a great
equalizer in American society, capable of lifting less advantaged children and
improving their chances for success as adults. But a body of recently published
scholarship suggests that the achievement gap between rich and poor children is
widening, a development that threatens to dilute education’s leveling effects.
It is a well-known fact that children from affluent families tend to do better
in school. Yet the income divide has received far less attention from policy
makers and government officials than gaps in student accomplishment by race.
Now, in analyses of long-term data published in recent months, researchers are
finding that while the achievement gap between white and black students has
narrowed significantly over the past few decades, the gap between rich and poor
students has grown substantially during the same period.
“We have moved from a society in the 1950s and 1960s, in which race was more
consequential than family income, to one today in which family income appears
more determinative of educational success than race,” said Sean F. Reardon, a
Stanford University sociologist. Professor Reardon is the author of a study that
found that the gap in standardized test scores between affluent and low-income
students had grown by about 40 percent since the 1960s, and is now double the
testing gap between blacks and whites.
In another study, by researchers from the University of Michigan, the imbalance
between rich and poor children in college completion — the single most important
predictor of success in the work force — has grown by about 50 percent since the
The changes are tectonic, a result of social and economic processes unfolding
over many decades. The data from most of these studies end in 2007 and 2008,
before the recession’s full impact was felt. Researchers said that based on
experiences during past recessions, the recent downturn was likely to have
aggravated the trend.
“With income declines more severe in the lower brackets, there’s a good chance
the recession may have widened the gap,” Professor Reardon said. In the study he
led, researchers analyzed 12 sets of standardized test scores starting in 1960
and ending in 2007. He compared children from families in the 90th percentile of
income — the equivalent of around $160,000 in 2008, when the study was conducted
— and children from the 10th percentile, $17,500 in 2008. By the end of that
period, the achievement gap by income had grown by 40 percent, he said, while
the gap between white and black students, regardless of income, had shrunk
Both studies were first published last fall in a book of research, “Whither
Opportunity?” compiled by the Russell Sage Foundation, a research center for
social sciences, and the Spencer Foundation, which focuses on education. Their
conclusions, while familiar to a small core of social sciences scholars, are now
catching the attention of a broader audience, in part because income inequality
has been a central theme this election season.
The connection between income inequality among parents and the social mobility
of their children has been a focus of President Obama as well as some of the
Republican presidential candidates.
One reason for the growing gap in achievement, researchers say, could be that
wealthy parents invest more time and money than ever before in their children
(in weekend sports, ballet, music lessons, math tutors, and in overall
involvement in their children’s schools), while lower-income families, which are
now more likely than ever to be headed by a single parent, are increasingly
stretched for time and resources. This has been particularly true as more
parents try to position their children for college, which has become ever more
essential for success in today’s economy.
A study by Sabino Kornrich, a researcher at the Center for Advanced Studies at
the Juan March Institute in Madrid, and Frank F. Furstenberg, scheduled to
appear in the journal Demography this year, found that in 1972, Americans at the
upper end of the income spectrum were spending five times as much per child as
low-income families. By 2007 that gap had grown to nine to one; spending by
upper-income families more than doubled, while spending by low-income families
grew by 20 percent.
“The pattern of privileged families today is intensive cultivation,” said Dr.
Furstenberg, a professor of sociology at the University of Pennsylvania.
The gap is also growing in college. The University of Michigan study, by Susan
M. Dynarski and Martha J. Bailey, looked at two generations of students, those
born from 1961 to 1964 and those born from 1979 to 1982. By 1989, about
one-third of the high-income students in the first generation had finished
college; by 2007, more than half of the second generation had done so. By
contrast, only 9 percent of the low-income students in the second generation had
completed college by 2007, up only slightly from a 5 percent college completion
rate by the first generation in 1989.
James J. Heckman, an economist at the University of Chicago, argues that
parenting matters as much as, if not more than, income in forming a child’s
cognitive ability and personality, particularly in the years before children
“Early life conditions and how children are stimulated play a very important
role,” he said. “The danger is we will revert back to the mindset of the war on
poverty, when poverty was just a matter of income, and giving families more
would improve the prospects of their children. If people conclude that, it’s a
Meredith Phillips, an associate professor of public policy and sociology at the
University of California, Los Angeles, used survey data to show that affluent
children spend 1,300 more hours than low-income children before age 6 in places
other than their homes, their day care centers, or schools (anywhere from
museums to shopping malls). By the time high-income children start school, they
have spent about 400 hours more than poor children in literacy activities, she
Charles Murray, a scholar at the American Enterprise Institute whose book,
“Coming Apart: The State of White America, 1960-2010,” was published Jan. 31,
described income inequality as “more of a symptom than a cause.”
The growing gap between the better educated and the less educated, he argued,
has formed a kind of cultural divide that has its roots in natural social
forces, like the tendency of educated people to marry other educated people, as
well as in the social policies of the 1960s, like welfare and other government
programs, which he contended provided incentives for staying single.
“When the economy recovers, you’ll still see all these problems persisting for
reasons that have nothing to do with money and everything to do with culture,”
There are no easy answers, in part because the problem is so complex, said
Douglas J. Besharov, a fellow at the Atlantic Council. Blaming the problem on
the richest of the rich ignores an equally important driver, he said: two-earner
household wealth, which has lifted the upper middle class ever further from less
educated Americans, who tend to be single parents.
The problem is a puzzle, he said. “No one has the slightest idea what will work.
The cupboard is bare.”
Education Gap Grows Between Rich and Poor,
The Great Divorce
January 30, 2012
The New York Times
By DAVID BROOKS
I’ll be shocked if there’s another book this year as important
as Charles Murray’s “Coming Apart.” I’ll be shocked if there’s another book that
so compellingly describes the most important trends in American society.
Murray’s basic argument is not new, that America is dividing into a two-caste
society. What’s impressive is the incredible data he produces to illustrate that
trend and deepen our understanding of it.
His story starts in 1963. There was a gap between rich and poor then, but it
wasn’t that big. A house in an upper-crust suburb cost only twice as much as the
average new American home. The tippy-top luxury car, the Cadillac Eldorado
Biarritz, cost about $47,000 in 2010 dollars. That’s pricy, but nowhere near the
price of the top luxury cars today.
More important, the income gaps did not lead to big behavior gaps. Roughly 98
percent of men between the ages of 30 and 49 were in the labor force, upper
class and lower class alike. Only about 3 percent of white kids were born
outside of marriage. The rates were similar, upper class and lower class.
Since then, America has polarized. The word “class” doesn’t even capture the
divide Murray describes. You might say the country has bifurcated into different
social tribes, with a tenuous common culture linking them.
The upper tribe is now segregated from the lower tribe. In 1963, rich people who
lived on the Upper East Side of Manhattan lived close to members of the middle
class. Most adult Manhattanites who lived south of 96th Street back then hadn’t
even completed high school. Today, almost all of Manhattan south of 96th Street
is an upper-tribe enclave.
Today, Murray demonstrates, there is an archipelago of affluent enclaves
clustered around the coastal cities, Chicago, Dallas and so on. If you’re born
into one of them, you will probably go to college with people from one of the
enclaves; you’ll marry someone from one of the enclaves; you’ll go off and live
in one of the enclaves.
Worse, there are vast behavioral gaps between the educated upper tribe (20
percent of the country) and the lower tribe (30 percent of the country). This is
where Murray is at his best, and he’s mostly using data on white Americans, so
the effects of race and other complicating factors don’t come into play.
Roughly 7 percent of the white kids in the upper tribe are born out of wedlock,
compared with roughly 45 percent of the kids in the lower tribe. In the upper
tribe, nearly every man aged 30 to 49 is in the labor force. In the lower tribe,
men in their prime working ages have been steadily dropping out of the labor
force, in good times and bad.
People in the lower tribe are much less likely to get married, less likely to go
to church, less likely to be active in their communities, more likely to watch
TV excessively, more likely to be obese.
Murray’s story contradicts the ideologies of both parties. Republicans claim
that America is threatened by a decadent cultural elite that corrupts regular
Americans, who love God, country and traditional values. That story is false.
The cultural elites live more conservative, traditionalist lives than the
Democrats claim America is threatened by the financial elite, who hog society’s
resources. But that’s a distraction. The real social gap is between the top 20
percent and the lower 30 percent. The liberal members of the upper tribe latch
onto this top 1 percent narrative because it excuses them from the central role
they themselves are playing in driving inequality and unfairness.
It’s wrong to describe an America in which the salt of the earth common people
are preyed upon by this or that nefarious elite. It’s wrong to tell the familiar
underdog morality tale in which the problems of the masses are caused by the
The truth is, members of the upper tribe have made themselves phenomenally
productive. They may mimic bohemian manners, but they have returned to 1950s
traditionalist values and practices. They have low divorce rates, arduous work
ethics and strict codes to regulate their kids.
Members of the lower tribe work hard and dream big, but are more removed from
traditional bourgeois norms. They live in disorganized, postmodern neighborhoods
in which it is much harder to be self-disciplined and productive.
I doubt Murray would agree, but we need a National Service Program. We need a
program that would force members of the upper tribe and the lower tribe to live
together, if only for a few years. We need a program in which people from both
tribes work together to spread out the values, practices and institutions that
lead to achievement.
If we could jam the tribes together, we’d have a better elite and a better mass.
The Great Divorce, NYT, 30.1.2012,
Millionaires Before Jobs
The New York Times
nothing partisan about a road or a bridge or an airport; Democrats and
Republicans have voted to spend billions on them for decades and long supported
rebuilding plans in their own states. On Thursday, though, when President
Obama’s plan to spend $60 billion on infrastructure repairs came up for a vote
in the Senate, not a single Republican agreed to break the party’s filibuster.
That’s because the bill would pay for itself with a 0.7 percent surtax on people
making more than $1 million. That would affect about 345,000 taxpayers,
according to Citizens for Tax Justice, adding an average of $13,457 to their
annual tax bills. Protecting that elite group — and hewing to their rigid
antitax vows — was more important to Senate Republicans than the thousands of
construction jobs the bill would have helped create, or the millions of people
who would have used the rebuilt roads, bridges and airports.
Senate Republicans filibustered the president’s full jobs act last month for the
same reasons. And they have vowed to block the individual pieces of that bill
that Democrats are now bringing to the floor. Senate Democrats have also accused
them of opposing any good idea that might put people back to work and rev the
economy a bit before next year’s presidential election.
There is no question that the infrastructure bill would be good for the flagging
economy — and good for the country’s future development. It would directly spend
$50 billion on roads, bridges, airports and mass transit systems, and it would
then provide another $10 billion to an infrastructure bank to encourage
private-sector investment in big public works projects.
Senator Kay Bailey Hutchison, a Republican of Texas, co-sponsored an
infrastructure-bank bill in March, and other Republicans have supported similar
efforts over the years. But the Republicans’ determination to stick to an
antitax pledge clearly trumps even their own good ideas.
A competing Republican bill, which also failed on Thursday, was cobbled together
in an attempt to make it appear as if the party has equally valid ideas on job
creation and rebuilding. It would have extended the existing highway and public
transportation financing for two years, paying for it with a $40 billion cut to
other domestic programs. Republican senators also threw in a provision that
would block the Environmental Protection Agency from issuing new clean air
rules. Only in the fevered dreams of corporate polluters could that help create
Mitch McConnell, the Senate Republican leader, bitterly accused Democrats of
designing their infrastructure bill to fail by paying for it with a
millionaire’s tax, as if his party’s intransigence was so indomitable that
daring to challenge it is somehow underhanded.
The only good news is that the Democrats aren’t going to stop. There are many
more jobs bills to come, including extension of unemployment insurance and the
payroll-tax cut. If Republicans are so proud of blocking all progress, they will
have to keep doing it over and over again, testing the patience of American
Putting Millionaires Before Jobs, NYT, 3.11.2011,
Oligarchy, American Style
The New York Times
By PAUL KRUGMAN
is back in the news, largely thanks to Occupy Wall Street, but with an assist
from the Congressional Budget Office. And you know what that means: It’s time to
roll out the obfuscators!
Anyone who has tracked this issue over time knows what I mean. Whenever growing
income disparities threaten to come into focus, a reliable set of defenders
tries to bring back the blur. Think tanks put out reports claiming that
inequality isn’t really rising, or that it doesn’t matter. Pundits try to put a
more benign face on the phenomenon, claiming that it’s not really the wealthy
few versus the rest, it’s the educated versus the less educated.
So what you need to know is that all of these claims are basically attempts to
obscure the stark reality: We have a society in which money is increasingly
concentrated in the hands of a few people, and in which that concentration of
income and wealth threatens to make us a democracy in name only.
The budget office laid out some of that stark reality in a recent report, which
documented a sharp decline in the share of total income going to lower- and
middle-income Americans. We still like to think of ourselves as a middle-class
country. But with the bottom 80 percent of households now receiving less than
half of total income, that’s a vision increasingly at odds with reality.
In response, the usual suspects have rolled out some familiar arguments: the
data are flawed (they aren’t); the rich are an ever-changing group (not so); and
so on. The most popular argument right now seems, however, to be the claim that
we may not be a middle-class society, but we’re still an upper-middle-class
society, in which a broad class of highly educated workers, who have the skills
to compete in the modern world, is doing very well.
