Anglonautes > Vocapedia > 2000s - 2010s - 2020s > English words - vocabulary - dictionary - encyclopedia > Economy > The rich, the wealthy, billionaires, centibillionaires

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 income gains

went to the top 1 percent,

not to the top 11 percent.

The Rich Get Even Richer,
NYT,
25.3.2012,
https://www.nytimes.com/2012/03/26/
opinion/the-rich-get-even-richer.html

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 gains.

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 industrial world.

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 and experience.

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 democracy.

Inequality Undermines Democracy,
NYT,
20.3.2012,
http://www.nytimes.com/2012/03/21/
business/economy/tolerance-for-income-gap-
may-be-ebbing-economic-scene.html

Education Gap Grows

Between Rich and Poor,

Studies Say

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 late 1980s.

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 substantially.

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 start school.

“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 mistake.”

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 found.

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,” he said.

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, Studies Say,
    NYT, 9.2.2011,
    http://www.nytimes.com/2012/02/10/education/
    education-gap-grows-between-rich-and-poor-studies-show.html

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 cultural masses.

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 elites.

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,
https://www.nytimes.com/2012/01/31/
opinion/brooks-the-great-divorce.html

Putting Millionaires Before Jobs

November 3, 2011
The New York Times

There’s 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 jobs.

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 voters.

    Putting Millionaires Before Jobs, NYT, 3.11.2011,
    http://www.nytimes.com/2011/11/04/opinion/
    the-senate-puts-millionaires-before-jobs.html

Oligarchy, American Style

November 3, 2011
The New York Times
By PAUL KRUGMAN

Inequality 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 stake.

Oligarchy, American Style, NYT, 3.11.2011,
http://www.nytimes.com/2011/11/04/opinion/oligarchy-american-style.html

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 fashionable.

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 meet.

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 time ago.

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, 19.9.2010,
https://www.nytimes.com/2010/09/20/
opinion/20krugman.html

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 box
at Aston Villa

The Guardian
Jenny Percival
Saturday 3 April 2010
This article appeared on p9
of the Main section section of the Guardian
on 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 attack.

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 countryside.

"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 retirement.

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,
    G, 3.4.2010,
    http://www.guardian.co.uk/uk/2010/apr/03/baker-won-lottery-dies-penniless

Unequal Britain: richest 10%

are now 100 times better off

than the poorest

• 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
08.54 GMT
Guardian.co.uk
Amelia Gentleman and Hélène Mulholland
This article was published
on guardian.co.uk at 08.54 GMT
on Wednesday 27 January 2010.
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 possessions).

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 or more.

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 states.

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 least deprived.

    Unequal Britain: richest 10% are now 100 times better off than the poorest,
    G, 27.1.2010,
    http://www.guardian.co.uk/society/2010/jan/27/unequal-britain-report

Elton John, McCartney

Hit By Economic Crisis: Rich List

April 24, 2009
Filed at 5:04 a.m. ET
By REUTERS
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 million pounds.

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 pounds.

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,
    NYT, 24.4.2009,
    http://www.nytimes.com/reuters/2009/04/24/arts/
    entertainment-us-britain-richlist.html

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 bankruptcy protection.

“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 population.

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,
NYT,
30.11.2008,
https://www.nytimes.com/2008/11/30/
us/30gated.html

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 York.”

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 Cognac.

“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 anything differently.”

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 class resentment.

“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 Series.

“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,
http://travel.nytimes.com/2008/04/14/nyregion/14partying.html

When 3rd Place

on the Rich List

Just Isn’t Enough

January 17, 2008
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 cab.

“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 start-up.

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 orders.

“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 ambitions.

“Sheldon wanted to be richer than Bill Gates,” he said. “He always wanted to be No. 1.”

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 Singapore.

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, harder-to-reach goal.

“He has more money than he can ever spend but he has to grow it bigger,” he said.

When 3rd Place on the Rich List Just Isn’t Enough, NYT, 17.1.2008,
http://www.nytimes.com/2008/01/17/business/17adelson.html

Gap between rich and poor

'widest in 40 years'

Published: 17 July 2007
PA
The Independent

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 Foundation.

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 category.

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 apart.

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 increased."

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 tackled.

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,
http://news.independent.co.uk/uk/this_britain/article2776936.ece

Super-rich treble wealth

in last 10 years

April 29, 2007
From The Sunday Times
Richard Woods

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 born here.

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 Monaco.

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 British rich.”

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 understanding.

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,
http://www.timesonline.co.uk/tol/news/uk/article1719880.ece

Philanthropy hits record

as number of $100 million donations

increase

Updated 2/26/2007
11:14 PM ET
USA TODAY
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 2005.

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,
    UT, 26.2.2007,
    http://www.usatoday.com/news/nation/2007-02-26-big-donations_x.htm

Gilded Paychecks

Very Rich Are Leaving

the Merely Rich Behind

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 harder.

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 riches.”

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 accomplishment.

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 misgivings.

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 in 1989.

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 for inflation.

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 $50 million.”

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 intellectually charged.”

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 mapmaking.

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 talent.

“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.”

Very Rich Are Leaving the Merely Rich Behind, NYT, 27.11.2006,
http://www.nytimes.com/2006/11/27/business/27richer.html

Wealth gap swallows up

American dream

Posted 11/24/2006 1:32 AM ET
USA Today
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 priority.

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 infrastructure."

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 crash."

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 Tommy Hilfiger.

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 for Humanity.

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 face."

Contributing: Barbara Hansen

Wealth gap swallows up American dream,
UT,
24.11.2006,
http://www.usatoday.com/money/perfi/housing/
2006-11-24-luxury-homes-usat_x.htm

Super rich

It has exclusive shops, fabulously luxurious homes
and a glamorous cultural scene, but this is not
what has made London the destination of choice
for the world's multi-billionaires.

For the ultra-rich few,
this 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

The Guardian

James Meek

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 new levels.

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 taxman.

"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 individuals.

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, completely invisible.

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 matches.

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) to £1.6trn.

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 cultures.

"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 their money."

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 says.

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".

Super rich,
G,
17.4.2006,
https://www.theguardian.com/money/2006/apr/17/
tax.g2

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