It’s a nice story, and a lot less disturbing than the picture of a nation in
which a much smaller group of rich people is becoming increasingly dominant. But
it’s not true.
Workers with college degrees have indeed, on average, done better than workers
without, and the gap has generally widened over time. But highly educated
Americans have by no means been immune to income stagnation and growing economic
insecurity. Wage gains for most college-educated workers have been unimpressive
(and nonexistent since 2000), while even the well-educated can no longer count
on getting jobs with good benefits. In particular, these days workers with a
college degree but no further degrees are less likely to get workplace health
coverage than workers with only a high school degree were in 1979.
So who is getting the big gains? A very small, wealthy minority.
The budget office report tells us that essentially all of the upward
redistribution of income away from the bottom 80 percent has gone to the
highest-income 1 percent of Americans. That is, the protesters who portray
themselves as representing the interests of the 99 percent have it basically
right, and the pundits solemnly assuring them that it’s really about education,
not the gains of a small elite, have it completely wrong.
If anything, the protesters are setting the cutoff too low. The recent budget
office report doesn’t look inside the top 1 percent, but an earlier report,
which only went up to 2005, found that almost two-thirds of the rising share of
the top percentile in income actually went to the top 0.1 percent — the richest
thousandth of Americans, who saw their real incomes rise more than 400 percent
over the period from 1979 to 2005.
Who’s in that top 0.1 percent? Are they heroic entrepreneurs creating jobs? No,
for the most part, they’re corporate executives. Recent research shows that
around 60 percent of the top 0.1 percent either are executives in nonfinancial
companies or make their money in finance, i.e., Wall Street broadly defined. Add
in lawyers and people in real estate, and we’re talking about more than 70
percent of the lucky one-thousandth.
But why does this growing concentration of income and wealth in a few hands
matter? Part of the answer is that rising inequality has meant a nation in which
most families don’t share fully in economic growth. Another part of the answer
is that once you realize just how much richer the rich have become, the argument
that higher taxes on high incomes should be part of any long-run budget deal
becomes a lot more compelling.
The larger answer, however, is that extreme concentration of income is
incompatible with real democracy. Can anyone seriously deny that our political
system is being warped by the influence of big money, and that the warping is
getting worse as the wealth of a few grows ever larger?
Some pundits are still trying to dismiss concerns about rising inequality as
somehow foolish. But the truth is that the whole nature of our society is at
Oligarchy, American Style, NYT, 3.11.2011,
The Angry Rich
September 19, 2010
The New York imes
By PAUL KRUGMAN
Anger is sweeping America. True, this white-hot rage is a minority
phenomenon, not something that characterizes most of our fellow citizens. But
the angry minority is angry indeed, consisting of people who feel that things to
which they are entitled are being taken away. And they’re out for revenge.
No, I’m not talking about the Tea Partiers. I’m talking about the rich.
These are terrible times for many people in this country. Poverty, especially
acute poverty, has soared in the economic slump; millions of people have lost
their homes. Young people can’t find jobs; laid-off 50-somethings fear that
they’ll never work again.
Yet if you want to find real political rage — the kind of rage that makes people
compare President Obama to Hitler, or accuse him of treason — you won’t find it
among these suffering Americans. You’ll find it instead among the very
privileged, people who don’t have to worry about losing their jobs, their homes,
or their health insurance, but who are outraged, outraged, at the thought of
paying modestly higher taxes.
The rage of the rich has been building ever since Mr. Obama took office. At
first, however, it was largely confined to Wall Street. Thus when New York
magazine published an article titled “The Wail Of the 1%,” it was talking about
financial wheeler-dealers whose firms had been bailed out with taxpayer funds,
but were furious at suggestions that the price of these bailouts should include
temporary limits on bonuses. When the billionaire Stephen Schwarzman compared an
Obama proposal to the Nazi invasion of Poland, the proposal in question would
have closed a tax loophole that specifically benefits fund managers like him.
Now, however, as decision time looms for the fate of the Bush tax cuts — will
top tax rates go back to Clinton-era levels? — the rage of the rich has
broadened, and also in some ways changed its character.
For one thing, craziness has gone mainstream. It’s one thing when a billionaire
rants at a dinner event. It’s another when Forbes magazine runs a cover story
alleging that the president of the United States is deliberately trying to bring
America down as part of his Kenyan, “anticolonialist” agenda, that “the U.S. is
being ruled according to the dreams of a Luo tribesman of the 1950s.” When it
comes to defending the interests of the rich, it seems, the normal rules of
civilized (and rational) discourse no longer apply.
At the same time, self-pity among the privileged has become acceptable, even
Tax-cut advocates used to pretend that they were mainly concerned about helping
typical American families. Even tax breaks for the rich were justified in terms
of trickle-down economics, the claim that lower taxes at the top would make the
economy stronger for everyone.
These days, however, tax-cutters are hardly even trying to make the trickle-down
case. Yes, Republicans are pushing the line that raising taxes at the top would
hurt small businesses, but their hearts don’t really seem in it. Instead, it has
become common to hear vehement denials that people making $400,000 or $500,000 a
year are rich. I mean, look at the expenses of people in that income class — the
property taxes they have to pay on their expensive houses, the cost of sending
their kids to elite private schools, and so on. Why, they can barely make ends
And among the undeniably rich, a belligerent sense of entitlement has taken
hold: it’s their money, and they have the right to keep it. “Taxes are what we
pay for civilized society,” said Oliver Wendell Holmes — but that was a long
The spectacle of high-income Americans, the world’s luckiest people, wallowing
in self-pity and self-righteousness would be funny, except for one thing: they
may well get their way. Never mind the $700 billion price tag for extending the
high-end tax breaks: virtually all Republicans and some Democrats are rushing to
the aid of the oppressed affluent.
You see, the rich are different from you and me: they have more influence. It’s
partly a matter of campaign contributions, but it’s also a matter of social
pressure, since politicians spend a lot of time hanging out with the wealthy. So
when the rich face the prospect of paying an extra 3 or 4 percent of their
income in taxes, politicians feel their pain — feel it much more acutely, it’s
clear, than they feel the pain of families who are losing their jobs, their
houses, and their hopes.
And when the tax fight is over, one way or another, you can be sure that the
people currently defending the incomes of the elite will go back to demanding
cuts in Social Security and aid to the unemployed. America must make hard
choices, they’ll say; we all have to be willing to make sacrifices.
But when they say “we,” they mean “you.” Sacrifice is for the little people.
The Angry Rich, NYT,
Baker who won £9m on lottery
dies penniless, five years on
Keith Gough spent much of his winnings
on racehorses, fast cars and an executive
at Aston Villa
Saturday 3 April 2010
This article appeared on p9
of the Main section section of the Guardian
Saturday 3 April 2010.
It was published on guardian.co.uk at 01.32 BST
on Saturday 3 April 2010.
A former baker who claimed that winning £9m on the lottery ruined his life,
leaving him penniless, alone and alcoholic, has died of a suspected heart
Keith Gough, 58, won the jackpot with his wife Louise in June 2005, but spent
much of his winnings on racehorses, fast cars and an executive box at Aston
Villa. He died at the Princess Royal hospital in Telford, Shropshire. It is
believed he suffered a heart attack.
Two years after his win, Gough split from his wife of 25 years and began
drinking heavily. He then reportedly checked into the Priory rehabilitation
clinic in Birmingham for treatment.
He said he slept in the spare room of his nephew's house and spent most of his
time indoors, only venturing out for long walks alone in the Shropshire
"My life was brilliant. But the lottery has ruined everything. What's the point
of having money when it sends you to bed crying?" he told the News of the World
last year. "Now when I see someone going in to a newsagent I advise them not to
buy a lottery ticket."
According to the paper the win made him a target for conmen, one of whom cheated
him out of £700,000.
Gough, who lived in Brignorth, Shropshire, at the time of his win, said he and
his wife, a secretary, had been very much in love and looking forward to
John Homer, who owns a newsagents in Broseley, Shropshire, said yesterday that
he still remembered when "Goughie" bought his winning ticket. Homer, 65, said:
"It was a Wednesday and a rollover from the previous Saturday. It all went
downhill from there. He and his wife split. He did have a drink problem and it
got progressively worse."
He added: "It's very sad because it should have made him a very happy man, but
he didn't get the best out of it. You never expected any sorrow or problems, but
he must have had some, although he never spoke about them to me."
Gough, who was driving a T-registered Skoda at the time of the win, said at the
time he had to "pinch himself". "I have never had any dreams come true before
and now I suppose I don't have to have any dreams."
Baker who won £9m on
lottery dies penniless, five years on,
Unequal Britain: richest 10%
are now 100 times better off
• 1980s income gap still not plugged, say analysts
• Brown says equality panel report a 'sobering' read
• Datablog: get the numbers behind this story
Wednesday 27 January 2010
Amelia Gentleman and Hélène Mulholland
This article was published on guardian.co.uk at 08.54 GMT
on Wednesday 27
It was last modified at 08.57 GMT
on Wednesday 27 January 2010.
A detailed and startling analysis of how unequal Britain has become offers a
snapshot of an increasingly divided nation where the richest 10% of the
population are more than 100 times as wealthy as the poorest 10% of society.
Gordon Brown described the paper, published today, as "sobering", saying: "The
report illustrates starkly that despite a levelling-off of inequality in the
last decade we still have much further to go."
The report, An Anatomy of Economic Inequality in the UK, scrutinises the degree
to which the country has become more unequal over the past 30 years. Much of it
will make uncomfortable reading for the Labour government, although the paper
indicates that considerable responsibility lies with the Tories, who presided
over the dramatic divisions of the 1980s and early 1990s.
Researchers analyse inequality according to a number of measures; one indicates
that by 2007-8 Britain had reached the highest level of income inequality since
soon after the second world war.
The new findings show that the household wealth of the top 10% of the population
stands at £853,000 and more – over 100 times higher than the wealth of the
poorest 10%, which is £8,800 or below (a sum including cars and other
When the highest-paid workers, such as bankers and chief executives, are put
into the equation, the division in wealth is even more stark, with individuals
in the top 1% of the population each possessing total household wealth of £2.6m
Commissioned by Harriet Harman, minister for women and equality, the National
Equality Panel has been working on the 460-page document for 16 months, led by
Prof John Hills, of the London School of Economics.
The report is more ambitious in scope than any other state-of-the-nation wealth
assessment project ever undertaken.
It concludes that the government has failed to plug the gulf that existed
between the poorest and richest in society in the 1980s. "Over the most recent
decade, earnings inequality has narrowed a little and income inequality has
stabilised on some measures, but the large inequality growth of the 1980s has
not been reversed," it states.
Hills said: "These are very challenging issues for any government because the
problems are so deep-seated."
"But we hope that by doing this work, policy makers have now got information
they never had before, to try and get at the roots of some of those problems."
Harman said the issues raised meant the government needs to "sustain and step
up" action introduced by government over the past 13 years, such as children's
centres and tax credits. "It takes generations to make things more equal," she
told Radio 4's Today programme.
Social mobility was "essential" for the economy, she said. "..The government
should take action to ensure everyone has a fair chance."
The panel found "systematic differences in equality panel economic outcomes"
remained between social groups, and said many would find the "sheer scale of
inequalities" in outcomes "shocking".
Inequality in earnings and income is high in Britain compared with other
industrialised countries, the report states.
A central theme of the report is the profound, lifelong negative impact that
being born poor, and into a disadvantaged social class, has on a child. These
inequalities accumulate over the life cycle, the report concludes. Social class
has a big impact on children's school readiness at the age of three, but
continues to drag children back through school and beyond.
"The evidence we have looked at shows the long arm of people's origins in
shaping their life chances, stretching through life stages, literally from
cradle to grave. Differences in wealth in particular are associated with
opportunities such as the ability to buy houses in the catchment areas of the
best schools or to afford private education, with advantages for children that
continue through and beyond education. At the other end of life, wealth levels
are associated with stark differences in life expectancy after 50," the report
It echoes other recent research suggesting that social mobility has stagnated,
and concludes that "people's occupational and economic destinations in early
adulthood depend to an important degree on their origins". Achieving the
"equality of opportunity" that all political parties aspire to is very hard when
there are such wide differences between the resources that people have to help
them fulfil their diverse potentials, the panel notes.
Researchers analysed the total wealth accrued by households over a lifetime. The
top 10%, led by higher professionals, had amassed wealth of £2.2m, including
property and pension assets, by the time they drew close to retirement (aged
55-64), while the bottom 10% of households, led by routine manual workers, had
amassed less than £8,000.
Harman acknowledged in the report that the "persistent inequality of social
class" was a large factor in perpetuating disadvantage, adding that the
government would begin to address this with the new legal duty placed on public
bodies to address socio-economic inequality, included in the equality bill.
The report follows research published by Save the Children which revealed that
13% of the UK's children were now living in severe poverty, and that efforts to
reduce child poverty had been stalling even before the recession began in 2008.
The Hills report also found that: • Divisions between social groups are no
longer as significant as the inequalities between individuals from the same
social group; inequality growth of the last 40 years is mostly attributable to
gaps within groups rather than between them.
• White British pupils with GCSE results around or below the national median are
less likely to go on to higher education than those from minority ethnic groups.
Pakistani, Black African and Black Caribbean boys have results at the age of 16
well below the median in England.
• Compared with a white British Christian man with similar qualifications, age
and occupation, Pakistani and Bangladeshi Muslim men and Black African Christian
men have an income that is 13-21% lower. Nearly half of Bangladeshi and
Pakistani households are in poverty.
• Girls have better educational outcomes than boys at school and are more likely
to enter higher education and achieve good degrees, but women's median hourly
pay is 21% less than men's.
The significance of where you live is another theme. The panel says the
government is a "very long way" from fulfilling its vision, set out in 2001,
that "within 10 to 20 years no one should be seriously disadvantaged by where
they live". The paper notes "profound and startling differences" between areas.
Median hourly wages in the most deprived 10th of areas are 40% lower than in the
Unequal Britain: richest
10% are now 100 times better off than the poorest,
Elton John, McCartney
Hit By Economic Crisis: Rich List
April 24, 2009
Filed at 5:04 a.m. ET
The New York Times
LONDON (Reuters) - British singers Paul McCartney, Elton John and Mick Jagger
have lost large chunks of their personal fortunes during the economic crisis
over the last year, according to a rich list published on Friday.
Along with many of the world's richest people, their wealth has been eroded by
sharp falls in the value of property, shares and other investments, the annual
survey for the Sunday Times newspaper said.
Elton John's personal wealth fell by more than a quarter to 175 million pounds
from 235 million pounds ($342.3 million) last year.
The flamboyant 62-year-old, whose hits include "Your Song," and "Rocket Man,"
saw his wealth tumble due to a combination of the effects of the downturn, the
end of a lucrative run of Las Vegas concerts and donations to charity worth 42
Former Beatle McCartney saw 60 million pounds wiped off his fortune, a 12
percent decline on last year.
Jagger, lead singer of the Rolling Stones, fared even worse. His wealth slipped
by 16 percent to 190 million pounds.
Top of the list of British music millionaires was a less well-known name: Clive
Calder, who founded the Zomba record label, home to artists like Britney Spears.
He sold it seven years ago for about $3 billion.
The rich list said his current wealth is unchanged from last year at 1.3 billion
The biggest climber was Judy Craymer, the producer of hit musical "Mamma Mia!."
Her finances grew by 29 percent to 75 million pounds on the back of the
successful Hollywood adaptation of the show.
It was a bad year for troubled British soul singer Amy Winehouse whose fortune
was cut in half to 5 million pounds after releasing no new records last year.
The list of the richest 1,000 in Britain is out on Sunday.
(Reporting by Michael Holden)
Elton John, McCartney
Hit By Economic Crisis: Rich List,
Big Sky Journal
Economy Crashes the Gates
at a Montana Club for the Rich
November 30, 2008
The New York Times
By KIRK JOHNSON
BIG SKY, Mont. — Every town has its walls and gates — some visible, some not
— for keeping things out or in.
Here some of the gates are world famous. The Yellowstone Club, a cloistered and
cosseted mountain retreat for the super-rich, helped define a style and an era
with its creation in 1999.
The club had 340 members with a private ski mountain only a schuss away from $20
million vacation homes. It was the corner office and the executive suite of
gated communities all in one — an exemplar of exclusivity.
But the sense of refuge was an illusion. The global financial crises have
stormed even these gilded confines: This month, the Yellowstone Club filed for
“The economy caught up with them,” said L. C. Sammons, a retired physician from
Memphis who lives in Big Sky just down the road from the club.
Other corners of the resort-economy West are taking punches. The Tamarack Resort
in Idaho, which opened in 2004 north of Boise, is operating in receivership
after the owners defaulted on a $250 million loan. Home construction has halted
but the ski area is scheduled to open on Dec. 12. In Utah, the Promontory Club,
a 7,224-acre ski and golf development near Park City, declared bankruptcy in
March when the company defaulted on a $275 million loan.
Here in Big Sky, the Yellowstone Club’s troubles have been complicated by
domestic entanglement. Tim Blixseth, the club’s founder, and his wife, Edra,
divorced this year, putting the club in her control. Ms. Blixseth then filed for
Chapter 11 bankruptcy protection, citing the club’s inability to restructure
$399 million in debt.
“The freeze on the credit market put them in a bad place,” said Bill Keegan, a
spokesman for the club. “They need to restructure their debt, and they realized
it wouldn’t happen for the opening.”
To open for the season, Ms. Blixseth asked for an expedited hearing to raise
cash, and Judge Ralph B. Kirscher of United States Bankruptcy Court signed an
order in mid-November allowing Credit Suisse to lend the club $4.5 million to
pay its debtors.
Montana has a history as a sometimes brutal exurb of capitalism, with tensions
between rich and poor and labor and capital a theme since the 1800s. Over the
last decade, people with Yellowstone Club-size wallets bought vast swaths of
land, spurring the leisure economy at the same time that wage stagnation —
Montana sank to 39th in the nation in median family income, according to the
most recent Census figures — took hold of much of the rest of the state’s
Some residents, in interviews here and in Bozeman, an hour north of Big Sky,
said they were not particularly upset about the club’s plight, given its
excesses and presumptions.
But most people also know someone whose fortunes are tied to the financial
engines that made this corner of Montana’s economy go in recent years — wealth,
vacation housing and tourism.
“It’s kind of like a double-edged sword for a lot of people around here,” said
Greg Thomas, a 31-year-old construction worker from Bozeman. “It’s pretty
grotesque and ridiculous, but at the same time, a lot of people depend on going
up there for jobs.”
Bill Hopkins was more to the point.
“I can kind of gloat on one hand, but I’m not really happy about it,” said Mr.
Hopkins, 51, who works at Yellowstone National Park, just south of here,
coordinating volunteer trail maintenance crews. Mr. Hopkins said he disliked the
club’s environmental footprint — 13,500 acres of formerly pristine open-space
backcountry, now sealed off and built on.
“The damage has been done, as far as development there,” he said, “so as long as
it’s developed, I’d just as soon see it operational.”
The reaction to the club’s problems in Big Sky, population 2,500, has been
filtered through an economic slowdown that was already well under way.
Mark Robin, owner of the Hungry Moose Deli, said the river of headlights that
used to greet him at 6 a.m. each day when he opened the shop — cars and trucks
full of construction and maintenance-crew commuters driving down from Bozeman,
eager for coffee and breakfast — had already slowed to a trickle as housing
construction slumped outside the club.
And the credit crisis had already struck home as well, at a Big Sky ski resort
open to the public called Moonlight Basin, which received its financing from
Lehman Brothers before it collapsed. Moonlight laid off much of its workforce
this fall, then renegotiated its debt, rehired its workers and is planning to
open for the season in December.
Residents of Big Sky say everybody knows how hard the day-to-day struggle can be
in rural Montana. Scrambling and getting by is just part of the landscape in a
seasonal economy, said Marne Hayes, the executive director of the Big Sky
Chamber of Commerce.
“People work really hard to stay here, and it’s not always an easy thing to do,”
said Ms. Hayes, who came here from Pennsylvania in the early 1990s and took odd
jobs for years to make ends meet. As for economic cycles, she added, “people who
live and work here never thought they were immune.”
Some of the Yellowstone Club’s members, who paid $18,000 in annual dues for
years, on top of their $250,000 deposit to join, are not quite so understanding.
About 120 of them filed a brief in bankruptcy court asking what became of all
the fat checks.
“That money seems to be gone,” the brief states, “and members want to know why.”
Jim Robbins contributed reporting from Helena, Mont.
Economy Crashes the
Gates at a Montana Club for the Rich,
Despite Tough Times,
Ultrarich Keep Spending
April 14, 2008
The New York Times
By CHRISTINE HAUGHNEY
and ERIC KONIGSBERG
Who said anything about a recession? Sometime between the government bailout
of Bear Stearns and the Bureau of Labor Statistics report that America lost
80,000 jobs in March, Lee Tachman spent roughly $50,000 last month on a four-day
jaunt to Miami for himself and three close friends.
The trip was an exercise in luxuriant male bonding. Mr. Tachman, who is 38, and
his friends got around by private jet, helicopter, Hummer limousine, Ferraris
and Lamborghinis; stayed in V.I.P. rooms at Casa Casuarina, the South Beach
hotel that was formerly Gianni Versace’s mansion; and played “extreme adventure
paintball” with former agents of the federal Drug Enforcement Administration.
Mr. Tachman, a manager for a company that executes trades for hedge funds and
the owner of “a handful” of buildings in New York, said he has not felt the need
to cut back.
“I always feel like there’s a sword of Damocles over my head, like it could all
come crashing down at any time,” he said. “But there’s always going to be people
who are trading, and there’s always going to be a demand for real estate in New
He is hardly alone in his eagerness to keep spending. Some businesses that cater
to the superrich report that clients — many of them traders and private equity
investors whose work is tied to Wall Street — are still splurging on
multimillion-dollar Manhattan apartments, custom-built yachts, contemporary art
and lavish parties.
Buyers this year have already closed on 71 Manhattan apartments that each cost
more than $10 million, compared with 17 apartments in that price range during
all of 2007. Last week, a New York art dealer paid a record $1.6 million for an
Edward Weston photograph at Sotheby’s. And the GoldBar, a downtown lounge,
reports that bankers continue to order $3,000 bottles of Rémy Martin Louis XIII
“When times get tough, the smart spend money,” said David Monn, an event planner
who is organizing a black-tie party on May 10 for dignitaries and recent
purchasers of apartments at the Plaza Hotel; the average price there was $7
million. “Short of our country going on food stamps, I don’t think we’re doing
Some extreme spenders say they have not cut back on their impulse Bentley or
apartment purchases because they have made so much money in the good times from
the Internet, stock market and real estate. Some have been able to move their
money into investments like private equity that are available only to those with
extensive capital. Some rationalize cars and home renovations as “investments.”
And some simply don’t want to skimp on the weddings and anniversary parties that
they see as milestone events.
“We’re trying to spend on what we feel is important,” said Victor Self, an
executive with a fitness company who, with his partner, is planning to spend
$100,000 on a commitment ceremony on St. Barts and a dessert party for 200 to
300 guests at Jeffrey, a clothing store in the meatpacking district.
Many economists warn that the nation’s financial troubles may spread far more
widely, and could ultimately touch even the wealthiest. The financial sector
could lose as many as 20,000 jobs in New York City by the end of 2009, according
to the city’s Independent Budget Office. And at a March 18 policy meeting,
Federal Reserve Board members raised the possibility of a “prolonged and severe
economic downturn,” recently released minutes show. That threat has undoubtedly
caused some affluent people to consider some degree of frugality.
But that still leaves plenty who are consuming away, and one of the things New
Yorkers love to consume is real estate. In October, Marc Sperling, the
36-year-old president of an equity-trading company, bought a new condo on the
Upper West Side in a building where four-bedroom apartments like his cost more
than $4 million. When he moves into the completed building next year, he plans
to hold on to his other two apartments in Murray Hill and Miami Beach — each of
which he values at about $2.5 million.
Mr. Sperling views the nation’s economic slump as a temporary problem, and is
grateful that it has yet to affect him. “I think if you have the means to ride
it out, that’s what you do,” he said.
His view of the subprime mortgage crisis seemed to reflect a sort of inverse
“I don’t want to sound harsh, but the people who were buying million-dollar
houses with a combined household income of $70,000 or $80,000 were the ones who
were chasing easy money,” he said.
Days before the collapse of Bear Stearns, the bank’s chairman, James E. Cayne,
paid $25 million for a 14th-floor condo at the Plaza Hotel.
He, too, is invited to the May 10 party at the Plaza. It will feature a dozen
female string musicians made up to look like statues and clothed in dresses of
fresh flowers, like roses and gardenias. There will be caviar and Cognac bars,
as well as a buffet designed to visually replicate 17th-century Dutch paintings
from the recent Metropolitan Museum of Art exhibit, “The Age of Rembrandt.”
Even high-end rentals are going fast. In just the three weeks since it arrived
on the market, a four-bedroom apartment at 15 Central Park West, advertised for
$55,000 a month, has gone to contract. The broker, Roberta Golubock with
Sotheby’s International Realty, said she showed the apartment to eight
financially qualified prospects.
Some New Yorkers defend their spending as investments or gifts to themselves. In
August, Karen Borkowsky and Robert Kennedy, a partner in a law firm, were
married at the Rainbow Room. The reception, which the event planner, Shawn
Rabideau, lavished with glass and calla lilies, cost $150,000 to $200,000. But
when Ms. Kennedy considered that she had survived breast cancer and, at age 41,
married a guy she had dated in high school, the wedding’s cost seemed less
exorbitant. Then, shortly after returning from their honeymoon, the couple
started a $400,000 project to combine and restore two apartments into a
three-bedroom, three-bath co-op on the Upper West Side. “We are investing in the
longevity of the apartment,” she said.
There are also some people who say they have not been hurt because they have
poured so much money into opportunities not available to the Main Street
investor. Paul Parmar, a 37-year-old investor in companies specializing in
health care, defense, media, luxury items and private aviation, says he is
living just as large as ever.
In recent months, Mr. Parmar, who lives in Colts Neck, N.J., said he bought 140
acres in Mineola, Tex., and is spending $20 million to begin building a refuge
there for abused tigers. Since January, he said he added to his car collection
with a $110,000 BMW 750 Li (for his girlfriend) and a Bentley Arnage for
himself, for about $300,000. He is leasing a Maybach through Luxautica, an
“ultimate car club” that has annual fees of about $125,000.
“On a spending level,” Mr. Parmar said, speaking about a possible recession, “it
doesn’t affect me at all.” That said, providers of luxury goods reported
anecdotal evidence of a widening gap between the merely rich and the ultrarich.
Clifford Greenhouse, who owns a household-staff employment company, said he
suspects that the merely rich might be starting to lag behind their far richer
counterparts, and are trimming their budgets. He cited reduced demand for
chauffeurs — a relatively small-ticket service — yet ever-strong demand for
private chefs, butlers and “household managers.”
Darren Sukenik, a real estate broker with Prudential Douglas Elliman, said that
while business may be slower for clients with a mere million to spend on
apartments, none of his clients with budgets of more than $2.5 million have
stopped shopping. Seth Semilof, the publisher of Haute Living, a luxury
magazine, said that luxury car dealerships that advertise with him are pushing
Bentleys and Rolls-Royces at the expense of less-extravagant cars like the BMW 5
“If you look at the $20 million-plus market, it’s still strong as ever,” Mr.
Semilof said. Some of the ultrarich are still willing to pay above sticker price
for things they want badly enough. Mr. Semilof helped three buyers in the past
two months acquire Rolls-Royce Phantom convertibles for as much as $200,000
above the asking price of $465,000.
And Eric Lepeingle, a yacht salesman for the Rodriguez Group, said that since
January, three New Yorkers bought yachts worth $8 million to $35 million.
Although the weak dollar does give some pause to buyers considering
Italian-built yachts, Mr. Lepeingle said, they eventually give in. “They want
the product anyway,” he said.
All sorts of products, actually.
“They want their Jeroboam, or Methuselah, or Nebuchadnezzar,” said Ronnie Madra,
referring to the sizes of Champagne bottles served at 1OAK, a lounge on West
17th Street where he is a part-owner. A Nebuchadnezzar, weighing in at 15
liters, costs up to $35,000.
There would be no Nebuchadnezzar for Mr. Tachman and his friends in Miami, but
they soldiered on until the moment the wheels of their private jet returned to
the tarmac in New York.
There were hand-rolled cigars, massages, guided rides in racing boats and
fighter jets — all arranged by In The Know Experiences, a travel and concierge
service in Manhattan.
“It was just all out — it was insane,” said Mr. Tachman. “I’m not afraid to
spend money like that.”
Sharon Otterman contributed reporting.
Despite Tough Times,
Ultrarich Keep Spending, NYT, 14.4.2008,
Place on the Rich List
Just Isn’t Enough
The New York Times
By GARY RIVLIN
LAS VEGAS —
Sheldon G. Adelson, the casino mogul, has seen his personal net worth plummet by
more than $15 billion in recent months as Wall Street investors have grown more
bearish about the casino companies that are pushing aggressively into Asia.
That slide might put a crimp in his stated goal of surpassing Bill Gates and
Warren E. Buffett, the only two titans ahead of him on Forbes’ most recent list
of the country’s richest people. But a few miserable months on the financial
front are not likely to have much of an impact on him — or the charities and
various conservative political causes he supports.
Mr. Adelson, 74, still holds $19 billion worth of stock in the Las Vegas Sands,
which operates the Venetian here and also a pair of giant casinos in Macao, the
Chinese territory near Hong Kong that has surpassed the Las Vegas Strip as the
world’s top gambling market.
On Thursday, the Venetian formally opens its new Palazzo tower. At 7,200 rooms,
the expanded Venetian is the world’s largest hotel.
Few Americans have made as much money in China as Mr. Adelson, and he is a major
donor to the Republican Party. Yet Mr. Adelson may well be the richest American
that most people have never heard of. One explanation for his relative anonymity
is that he is a newcomer to the highest altitudes of the fabulously wealthy.
The Las Vegas Sands went public in December 2004, and over the next two years
his net worth soared by $17.5 billion. That works out to almost $1 million an
hour, weekends, holidays and nights included. “He got richer faster than anyone
else in history,” said Peter W. Bernstein, co-author of “All the Money in the
World,” a book about the people on the Forbes 400 list.
Certainly people in Las Vegas know Mr. Adelson, a querulous figure who has
existed in a near-constant state of embattlement since building the Venetian in
the late 1990s. He filed claims and counterclaims against scores of contractors
who worked on that project, and over the years he has started legal fights with
the local A.C.L.U., the Culinary Workers, the Las Vegas Convention and Visitors
Authority and even the power company, which he thought should pay the cost of
removing utility poles from the Venetian site.
“Sheldon is a brilliant businessman, but he can be enormously difficult,” said
Gary Loveman, chief executive of Harrah’s, the Las Vegas-based casino giant.
“When he has a strong point of view, he pursues it very stridently.”
“He’s very tough,” Mr. Loveman added. “Some would say unreasonably tough.”
Mr. Adelson declined to comment for this article, despite repeated requests. But
longtime friends and associates said his hard exterior was rooted in his days
growing up in a rough-and-tumble section of Boston, where his father drove a
“Rich in our neighborhood then was having $3 in your pocket,” said Irwin
Chafetz, a Sands board member and former business partner who has known Mr.
Adelson since grade school. Today Mr. Chafetz’s childhood friend owns homes in
Las Vegas, Malibu, Boston and Tel Aviv, and keeps several jets, including a
Boeing 767, a 747 and a 737.
Mr. Adelson started a business selling toiletry kits to motels, tried his hand
at the mortgage broker business, and in the 1960s he joined Mr. Chafetz and
another friend from the old neighborhood, Ted Cutler, in a charter tours
But it was not until he founded Comdex, the premier computer trade show through
much of the 1980s and 1990s, that he hit on an idea that propelled him into the
upper reaches of the wealthy.
To this day, Mr. Cutler is not sure if his longtime friend even knows how to use
a computer (“we always had people working for us who understood them”). But then
a passion for technology was not what spurred Mr. Adelson, a college dropout
then in his mid-40s, to create this yearly festival for technology buffs held
every November in Las Vegas.
Rather, friends and former work associates said, he was enthralled by the idea
of renting convention space for 25 cents a square foot and selling it to vendors
for $25 or more. Mr. Adelson’s timing on Comdex could not have been better — yet
he seemed to feel more pressure, not less, according to former colleagues.
“His yelling was legendary,” said Peter B. Young, a public relations man who
worked Mr. Adelson for the 17 years he ran Comdex. Sometimes Mr. Adelson turned
his fury on a particular person, Mr. Young said, but often it was just “generic
yelling” that seemed his boss’s preferred way of passing along routine marching
“To work with Sheldon you need to have a coat of Teflon,” said Jason Chudnofsky,
chief executive of Comdex under Mr. Adelson from 1987 to 1995.
It helped that his demanding and exacting boss was helping to make him rich, Mr.
Chudnofsky said — and that his rants seemed largely about his own larger
“Sheldon wanted to be richer than Bill Gates,” he said. “He always wanted to be
To accommodate their growing trade business, Mr. Adelson and his partners — Mr.
Chafetz, Mr. Cutler and Jordan Shapiro, an optometrist from the old neighborhood
(“the boys,” as they were often called internally) — bought the aging Sands
Hotel and Casino from the financier Kirk Kerkorian for $128 million.
“The Sands had enough land to build a convention center,” Mr. Chafetz said.
“That’s why we got into the casino business.” When it was completed, at the
start of the 1990s, the Sands Expo and Convention Center stood as the largest
privately owned exhibition center in the country.
In 1995, Mr. Adelson sold Comdex to Softbank of Japan for $862 million – giving
him a personal payoff of just over $500 million. He and his partners were all in
their 60s, but where the three other ‘‘boys” chose to semi-retire, Mr. Adelson
made even bigger bets.
He demolished the Sands in a spectacular implosion (replete with an anticipatory
fireworks show), borrowed hundreds of millions of dollars and in its place built
the Venetian, which cost $1.5 billion and opened in 1999.
With the Venetian, Mr. Adelson broke the basic rules of casino design by
building a facility that was geared toward conventions rather than centered on
the casino. Where the old way was to motivate guests to spend time on the casino
floor by offering few amenities in the room, the Venetian parted from Las Vegas
tradition, installing mini-bars and fax machines in each guest room
His plans were met with skepticism, if not scorn. But the Venetian is now the
Strip’s second most profitable casino hotel, behind only the Bellagio, said
Robert A. LaFleur, an industry analyst with the Susquehanna Financial Group, and
that is with only a third of its revenue coming from its gambling floor.
“He’s shown people in Las Vegas that there’s a different way to do things,” said
Mike Sloan, a retired casino executive who now consults for the MGM Mirage and
other gambling concerns.
Yet despite the influential role he played in establishing Las Vegas as a top
convention destination, he is better known locally for his quarrels and legal
battles. To cite but one of a long list of examples: his attempts to bar members
of the Culinary Workers from picketing on the sidewalk in front of the Venetian,
a case he pursued all the way to the United States Supreme Court (he lost). The
Venetian is the only major Las Vegas casino that is nonunion.
Then there is his long-running feud with Stephen A. Wynn, who built the Mirage
and Bellagio, among other large Strip properties. The two tycoons have fought
over everything from the noises emitted by the artificial volcano in front of
the Mirage to the size of the Venetian’s parking garage.
“Sheldon is a man who harbors a lot of animosity toward a lot of people,” Mr.
Wynn said. “And when Sheldon is angry, he gets nasty.”
The two are at it once again, this time in Macao — and so far, a stock market
correction notwithstanding, Mr. Adelson is beating his longtime foe. He already
runs two resorts in Macao (one has a casino three times the size of Las Vegas’s
biggest gambling floor), and his company, the Las Vegas Sands, is in the midst
of spending another $7 billion to $9 billion building an additional 13 hotels
there. The Sands is also spending another $3.6 billion on a casino hotel in
Mr. Wynn who is less bullish on Macao’s short-term prospects than Mr. Adelson,
operates a single property in Macao.
“So much of their value is on the come, as they say in the gambling business,”
said Mr. LaFleur, the analyst, explaining the inflated price of Sands stock
relative to Wynn Resorts and other competitors.
Mr. Adelson has five children from two marriages. He has given tens of millions
of dollars to charitable causes, most of them Jewish-related, and has talked
about donating billions more to foster medical research.
Last January he gave $1 million to American Solutions for Winning the Future,
former House Speaker Newt Gingrich’s political group, and more recently he
helped finance Freedom’s Watch, a conservative response to MoveOn.org.
Yet Mr. Adelson is hardly slowing down to enjoy other aspects of life. He is
looking past Asia, already talking about replicating his Macao strategy and
creating a mini-Las Vegas somewhere in Europe.
“I work for a guy who’s obsessed,” said Robert G. Goldstein, one of a troika of
top executives who have been with Mr. Adelson since 1995. Every time the Sands
reaches another milestone, Mr. Goldstein said, his boss establishes a new,
“He has more money than he can ever spend but he has to grow it bigger,” he
When 3rd Place on the Rich List Just Isn’t Enough, NYT,
Gap between rich and poor
'widest in 40 years'
Published: 17 July 2007
Briton is becoming a segregated society with the gap between rich and poor
reaching its highest level for more than 40 years, a report showed today.
During the past 15 years there has been an increase in the number of households
living below the poverty line, with these households accounting for more than
half of all families in areas of some cities, according to the Joseph Rowntree
At the same time, households in already wealthy areas have tended to become
disproportionately wealthier, with many rich people now living in areas
segregated from the rest of society.
The group said the widening gap between rich and poor had led to a fall in the
number of average households, which were classed as being neither rich nor poor,
with these families gradually disappearing from London and the South East.
Since 1970 levels of poverty and wealth in different areas of Britain have
changed significantly, with the country now moving back towards levels of
inequality last seen more than 40 years ago.
While the number of people who are living in extreme poverty has fallen, the
number of people living below the poverty line has increased, with more than one
in four households classed as being so-called breadline poor in 2001.
At the same time the number of asset wealthy households rose dramatically
between 1999 and 2003 with more than a fifth of families now falling into this
But the proportion of average households fell from around two-thirds of families
in 1980 to just over half by 2000.
The group, which drew up a poverty and wealth map for Britain, said there was
evidence of increasing polarisation, with rich and poor now living further
It said urban clustering of poverty had increased, while wealthy households were
becoming concentrated in the outskirts and surrounds of major cities.
The report said: "Poor, rich and average households became less and less likely
to live next door to one another between 1970 and 2000.
"As both the poor and wealthy households have become more and more clustered in
different areas, so the spatial concentration of average households has also
A second report by the group, also published today, said the public thought the
gap between rich and poor was too large.
It found that during the past 20 years, a "large and enduring" majority of
people felt this way.
But it added that people were more likely to think those on higher incomes were
being overpaid, than to think those on low incomes were being underpaid.
The research also found while people thought the gap between rich and poor was
too great, there was no clear consensus on how the issue of inequality should be
Author of the report Michael Orton said: "There is evidence that a high level of
inequality may cause real socio-economic problems.
"There is widespread acceptance that some occupations should be paid more than
others: but the gap between high and low paid occupations is far greater than
people think it should be."
Minister for Employment and Welfare Reform Caroline Flint said: "Our commitment
to ensuring everyone shares the nation's increasing wealth has resulted in the
rising trend of inequality recently stabilising.
"Since 1997, 600,000 children and over one million pensioners have been lifted
out of poverty. Thanks to reforms of the tax and benefits system, the average
household is £1,000 better off than 10 years ago.
"The investment of £20 billion to regenerate cities, towns and neighbourhoods
will help previously excluded areas to bridge the gap between themselves and the
rest of the country."
Liberal Democrat spokesman David Laws said: "This report shows that Britain is
becoming a more polarised society with growing inequality of wealth, geographic
concentrations of deprivation, and falling social mobility.
"Britain is a meritocracy, but one in which the chances of acquiring merit are
diminishing for as much as a quarter of the population.
"This left out 25% is in danger of feeling totally marginalised from mainstream
society, which will breed high levels of disillusionment, crime and exclusion.
"The Government needs to tackle the causes of these massive inequalities by
improving education, making the housing market work, and getting millions of
people trapped on benefit back into employment."
Shadow home secretary David Davis, who is chairing the Tories' social mobility
taskforce, said: "When it comes to opportunities for the least well off, our
society is flatlining.
"Not only is this a loss of opportunity for young people and a tragedy for
families and individuals trapped at the bottom of the pile - it is also a
massive loss of talent and creativity for our nation.
"Britain's decline in social mobility has been accompanied by a fall in her
economic competitiveness; this is no coincidence.
"This is why my recently established taskforce will examine what is blocking the
different routes to wealth and wider success and set out proposals as to how
they can be overcome."
Gap between rich and poor 'widest in 40 years', I, 17.7.2007,
Super-rich treble wealth
in last 10 years
April 29, 2007
From The Sunday Times
THE WEALTH of the richest 1,000 people in Britain has more than trebled in
the decade since Tony Blair came to power promising greater fairness, according
to The Sunday Times Rich List, published today.
The 260% rise in the wealth of Britain’s richest contrasts with a 120% average
wealth increase for the population as a whole. Britons have benefited from the
booming housing market but, unlike the super-rich, have done less well with
their financial investments.
As the prime minister prepares to leave Downing Street, one legacy is a nation
that has become a haven for the international super-rich. The number of
billionaires living in Britain has surged to 68, up from 54 last year. About a
third are from overseas and only three of the wealthiest 10 billionaires were
The richest are Lakshmi Mittal, the Indian-born steel magnate now worth £19.25
billion, and Roman Abramovich, the Russian oil tycoon valued at £10.8 billion.
“They have come for the tax, the social circles and the security,” said Philip
Beresford, the compiler of the list. “At first they were concentrated in London
but now they are snapping up country estates.”
Complex rules on residency and domicile status mean the super-rich from overseas
can, as one accountancy expert put it, “avoid paying virtually any tax in
Britain apart from council tax”. Beresford added: “There’s the cluster effect.
Russians have followed Abramovich, Indians are following the Mittals and Swedes
are following the Rausings.”
The richest Briton is the Duke of Westminster, whose property holdings keep
rising in value.
He is worth £7 billion. Next come Sir Philip and Lady Green, owners of Bhs,
Topshop and other retail chains, who are worth £4.9 billion. They are based in
More than half of the buyers of homes in the capital costing more than £2m come
from overseas, according to Knight Frank, the estate agent. “The middle classes
used to live in Chelsea and they have already been forced out to Battersea,”
said Liam Bailey of Knight Frank. “Now the same thing is happening to the
However, many insist the mix of foreign incomers with homegrown entrepreneurial
flair has been good for Britain. Mike Warburton, a tax expert with Grant
Thornton, the accountancy firm, said: “In many ways we are a tax haven for
nationals from overseas. But there is no doubt the UK has benefited enormously.
“It has attracted talent, wealth and enterprise. It has made London the
financial centre of the world. The super-rich from overseas can quite
legitimately avoid tax — but it doesn’t mean they don’t spend.”
The most surprising entries in the top 10 are David Khalili, an Iranian Jew, and
Jim Ratcliffe, a little-known British deal maker who has built the third-largest
chemical company in the world.
Khalili, 61, is based in London but was born in Iran. After national service he
completed his education in America where he was fascinated by the great art
collections. He began buying undervalued Islamic art, Spanish metalwork and
Indian textiles. His collections may be worth £4.5 billion and with other
assets, including property, he is valued at £5.8 billion.
Khalili said that he wanted to exhibit his art to promote inter-faith
Ratcliffe has risen almost without trace to become Britain’s 10th richest
person. A former venture capitalist, he has made a £3.3 billion fortune by
snapping up undervalued chemical companies. In 1998 he was 880th in the Rich
List with a mere £20m.
His Ineos group now employs more than 15,000 people in 14 countries. Ratcliffe
guards his privacy and last week declined to answer questions about his own
life. “He’s a very personal man,” said a spokesman.
Super-rich treble wealth
in last 10 years, STs, 29.4.2007,
Philanthropy hits record
as number of $100 million donations
11:14 PM ET
By Martha T. Moore
As the rich get richer, they get more generous. Much more generous.
The number of individual donations of $100 million or more hit a record in
2006, according to The Chronicle of Philanthropy, which compiles a yearly list
of the biggest givers Last year, there were 21 donations of $100 million or more
by individuals to universities, hospitals and charities, compared with 11 in
The biggest gift by far was Warren Buffett's pledge to donate stock in his
investment firm Berkshire Hathaway, now worth $43.5 billion, to several groups,
including the Bill and Melinda Gates Foundation. Even without this huge
donation, the philanthropy of the country's 60 most generous givers hit a record
$7 billion in 2006, up from $4.3 billion the year before.
The reason for the increase in mega-gifts is simple: There are more people
with deep pockets.
"It's a sign that wealth is growing and people are just raising their sights in
terms of philanthropy," says Stacy Palmer, editor of The Chronicle.
Universities and other fundraising institutions ask for more and larger
contributions, too. Stanford University, for example, is in the midst of a $4
billion campaign, the largest ever for a university.
Among those swimming in the deep end of the donor pool: Nike co-founder Phil
Knight, who gave $105 million to Stanford's business school; David Rockefeller,
who gave away $225 million, mostly to the Rockefeller family foundation; oilman
T. Boone Pickens, who gave away $172 million, including $160 million to set up
his own foundation; and New York City Mayor Michael Bloomberg, who gave $165
million to 1,000 groups but would name only five, which combat smoking.
In addition to the amount of money available to be given away, philanthropy
experts and the givers themselves say there is a greater consciousness that
those who have should give.
"It's sort of gotten out there that it's the right thing to do to be generous,"
says Stanley Katz, Princeton University professor of public policy and a scholar
of philanthropy. "For the moment, that's more of the ethos of wealthy people."
A gift the size of Buffett's does have an influence, one of the top givers says.
"When people see substantial gifts, and they're in the same league, if they
haven't given to that level, they start to think about giving," Pickens says.
Philanthropy hits record as number of $100 million donations increase,
Very Rich Are Leaving
the Merely Rich
November 27, 2006
The New York Times
By LOUIS UCHITELLE
A decade into the practice of medicine, still
striving to become “a well regarded physician-scientist,” Robert H. Glassman
concluded that he was not making enough money. So he answered an ad in the New
England Journal of Medicine from a business consulting firm hiring doctors.
And today, after moving on to Wall Street as an adviser on medical investments,
he is a multimillionaire.
Such routes to great wealth were just opening up to physicians when Dr. Glassman
was in school, graduating from Harvard College in 1983 and Harvard Medical
School four years later. Hoping to achieve breakthroughs in curing cancer, his
specialty, he plunged into research, even dreaming of a Nobel Prize, until Wall
Street reordered his life.
Just how far he had come from a doctor’s traditional upper-middle-class
expectations struck home at the 20th reunion of his college class. By then he
was working for Merrill Lynch and soon would become a managing director of
health care investment banking.
“There were doctors at the reunion — very, very smart people,” Dr. Glassman
recalled in a recent interview. “They went to the top programs, they remained
true to their ethics and really had very pure goals. And then they went to the
20th-year reunion and saw that somebody else who was 10 times less smart was
making much more money.”
The opportunity to become abundantly rich is a recent phenomenon not only in
medicine, but in a growing number of other professions and occupations. In each
case, the great majority still earn fairly uniform six-figure incomes, usually
less than $400,000 a year, government data show. But starting in the 1990s, a
significant number began to earn much more, creating a two-tier income stratum
within such occupations.
The divide has emerged as people like Dr. Glassman, who is 45, latched onto
opportunities within their fields that offered significantly higher incomes.
Some lawyers and bankers, for example, collect much larger fees than others in
their fields for their work on business deals and cases.
Others have moved to different, higher-paying fields — from academia to Wall
Street, for example — and a growing number of entrepreneurs have seen windfalls
tied largely to expanding financial markets, which draw on capital from around
the world. The latter phenomenon has allowed, say, the owner of a small
mail-order business to sell his enterprise for tens of millions instead of the
hundreds of thousands that such a sale might have brought 15 years ago.
Three decades ago, compensation among occupations differed far less than it does
today. That growing difference is diverting people from some critical fields,
experts say. The American Bar Foundation, a research group, has found in its
surveys, for instance, that fewer law school graduates are going into
public-interest law or government jobs and filling all the openings is becoming
Something similar is happening in academia, where newly minted Ph.D.’s migrate
from teaching or research to more lucrative fields. Similarly, many business
school graduates shun careers as experts in, say, manufacturing or consumer
products for much higher pay on Wall Street.
And in medicine, where some specialties now pay far more than others, young
doctors often bypass the lower-paying fields. The Medical Group Management
Association, for example, says the nation lacks enough doctors in family
practice, where the median income last year was $161,000.
“The bigger the prize, the greater the effort that people are making to get it,”
said Edward N. Wolff, a New York University economist who studies income and
wealth. “That effort is draining people away from more useful work.”
What kind of work is most useful is a matter of opinion, of course, but there is
no doubt that a new group of the very rich have risen today far above their
merely affluent colleagues.
Turning to Philanthropy
One in every 825 households earned at least $2 million last year, nearly double
the percentage in 1989, adjusted for inflation, Mr. Wolff found in an analysis
of government data. When it comes to wealth, one in every 325 households had a
net worth of $10 million or more in 2004, the latest year for which data is
available, more than four times as many as in 1989.
As some have grown enormously rich, they are turning to philanthropy in a
competition that is well beyond the means of their less wealthy peers. “The ones
with $100 million are setting the standard for their own circles, but no longer
for me,” said Robert Frank, a Cornell University economist who described the
early stages of the phenomenon in a 1995 book, “The Winner-Take-All Society,”
which he co-authored.
Fighting AIDS and poverty in Africa are favorite causes, and so is financing
education, particularly at one’s alma mater.
“It is astonishing how many gifts of $100 million have been made in the last
year,” said Inge Reichenbach, vice president for development at Yale University,
which like other schools tracks the net worth of its alumni and assiduously
pursues the richest among them.
Dr. Glassman hopes to enter this circle someday. At 35, he was making $150,000
in 1996 (about $190,000 in today’s dollars) as a hematology-oncology specialist.
That’s when, recently married and with virtually no savings, he made the switch
that brought him to management consulting.
He won’t say just how much he earns now on Wall Street or his current net worth.
But compensation experts, among them Johnson Associates, say the annual income
of those in his position is easily in the seven figures and net worth often
rises to more than $20 million.
“He is on his way,” said Alan Johnson, managing director of the firm, speaking
of people on career tracks similar to Dr. Glassman’s. “He is destined to
Indeed, doctors have become so interested in the business side of medicine that
more than 40 medical schools have added, over the last 20 years, an optional
fifth year of schooling for those who want to earn an M.B.A. degree as well as
an M.D. Some go directly to Wall Street or into health care management without
ever practicing medicine.
“It was not our goal to create masters of the universe,” said James Aisner, a
spokesman for Harvard Business School, whose joint program with the medical
school started last year. “It was to train people to do useful work.”
Dr. Glassman still makes hospital rounds two or three days a month, usually on
free weekends. Treating patients, he said, is “a wonderful feeling.” But he sees
his present work as also a valuable aspect of medicine.
One of his tasks is to evaluate the numerous drugs that start-up companies,
particularly in biotechnology, are developing. These companies often turn to
firms like Merrill Lynch for an investment or to sponsor an initial public stock
offering. Dr. Glassman is a critical gatekeeper in this process, evaluating,
among other things, whether promising drugs live up to their claims.
What Dr. Glassman represents, along with other very rich people interviewed for
this article, is the growing number of Americans who acknowledge that they have
accumulated, or soon will, more than enough money to live comfortably, even
luxuriously, and also enough so that their children, as adults, will then be
free to pursue careers “they have a hunger for,” as Dr. Glassman put it, “and
not feel a need to do something just to pay the bills.”
In an earlier Gilded Age, Andrew Carnegie argued that talented managers who
accumulate great wealth were morally obligated to redistribute their wealth
through philanthropy. The estate tax and the progressive income tax later took
over most of that function — imposing tax rates of more than 70 percent as
recently as 1980 on incomes above a certain level.
Now, with this marginal rate at half that much and the estate tax fading in
importance, many of the new rich engage in the conspicuous consumption that
their wealth allows. Others, while certainly not stinting on comfort, are
embracing philanthropy as an alternative to a life of professional
Bill Gates and Warren Buffett are held up as models, certainly by Dr. Glassman.
“They are going to make much greater contributions by having made money and then
giving it away than most, almost all, scientists,” he said, adding that he is
drawn to philanthropy as a means of achieving a meaningful legacy.
“It has to be easier than the chance of becoming a Nobel Prize winner,” he said,
explaining his decision to give up research, “and I think that goes through the
minds of highly educated, high performing individuals.”
As Bush administration officials see it — and conservative economists often
agree — philanthropy is a better means of redistributing the nation’s wealth
than higher taxes on the rich. They argue that higher marginal tax rates would
discourage entrepreneurship and risk-taking. But some among the newly rich have
Mark M. Zandi is one. He was a founder of Economy.com, a forecasting and data
gathering service in West Chester, Pa. His net worth vaulted into eight figures
with the company’s sale last year to Moody’s Investor Service.
“Our tax policies should be redesigned through the prism that wealth is being
increasingly skewed,” Mr. Zandi said, arguing that higher taxes on the rich
could help restore a sense of fairness to the system and blunt a backlash from a
middle class that feels increasingly squeezed by the costs of health care,
higher education, and a secure retirement. The Federal Reserve’s Survey of
Consumer Finances, a principal government source of income and wealth data, does
not single out the occupations and professions generating so much wealth today.
But Forbes magazine offers a rough idea in its annual surveys of the richest
Americans, those approaching and crossing the billion dollar mark.
Some routes are of long standing. Inheritance plays a role. So do the earnings
of Wall Street investment bankers and the super incomes of sports stars and
celebrities. All of these routes swell the ranks of the very rich, as they did
But among new occupations, the winners include numerous partners in recently
formed hedge funds and private equity firms that invest or acquire companies.
Real estate developers and lawyers are more in evidence today among the very
rich. So are dot-com entrepreneurs as well as scientists who start a company to
market an invention or discovery, soon selling it for many millions. And from
corporate America come many more chief executives than in the past.
Seventy-five percent of the chief executives in a sample of 100 publicly traded
companies had a net worth in 2004 of more than $25 million mainly from stock and
options in the companies they ran, according to a study by Carola Frydman, a
finance professor at the Massachusetts Institute of Technology’s Sloan School of
Management. That was up from 31 percent for the same sample in 1989, adjusted
Chief executives were not alone among corporate executives in rising to great
wealth. There were similar or even greater increases in the percentage of
lower-ranking executives — presidents, executive vice presidents, chief
financial officers — also advancing into the $25 million-plus category.
The growing use of options as a form of pay helps to explain the sharp rise in
the number of very wealthy households. But so does the gradual dismantling of
the progressive income tax, Ms. Frydman concluded in a recent study.
“Our simulation results suggest that, had taxes been at their low 2000 level
throughout the past 60 years, chief executive compensation would have been 35
percent higher during the 1950s and 1960s,” she wrote.
Trying Not to Live Ostentatiously
Finally, the owners of a variety of ordinary businesses — a small chain of
coffee shops or temporary help agencies, for example — manage to expand these
family operations with the help of venture capital and private equity firms,
eventually selling them or taking them public in a marketplace that rewards them
with huge sums.
John J. Moon, a managing director of Metalmark Capital, a private equity firm,
explains how this process works.
“Let’s say we buy a small pizza parlor chain from an entrepreneur for $10
million,” said Mr. Moon, who at 39, is already among the very rich. “We make it
more efficient, we build it from 10 stores to 100 and we sell it to Domino’s for
As a result, not only the entrepreneur gets rich; so do Mr. Moon and his
colleagues, who make money from putting together such deals and from managing
the money they raise from wealthy investors who provide much of the capital.
By his own account, Mr. Moon, like Dr. Glassman, came reluctantly to the
accumulation of wealth. Having earned a Ph.D. in business economics from Harvard
in 1994, he set out to be a professor of finance, landing a job at Dartmouth’s
Tuck Graduate School of Business, with a starting salary in the low six figures.
To this day, teaching tugs at Mr. Moon, whose parents immigrated to the United
States from South Korea. He steals enough time from Metalmark Capital to teach
one course in finance each semester at Columbia University’s business school.
“If Wall Street was not there as an alternative,” Mr. Moon said, “I would have
gone into academia.”
Academia, of course, turned out to be no match for the job offers that came Mr.
Moon’s way from several Wall Street firms. He joined Goldman Sachs, moved on to
Morgan Stanley’s private equity operation in 1998 and stayed on when the unit
separated from Morgan Stanley in 2004 and became Metalmark Capital.
As his income and net worth grew, the Harvard alumni association made contact
and he started to give money, not just to Harvard, but to various causes. His
growing charitable activities have brought him a leadership role in Harvard
alumni activities, including a seat on the graduate school alumni council.
Still, Mr. Moon tries to live unostentatiously. “The trick is not to want more
as your income and wealth grow,” he said. “You fly coach and then you fly first
class and then it is fractional ownership of a jet and then owning a jet. I
still struggle with first class. My partners make fun of me.”
His reluctance to show his wealth has a basis in his religion. “My wife and I
are committed Presbyterians,” he said. “I would like to think that my faith
informs my career decisions even more than financial considerations. That is not
always easy because money is not unimportant.”
It has a momentum of its own. Mr. Moon and his wife, Hee-Jung, who gave up law
to raise their two sons, are renovating a newly purchased Park Avenue co-op. “On
an absolute scale it is lavish,” he said, “but on a relative scale, relative to
my peers, it is small.”
Behavior is gradually changing in the Glassman household, too. Not that the
doctor and his wife, Denise, 41, seem to crave change. Nothing in his
off-the-rack suits, or the cafes and nondescript restaurants that he prefers for
interviews, or the family’s comparatively modest four-bedroom home in suburban
Short Hills, N.J., or their two cars (an Acura S.U.V. and a Honda Accord)
suggests that wealth has altered the way the family lives.
But it is opening up “choices,” as Mrs. Glassman put it. They enjoy annual ski
vacations in Utah now. The Glassmans are shopping for a larger house — not as
large as the family could afford, Mrs. Glassman said, but large enough to
accommodate a wood-paneled study where her husband could put all his books and
his diplomas and “feel that it is his own.” Right now, a glassed-in porch,
without book shelves, serves as a workplace for both of them.
Starting out, Dr. Glassman’s $150,000 a year was a bit less than that of his
wife, then a marketing executive with an M.B.A. from Northwestern. Their plan
was for her to stop working once they had children. To build up their income,
she encouraged him to set up or join a medical practice to treat patients. Dr.
Glassman initially balked, but he was coming to realize that his devotion to
research would not necessarily deliver a big scientific payoff.
“I wasn’t sure that I was willing to take the risk of spending many years
applying for grants and working long hours for the very slim chance of winning
at the roulette table and making a significant contribution to the scientific
literature,” he said.
In this mood, he was drawn to the ad that McKinsey & Company, the giant
consulting firm, had placed in the New England Journal of Medicine. McKinsey was
increasingly working among biomedical and pharmaceutical companies and it needed
more physicians on staff as consultants. Dr. Glassman, absorbed in the world of
medicine, did not know what McKinsey was. His wife enlightened him. “The way she
explained it, McKinsey was like a Massachusetts General Hospital for M.B.A.’s,”
he said. “It was really prestigious, which I liked, and I heard that it was very
He soon joined as a consultant, earning a starting salary that was roughly the
same as he was earning as a researcher — and soon $100,000 more. He stayed four
years, traveling constantly and during that time the family made the move to
Short Hills from rented quarters in Manhattan.
Dr. Glassman migrated to Merrill Lynch in 2001, first in private equity, which
he found to be more at the forefront of innovation than consulting at McKinsey,
and then gradually to investment banking, going full time there in 2004.
Linking Security to Income
Casey McCullar hopes to follow a similar circuit. Now 29, he joined the Marconi
Corporation, a big telecommunications company, in 1999 right out of the
University of Texas in Dallas, his hometown. Over the next six years he worked
up to project manager at $42,000 a year, becoming quite skilled in electronic
A trip to India for his company introduced him to the wonders of outsourcing and
the money he might make as an entrepreneur facilitating the process. As a first
step, he applied to the Tuck business school at Dartmouth, got in and quit his
Texas job, despite his mother’s concern that he was giving up future promotions
and very good health insurance, particularly Marconi’s dental plan.
His life at Tuck soon sent him in still another direction. When he graduates
next June he will probably go to work for Mercer Management Consulting, he says.
Mercer recruited him at a starting salary of $150,000, including bonus. “If you
had told me a couple of years ago that I would be making three times my Marconi
salary, I would not have believed you,” Mr. McCullar said.
Nearly 70 percent of Tuck’s graduates go directly to consulting firms or Wall
Street investment houses. He may pursue finance later, Mr. McCullar says, always
keeping in mind an entrepreneurial venture that could really leverage his
“When my mom talks of Marconi’s dental plan and a safe retirement,” he said,
“she really means lifestyle security based on job security.”
But “for my generation,” Mr. McCullar said, “lifestyle security comes from
financial independence. I’m doing what I want to do and it just so happens that
is where the money is.”
Rich Are Leaving the Merely Rich Behind, NYT, 27.11.2006,
Wealth gap swallows up
Posted 11/24/2006 1:32 AM ET
By Noelle Knox
NAPLES, Fla. — In the luxurious neighborhood
of Port Royal, home to the likes of mystery writer Janet Evanovich and mutual
fund magnate John Donahue, homeowners are insulated from many of life's daily
cares — including the real estate slump. This year, 15 estates in the country
club community have sold for $5 million to $16 million. But in the rest of
Collier County, home sales have plunged a gut-wrenching 50%.
Elsewhere across the USA, the megarich are
still snapping up homes in such enclaves as Vail, Colo., and Beverly Hills, and
often paying cash. Sales of homes above $5 million are up 11% this year and are
on track to break another record, according to an analysis by DataQuick
Information Systems for USA TODAY. As for the national average, by contrast,
sales are off about 8%. Prices fell in September for a second-consecutive month,
partly because they'd soared beyond the reach of many.
The divergent housing trends are a sign of how a widening wealth gap is
reshaping U.S. neighborhoods. In Naples, as in other areas, the consequences of
the growing divide between rich and working class are increasingly visible.
Residents here face "Not in My Backyard" resistance to affordable housing, so
workers live in distant suburbs and towns, roads are jammed, and labor shortages
unsettle the economy.
In Naples, about 130 homes over $5 million are for sale. That's more homes than
the county will let Habitat for Humanity build this year.
"There's the rich, and then there's everything else, in terms of the economy but
also in terms of social class," says Edward Wolff, a New York University
professor and expert on the wealth gap. He likens it to the social divisions of
the 1890s, adding: "If you don't counteract the extreme inequality trends, I see
some social upheaval coming. That's my worst fear."
The disparity in wealth could draw the scrutiny of the new Congress, now led by
Democrats. Rep. Barney Frank, D-Mass., who will head the House Financial
Services Committee, has said that addressing affordable housing is a top
Residents in Naples will tell you there's little friction between the haves and
have-nots. But if you want to draw 500 people to a public meeting, just put
affordable housing on the agenda, says Cormac Giblin, manager of the county's
housing and grants office.
Bill Earls, a real estate broker who lives in Port Royal, knows the area needs
affordable housing but says, "In the real high-end part of Naples, we don't want
to see those 10,000 rooftops going in. We don't want to see our streets clogged.
... I don't want to see the Chevy Spectrums and Ford Focuses on our highways. I
know we need them, but there's got to be a balance."
That attitude is not lost on Ezequiel Quiroz, a 27-year-old tow truck driver.
Quiroz works six days a week to keep up with his mortgage in the working-class
neighborhood of Golden Gate, 35 miles from the chic section of Naples.
'They make you feel like you're nothing'
Asked if he's frustrated by the growing gap between rich and poor, he says: "No,
but sometimes it bothers me that a lot of rich people look at you like you're
nothing because you're not driving a BMW or expensive car. They make you feel
like you're nothing."
He's not the only one who feels shunned.
"Unfortunately, (rich residents) don't want people like me, a working-class
person, living in their backyard," says Brian Settle, who works for NCH health
care System, which runs the two hospitals in Naples. "They don't want
firefighters, teachers. I don't understand that, because we are the
Settle says more than two dozen people have turned down jobs at the hospitals in
the past year because they couldn't afford to live in the area, and 140
employees have moved out of the area.
The company rents 200 apartments for the nurses who work between October and
May, when the population of Naples swells by nearly 50% with the addition of
"snowbirds," who live up North in summer.
"Naples is a beautiful place," Settle says, "but we have to provide
reasonable-priced workforce housing, or the infrastructure of our community will
The state of Florida estimates that Collier County, which includes Naples, has a
shortage of at least 35,000 affordable homes. That's the estimated number of
residents who spend 30% or more of their income on housing. It doesn't include
the thousands who commute from the surrounding counties because they can't
afford to live in Naples.
The lack of affordable housing in Naples has been magnified by growth —
population has doubled in the past 15 years, to about 300,000 — and the real
estate boom. Investors and vacation-home buyers helped drive up the median home
price to $446,900, second-highest in Florida after the Keys. Though prices are
falling a little, they're still too high for most people in the area. More than
80% of the workforce is employed in the four lowest-paying industries:
construction, retail, agriculture and services (pool cleaners, for instance, and
golf instructors). Median income for a family of four: $66,100. That would
qualify you for only about a $350,000 house, nearly $100,000 below the median.
House rich, cash poor
Homeownership is the No. 1 source of wealth-building for middle and lower
classes, and the housing boom made millions of homeowners "house rich." But over
the past five years, once you account for inflation, incomes for these groups
are actually down. Many low- and moderate-income families are spending home
equity just to maintain their lifestyles.
Nationwide, nearly 90% of homeowners who refinanced homes from July through
September took cash out of their property — the highest level in 16 years,
according to Freddie Mac.
And while rising home prices mean rising wealth, they also mean larger
mortgages. For the middle class, the ratio of debt to net worth has nearly
doubled since 2001 and is now in dangerous territory.
"The figures are astonishing," says Wolff, the NYU professor.
The number of homeowners who spend 30% or more of their income on housing has
jumped to 35%, up from 27% in 2000, leaving little or nothing left to save. By
contrast, incomes for the rich are rising, protecting them from the downsides of
real estate cycles.
"We've seen the prestige market go up when the rest of the market is going down,
and we've seen that market decline when the rest of the market was cooking,"
says John Karevoll, analyst with DataQuick. "These people are trying to figure
out the best place to park their assets. They are evaluating tax considerations,
capital gains considerations and return on investment. They are not exposed to
the normal real estate cycle like the rest of us."
There are three homes for sale in the USA for $100 million or more: Donald
Trump's estate ($125 million) in Palm Beach, Fla.; one near Aspen, Colo., owned
by Saudi Arabian diplomat Prince Bandar bin Sultan ($135 million); and a third
in Lake Tahoe, Calif. ($100 million), owned by Joel Horowitz, co-founder of
And in 24 states and the District of Columbia, the top 20 properties on the
market are all priced at $5 million or higher, according to the recently
published magazine Unique Homes: State by State.
"We've had probably one of the strongest high-end runs we've ever had," says
Stephen Shapiro of the Westside Estate Agency in Beverly Hills. He laments that
there aren't enough homes over $7.5 million for sale. "There's a dramatic lack
of inventory being chased by a lot of people with money."
'Not in my backyard' politics
Each year, Habitat for Humanity in Collier County is inundated by about 1,500
applications from low-income families seeking the American dream. The non-profit
has built about 100 homes a year in the area for the past five years, more than
in any other county in the USA.
"The biggest impediment is the local politics," says Sam Durso, CEO of the local
chapter of Habitat for Humanity. "The 'not in my backyard' attitude is what
keeps people from building more affordable housing. We could build two to three
times what we do, but we can't get enough land rezoned."
Dee Proehl, her longtime partner and their two children will move in January
into a Habitat home, six miles from Port Royal, where she cleans several
mansions. Her partner, George Cervantes, 41, is a forklift driver and dock
master at Cedar Bay Yacht Club. Together, they make under $42,000 a year, and
she has no health insurance.
"There's people who own businesses and own homes, and there's the people who
work for them — there's no in between," says Proehl, 42. "It's frustrating. They
want us here. They want us to do the work, but they don't want us to live here."
Yet some wealthier residents are starting to feel that the lack of affordable
housing is eroding their quality of life. Roads at rush hour look like parking
lots. Restaurant service is slower. Checkout lines are longer because businesses
can't find enough people willing to work here. And companies that raise wages to
lure job candidates usually pass the cost on to customers.
"For years it's been, 'Yeah, there's a problem, but it doesn't affect me
personally,' " says Giblin, of the county's housing and grants office. "What
we're finding now is, it's starting to affect the normal routines of the people
who live in Naples and Collier County in terms of getting quality services."
Efforts to encourage the building of affordable housing have had limited
success. The county lets developers build more homes per acre if they include
affordable housing as part of the project. Over five years, Collier County has
added 5,000 affordably priced homes, including about 500 homes built by Habitat
County planners are considering changing the zoning to force developers to
include some portion of workforce housing. That's likely to meet with fierce
opposition from builders and residents.
Homeowners in Collier County pay the lowest property taxes in Florida. They want
new residents to cover the cost burden that new homes impose on existing
schools, roads and other facilities. So the county hits builders with a one-time
charge of $30,000 in "impact fees" per house — the highest in the state. Those
extra costs make it all but impossible for a traditional developer to build a
home at a price a working-class family could afford.
"When you go to Kmart, and you've got 20 cash registers but only two are open,
it's not because Kmart wants to have the line 15-people deep," Giblin says.
"It's because they can't find people to work. It's starting to hit people in the
Contributing: Barbara Hansen
Wealth gap swallows up American dream,
It has exclusive shops, fabulously luxurious homes
glamorous cultural scene, but this is not
what has made London the destination
for the world's multi-billionaires. For the ultra-rich few,
country is now a virtual tax haven,
which is why more and more princes, tycoons
and oligarchs are making it their home. James Meek sets out to uncover the
secrets of Britain's seriously wealthy
Monday April 17, 2006
It would be only a year before anything resembling socialism
in power vanished from Westminster. Yet to the guests gathered for the farewell
garden party at 12 Kensington Palace Gardens, London, one day in 1978, such an
outcome must have seemed unlikely. The aristocratic residents, the Cholmondeley
family, hereditary Lord Great Chamberlains, were selling up and moving out after
six decades. The future seemed to belong to the trade unions, to the Soviets -
who had begun acquiring diplomatic premises in the street in the 1930s - to the
Arabs and Iranians, squelching with money after the 1973 surge in oil prices,
and to a horde of spotty, uppity, lefty graduates contemplating the staid notion
of a mortgage in the dingy enclaves of Notting Hill, Camden and Islington.
A generation later, the fact that the aristocrats had nothing
to worry about is the least surprising aspect of what we know. What is
remarkable is that the very manifestations of upper-class anxieties turned out
to be the means which would not only secure the private possession of wealth in
Britain but inflate it, in the early years of the 21st century, to staggering
The trade unions, arguably, paved the way for Margaret Thatcher's
wealth-friendly government in 1979. The oil money that began pouring out of
Britain into Iran and the Gulf in 1973 began almost immediately to tip straight
back: the buyers of 12 Kensington Palace Gardens from the Lord Great Chamberlain
were the Saudi royal family, who still own it. The scary Soviets turned into
free-spending Russians who, like the Arabs before them, are bringing the
billions they earned from the west for their raw materials, back to the west.
Those graduates turned into Blairites and Cameroons, stars of the bar, the arts
and the media, with school fees and million-pound houses. As for the Marquess of
Cholmondeley, he's still up there: number 666 on the Sunday Times Rich List last
year. In other words, he's only borderline super-rich.
London has attracted the extremely rich from all over the world as a place to
live and tend money at least since the 19th century. Today, the impression is
growing - subjective, anecdotal, hard to pin down yet confirmed by those who
deal regularly with the very wealthy - that gigantic fresh waves of private
wealth are breaking on Threadneedle Street and Kensington. The wealth may ebb
and flow, but it always leaves something behind for those many, many Londoners
whose business it is to make money out of money.
"It's very difficult, objectively, to say how much bigger the wealth management
market in London is, because of privacy. But it certainly is bigger," says David
Harvey of Step, the Society of Trust and Estate Practitioners, a London-based
global association of tax lawyers and financial advisers whose members,
scattered across the business centres and tax havens of the world, are
unashamedly dedicated to helping wealthy families keep their riches from the
"New York is obviously very stable, but most of the other big centres would have
questions over them," says Harvey. "Tokyo's gone through a period of depression.
Singapore is relatively new. Shanghai, you would question that, and Germany was
until recently seen as a tax-heavy jurisdiction. If you're looking to avoid tax
legally, you're as well going to London as anywhere else."
The government doesn't issue figures on the movements of private wealth in and
out of Britain, let alone offer guidance on how much is here already. The most
recent numbers (from 2003) show Britain owning about £3.5trn worth of abroad,
and abroad owning about £3.5trn worth of Britain. The figures haven't changed
much from two years earlier; nor do they distinguish between businesses and
London's most expensive residential streets, such as Kensington Palace Gardens,
offer a better guide to the changing nature of the private money flooding into
the capital. Even 10 years ago it seemed likely that private residents would
vanish from these gigantic, early-Victorian villas, unless they were turned into
flats. They were seen by estate agents as too expensive to sell. Now at least
three, and possibly four, super-rich millionaires, including the world's third
richest man, Lakshmi Mittal, have private residences on the street.
"There was a time when huge houses in somewhere like Kensington Palace Gardens
would have been inconceivable as private homes, because they were too big," says
Dick Ford, head of London residential sales for the elite Mayfair-based estate
agency Knight Frank. "Only an embassy or some kind of institution would take
them. Now everybody wants them as private houses."
Kensington Palace Gardens, sometimes known as KPG to its residents, has never
been a street for the poor. The former kitchen gardens for Kensington Palace
were sold off by the royal family for housing in the early 1840s - the freehold
still belongs to the Crown Estate, which passes the proceeds of lease sales on
to the government - and by 1854, almost all the houses were complete. It was
always a home of new money, of financiers and traders, alongside the procession
of dukes and earls. But by the 1970s, when the London property market went
through the floor - a house on Regent's Park that Knight Frank sold in 1973 for
£200,000 was sold a year later for £97,000 - it seemed likely that the street
would be embassies-only for ever more.
It is still home to the embassies of Russia, Nepal, Lebanon, Kuwait, Japan,
Saudi Arabia, Slovakia and the Czech Republic, to the Sultan of Brunei and the
Saudi royals, to the French and Finnish ambassadors and the Indian High
Commissioner. But Mittal, estimated by Forbes magazine to have a personal
fortune of £14.8bn, now lives there too, in the house once occupied by Baron de
Reuter, founder of the Reuters news agency. According to the Land Registry, he
paid just over £57m for the house in 2004 - the same year he blew a reported
£31m on a six-day wedding party for his daughter and 1,000 guests in Paris that
involved Versailles, a specially built wooden castle, a private performance by
Kylie Minogue and 5,000 bottles of vintage champagne.
Mittal's next-richest neighbour is Len Blavatnik, the Russian-American tycoon,
who moved in last year. One of the most private rich Russians, nobody outside
his circle knows exactly how much liquid wealth he owns, but figures of multiple
billions are bandied about by the guesstimators and his ownership of stakes in
Russian oil and aluminium companies makes this plausible. He emigrated from the
USSR to the US in 1978; he didn't begin to investigate the new Russia until
1990, when he returned from New York with a few million dollars in the bank and
a Harvard business degree.
Jonathan Hunt's presence as a KPG homeowner is a reminder that far from all the
big new private wealth in London being from overseas, the number of extremely
rich Britons, and the size of their fortunes, is on the up. Hunt founded the
Foxtons chain of estate agents; he paid £14m for his house in Kensington Palace
Gardens in November, a town house to go with his stately home in Suffolk.
There may be another mega-rich private resident on this street. A document filed
with the authorities in Luxembourg, setting up a trust and available on the
internet, gives a house address in Kensington Park Gardens as the home of a
fabulously wealthy art collector, the former CEO of an Israeli insurance
company. Unlike Hunt, Blavatnik and Mittal, his suspected purchase hasn't
previously been made public. It would be good to be certain; it would be nice to
say that, for this article, I was able to charm billionaires and
hundred-millionaires to their doorsteps to tell me why they chose to live in
Britain. But the thing about fantastically wealthy people is that they never
need to speak to a journalist. For every gabby tycoon, every Richard Branson,
there are a handful more whose faces will be seen at parties and post-deal press
conferences but are otherwise private; and many more who are, to the public,
I sent registered letters to all the private residents of KPG, asking them why
they lived in London when they could live anywhere. The letter to the Hunts was
returned without comment; the letter to Blavatnik triggered a phone message from
an assistant, John Stoneborough. "He's a very private chap," said Stoneborough.
Mittal and the art collector didn't reply.
The government may not track the increasing wealth of British richest residents,
but others try to. Newspaper rich lists go some way towards penetrating the
veil. Yet they often quote, as wealth, shareholdings in companies that cannot be
sold without destroying confidence in the company. There is also the temptation
to characterise someone as living in Britain just because they have a house
here. Roman Abramovich, the owner of Chelsea FC, does own homes in Britain and
is often described as Britain's second-richest man after Mittal; yet he owns
residences in Russia and France, too, and his official position, stated by his
assistants in Moscow, is that he lives in Russia and only visits the UK for
A firm specialising in studying the spending habits of the very wealthy in
Britain, Tulip Financial Research, employs a different approach. Using a
computer model, it looks not at overall wealth but liquid assets - cash and the
things people own that could quickly be turned into cash. The firm's most recent
survey suggests that, in the five years since 2000, Britons' liquid assets have
increased by more than 50%, far ahead of inflation, from £1trn (that's £1,000bn)
Tulip follows the standard division of the rich into four classes. First is the
"mass affluent", 4% of the population, who now have average liquid assets of
£144,000. Then comes the High Net Worth (HNW) individuals, 0.7% of the
population, with average liquid assets of £665,000. There are 135,000 people in
the third class, the ultra-HNWs. What this means is that Britain contains a
community the size of Peterborough whose average liquid assets (which doesn't
include their first or second home) average £6.4m. This one group, 0.3% of the
population, owns almost half the liquid assets in Britain, and they are on
average 66% richer than they were five years ago. The last group, the super-rich
- the thousand richest individuals in Britain - have seen their liquid assets
increase by 79% in five years, to an average £70m each.
"Of course," says John Clemens, managing partner of Tulip, "You have to remember
that 30% of the population owns no liquid assets at all."
If there is more private wealth in Britain, and in London in particular, than
ever before, where is it coming from? One explanation is that in the past few
years London has become, even more than in the 1990s, the world's conduit of
choice for private wealth. Its generous tax treatment of the mega-rich,
particularly those born abroad, makes it in some ways a virtual tax haven. The
old snobberies of race and class have partly yielded to new snobberies of money
and beauty. That, and its combination of attractions - political stability,
relatively honest officials, a host of ingenious tax-avoidance specialists, an
army of cheap immigrant labour, the luxury shops, restaurants and clubs that
charge prices high enough to reassure the wealthy that they are special, the
resident celebrities, the cultural energy, the existence of a vast City within
the city dedicated to money - mean only New York is London's peer. And there,
despite the Bush administration's income tax cuts that have gone
disproportionately to the very wealthy, the US Inland Revenue Service and Wall
Street regulators have a reputation for being fastidious with the rules.
"The IRS is perceived to be a much more burdensome tax regulator than the UK
Revenue," says David Harvey. "The UK tax authorities take the approach that it's
much better to fight over a small piece of a very large cake."
Seb Dovey, of the London-based wealth management consultancy Scorpio
Partnership, says: "I wouldn't say as a professional centre for private banking
London overtakes Switzerland, but it does punch higher than any of the other
European countries ... if you're an emerging rich person or a multi-billionaire,
London is the place to be. Those from the Middle East and India would use
Switzerland as a bank-deposit location, and their active money in play would be
managed out of the UK."
"I think the super-rich want to have two homes, one in New York and one in
London," says a British hedge fund manager. "The bulk of the super-rich want to
spend their lives in these two cities, but if they're based in New York, they
would pay a lot more tax than here."
"The great problem with the US is it's very self-sufficient," says Caroline
Garnham, a tax lawyer with the City firm Simmons & Simmons. "Great wealth has
been made in the US, but people from elsewhere don't go there for investment
management because the US doesn't understand the rest of the world or different
"It's recognised that we have the leading investment managers in this city,
leading not only in ability but in innovation. Although Switzerland has a huge
amount of wealth sitting in bank accounts, usually they're just put in bonds,
and haven't really moved into the equity market, let alone all the other fun
stuff we put it into."
One of the big tax advantages for super-rich British residents who aren't
British-born is this country's unique "non-domiciled" tax rule, which allows
tens of thousands of wealthy people to avoid paying tax on income earned
overseas. Almost four years after an investigation by Nick Davies in this
newspaper showed how the Swedish billionaire Hans Rausing, then described as
"the richest man in Britain", had in one year received more from the Treasury in
refunds and grants than it was getting from him in tax, the government shows no
sign of closing the loophole. "Non-domicile is much bigger than people think.
It's massively important," says the hedge fund manager.
The rise in the price of oil since 1998 has given the Gulf countries an extra
$1trn in revenue, he points out, but since 2001, Arabs benefiting from that
windfall are less likely to manage their wealth from the US. "I know this bloke
who runs a $50bn fund of Arab money. He's been investing in America for 30
years, but every time he goes there now, he's treated like a convict. He has to
show his passport at every meeting."
The hedge fund manager's Arab story chimes with another explanation of the
London private wealth phenomenon - that, worldwide, there is simply more money
sloshing around in the pockets of private individuals. Until recently, most of
the globe (the US was the main exception) functioned according to three
assumptions of what was "normal". One was that large chunks of the economy would
be owned by the state and run by civil servants on modest salaries. A second was
that the exceptionally wealthy should pay much higher taxes than other people;
third, that governments would stop individuals moving their money freely from
one country to another.
These assumptions have been challenged or rejected across great swathes of the
planet, including Britain, China, the former Soviet bloc, India, south-east
Asia, Africa and Latin America. State enterprises have been privatised and the
civil servants who ran them turned, in many cases, into millionaires. Economic
orthodoxy sees high taxes on the rich as an evil - in Russia and other former
Soviet-bloc countries, the rich and the poor now pay exactly the same income
tax. Company bosses are not embarrassed to take millions, even billions, out of
firms in salaries, dividends, bonuses and stock options, while big money flies
across most state borders as lightly as birds.
The Thatcher government pioneered the change in Britain in the 1980s,
privatising industries, cutting taxes and abolishing controls on the movement of
money in and out of the country. The rest of the world followed; the tighter the
state's grip on the economy in the first place, the faster wealth flowed into
fewer private pockets. Russia was, and remains, the most extreme example.
Until 1986, the number of legally rich Russians in Russia was, in effect, zero.
In a recent article in the British magazine Wealth, Andrei Movchan of the Moscow
firm Renaissance Capital Management estimated that there are 500 super-rich
Russians with assets of more than $300m, another 5,000 with upwards of $30m,
most of it already moved abroad, and as many as 115,000 million-dollar
households. For a country which is only spending $85 a year per person on health
care, it is a staggering concentration of wealth in a few hands in the space of
a single generation. And while much of that money is stashed in Switzerland,
Cyprus or Delaware, a good proportion has flowed into the UK.
But there is a third possible analysis, which suggests it's not so much that
private wealth in London is greater than it was 10 or 20 years ago - it's just
that those who have it are more inclined to flaunt it. Tatler, the 300-year-old
magazine that documents the social doings of Britain's high-visibility rich and
which has, according to its editor Geordie Greig, the richest readership in
Europe, recently ran a spread headlined Party Awards 2005. The party narratives
were replete with artificial snow in midsummer, a private tour of the Sistine
chapel, caviar by the kilo, synchronised swimmers and naked women on white
horses, foie gras risotto covered in gold leaf, a masked ball in a St Petersburg
palace and live black fish flown in from the Caribbean to swim in the bottom of
flower vases. The last award reads: "Best effort in the face of adversity -
Bettina Bonnefoy, for going ahead with her Peter Sellers-themed party on the day
of the London bombs."
"I think we are in an age of staggering riches being spent and earned," Greig
told me. "People will pay £250,000 at a charity auction for their son to escort
David Beckham on to the pitch at a football match."
When you're a billionaire, you don't live anywhere, and neither does your money.
Or rather you live everywhere, and so does your money. "I think the wealthy
house their money everywhere, and London seems a logical place," says Rory
Sherman, of the US magazine Trusts & Estates. To the modern super-rich, she
says, anyone with a mere $5-10m is "trailer trash". "I think the fabulously
wealthy have become more fabulously wealthy, and they have lots of places to put
There are no billionaires sitting in a room staring at their wealth stacked,
liquid, in bundles of dollars around them. The bulk of their wealth is always in
motion, breathing, expanding and contracting. Only by the sparkly feathers that
flutter to the forest floor, the golden spoor on the trail and the remnants of
its prey can you tell that there was a billion and that it passed this way.
The billions never stand still for long. Those who hope to catch a piece of them
as they race by have to be adept at slicing bits off them as they pass, or by
helping them to pause and feed, or by providing a nice rough bit of bark for
them to scratch on. And London is very good at that.
The fact that many of the wealthiest "British" residents actually reside
everywhere and nowhere, between London and Moscow or Monaco or countless other
cities and islands around the world, deflects attention from a deeper truth -
that often the thing which most concerns the very rich is time, rather than
geography. Their only true domicile is their own family, and the most
obsessively fretted-over question is how to pass wealth from generation to
generation without it being eaten away by taxes or thrown away in casinos and
divorces by children and grandchildren. The ultimate symbol of true wealth in
2006 is not a Bentley or a house in Kensington Park Gardens, or a diamond as big
as the Ritz. It's something called a "family office" - a full-time team of
lawyers and accountants dedicated to the sole aim of protecting and cultivating
one family's wealth further into the future than most governments, let alone
ordinary people, would ever dream of planning. David Harvey of Step suggested
that a sensible rich family would be advised to think 100 years ahead. "For a
lot of families, the question is: can we take it as far as generation three?" he
For the Benzon family, which in the 19th century occupied the Kensington Palace
Gardens house now owned by Jonathan Hunt, the answer was "no". Great wealth can,
and does, vanish swiftly if heirs prove incapable of bearing its weight. The
iron merchant Ernest Benzon drew guests as notable as Felix Mendelssohn, George
Eliot and Robert Browning to his lavish salon. In 1889, Benzon's grandson, also
called Ernest, described what then happened to the family fortune in his book,
How I Lost £250,000 in Two Years. The chapter headings chronicle the dissolving
of a fortune worth between £20m and £110m in today's money: Coming of Age,
Racing Experiences, Gambling Experiences, The Ring, Money Lenders, Monte Carlo
and Pigeon Shooting, London Tradesmen. Before losing his last shilling on the
roulette wheels of the riviera, Benzon once gambled away £10,000 at
chemin-de-fer during a 10-minute wait for a train.
Seb Dovey says there are about 2,500 active family offices across Europe, three
times that number in the US- worldwide, perhaps 11,000 family offices, each with
more than $100m to invest. "It's significant that the rate of new family offices
opening up has increased," he says. "We now estimate about 20 new family offices
are being set up across Europe every month. In the UK, that means two or three
offices a month."
When you talk to someone such as Caroline Garnham, an expert in setting up
family offices with the City law firm Simmons & Simmons, you realise that the
notion of the very rich being citizens of their own family, rather than citizens
of any one country, isn't entirely conceptual. Garnham, whose firm dominates one
of the City's newer, larger steel-and-glass skyscrapers, talks about "family
governance". Her advice to a super-rich family involves them moving from what
she calls "dictatorship" and setting up a kind of family parliament.
The tedious, ultra-specialised task of setting up a legally watertight
constitution for a family democracy is one in which London excels, Garnham says.
"A lot of this wealth structuring on a global basis happens out of London and
this can often be with someone who has no connection with England whatsoever ...
They won't keep their money here, because of our inheritance-tax regime, but
they will have it managed here."
A rare academic study of the changes in wealth and income in London in the past
few decades, Unequal City: London in the Global Arena, by Chris Hamnett, points
out that as it has grown wealthier, the capital has gained population. In 15
years, London has grown by the equivalent of a city the size of Frankfurt. It
has also grown more unequal. The gap between the richest and the poorest
citizens has increased radically.
At the same time, the direst Marxist predictions of the consequences of rampant
capitalism have not come about - inequality, says Hamnett, isn't the same as
polarisation. There aren't more poor Londoners now than there were 30 years ago;
but most Londoners are poorer relative to the very richest residents.
In this, London, and Britain as a whole, could be seen to be following in the
footsteps of the US - an economic paradigm for Thatcher and for Gordon Brown.
Across the Atlantic, even some conservative commentators are uneasy about the
degree to which the wealth of the very richest has grown, while the wealth of
the middle classes has stagnated or shrunk. Yet London and the country of which
it is capital may be trapped, hooked on the world's money to a degree that would
be difficult to replace. A million Britons work in the money management
business; Britain has a trade surplus of more than $25bn in financial services.
For every campaigner and journalist pointing out the apparent inequity of the
non-domiciled rule and other tax-avoidance schemes, there is a lobbyist or three
arguing that, far from being too much like an offshore tax haven, Britain should
be more like one, a sort of extra-large Grand Cayman, because that's what we're
good at in a competitive world, working the game of fees and percentages with
the planet's rich.
"I've always thought that England would benefit a lot by becoming an 'offshore
haven'," says Garnham. "It's already halfway there. Why not make more of it?
We're only a tiny little island".
Related > Anglonautes >
industry, energy, commodities
economy, money, taxes,
housing market, shopping,
jobs, unemployment, unions, retirement,