The 1% and the Rest of Us

by Tim Di Muzio

  According to the World Bank, in the 25 years from 1960 to 1985, global GDP increased from US$1.4 trillion to US$12.5 trillion, or an increase of 793%. But in the 51-year period from 1960 to 2011, the rate of change increased by 4,900% as global GDP reached US$70 trillion.13 Thus a series of class practices that strengthened the power of capital within a generally favourable energy regime spawned a historically unprecedented boom in the generation of income and wealth (Gill and Law 1988). Such practices also generated a period of growing inequality. Not only has the 1% (and often smaller proportions) in certain countries been appropriating an ever greater share of the national income, but the number of billionaires and millionaires has been steadily increasing, offering further evidence that income is accruing at the top of the wealth pyramid. For example, in 1987 Forbes recorded 140 billionaires in the world. The figure now stands at 1,226 billionaires worldwide with expectations that this number will grow in the years ahead;14 indeed, Wealth-X – a wealth intelligence firm – estimates that the number of ultra-HNWIs will increase by 3.9% over the next five years (Wealth-X 2013: 11).15 To recap, of the US$225 trillion in outstanding net financial wealth in 2013, US$46.2 trillion was owned by 12 million HNWIs from around the world. Put differently, 0.2% of the global population own 21% of the world’s financial assets (Capgemini and Merrill Lynch 2011; McKinsey 2011).

  However, if we leave the realm of income distribution and consider the distribution of household wealth, global inequality appears far worse. The first estimates on this measure of inequality noted that ‘the top 10 per cent of adults own 85 per cent of global household wealth’ while the bottom 50 per cent ‘collectively owns barely 1 per cent of global wealth’. Moreover, the study revealed that ‘the top 1 per cent own almost 40 times as much as the bottom 50 per cent’, with a massive gap between those in the top decile and those in the lowest decile. According to the authors of the report, the top decile has 13,000 times more wealth than those at the very bottom of the wealth pyramid (Davies et al. 2006: 26).

  In the available literature, most attempts to account for this massive private accumulation of wealth rely on a number of explanations. However, while rationalisations abound, there appears to be little consensus on the precise origins of this wealth boom, let alone a convincing ethical or philosophical justification for such obscene levels of accumulation and inequality. Dominant explanations include the following – either isolated or in combination: the levering of technological change, the deregulation of finance, globalisation, effort, hard work and luck, rewards for special knowledge or skills, liquidity events and the growth in hedge funds run by ‘super-intelligent’ human beings. These explanations are all quite common in popular accounts (Frank 2007; Freeland 2012; Taylor et al. 2009: 21ff). But, at a more general level, some commentators make the distinction between the ‘self-made’ affluent and dominant owners who inherited their fortune. To some extent, the latter category is viewed as less deserving than their newly minted affluent counterparts who are said to have made their fortunes without assistance of any kind – for what else can ‘self-made’ mean? The tendency to believe that individuals are the sole source of wealth is deeply hardwired into many societies. For example, Forbes’ own account of billionaires notes the following:

  We do not include royal family members or dictators who derive their fortunes entirely as a result of their position of power, nor do we include royalty who, often with large families, control the riches in trust for their nation. Over the years Forbes has valued the fortunes of these wealthy despots, dictators and royals but have listed them separately as they do not truly reflect individual, entrepreneurial wealth that could be passed down to a younger generation or truly given away.16

  A full assessment of this culturally convenient argument using the ‘capital as power’ framework and additional evidence is explored in Chapter 5.17 I believe an evaluation of this hypothesis is one of the most crucial arguments political economy has to come to terms with if it is to critically challenge the social reproduction of extreme wealth and gross inequality.

  But here we are concerned with differential consumption, so let us begin with a prescient observation. One of the main arguments in the popular literature advanced by Kempf (2008: 50), Frank (2007) and Freeland (2012), and recognised by Citigroup’s plutonomy thesis, is that dominant owners have created a ‘self-contained world unto their own’ (Frank 2007: 3). Frank calls this virtual world Richistan. In this world, the affluent have ‘their own health-care system (concierge doctors), travel network (NetJets, destination clubs), separate economy (double-digit income gains and double-digit inflation), language (Who’s your household manager?)’ and ability to purchase permanent residency or even citizenship in choice countries (ibid.: 3; Parmar 2013). We could add to this ‘virtual world’ their own clubs and associations (such as Metcircle Networking, with a net US$100 million membership cut-off, the Emperor’s Club, the Yellowstone Club, and so on). The high financiers of Wall Street even have their own super-secret fraternity: Kappa Beta Phi. A soirée held by the fraternity was infiltrated by a writer from the New York Times who caught a glimpse into ‘the psychology of the ultra-wealthy’ during one night of festivities. After watching how leading members of the club forced new recruits to dress in drag and mock the 99%, the reporter came to the conclusion that ‘the upper ranks of finance are composed of people who have completely divorced themselves from reality’ (Roose 2014).

  The 1% also have unique psychological concerns (sudden wealth syndrome, spoiled children), built environments (mansions, private islands, sea-steading), vehicles (yachts, private submarines, Gulfstream jets, Aston Martin One-77s), security arrangements (panic rooms, bodyguards, billionaire super-security), financial and consumer advice (How to Spend it, The Robb Report, Worth), financial services (elite hedge funds, private bankers), restaurants (Masa, Aragawa, Ithaa) and dating services (MillionaireMatch, Sugardaddie). They also enjoy an entire buffet of luxury goods such as Franck Muller watches (the Franck Muller Aeternitas Mega 4™ Grande Sonnerie Westminster Carillon – the most expensive watch in the world sold – for US$2.7 million in 2009), pens such as the Aurora Diamante (price tag: US$1,470,600 – only one available per year) and the Algonquin Hotel’s US$10,000 ‘Martini on the Rock’, which features a diamond at the bottom of the glass. If you are wondering how the ultra-rich of the ultra-rich pay for such high-price items, you likely will not be surprised to learn that they have their own exclusive credit card. The Palladium Card, issued by JPMorgan, has no spending limit. The card is offered to their private banking clientele with US$25 million or more invested with the bank. The card itself is worth about US$1,000 as it is minted from palladium and 23 carat gold. The card also has a number of additional benefits such as a concierge service and access to private airport lounges and special events. Little wonder this unlimited charge card has been dubbed ‘the credit card for the 1 percent of the 1 percent’ (Cohan 2012).

  According to Frank’s study, within this world apart there is an ongoing consumptive arms race, with those lower on the Richistani rungs doing their best to keep up with their centa-millionaire and billionaire counterparts – a competition for display and status that has seen these lower HNWIs take on ever larger mountains of debt (ibid.: 6–13). As previously mentioned, in Richistan the merely affluent do not try to keep up with the Joneses but with the Slims and Gateses of the world. One guide to such an endeavour is the CLEWI.

  The Cost of Living Extremely Well Index or CLEWI was started in 1976 by Forbes. The index tracks 40 goods and services that are generally reserved for the ultra-wealthy. Not surprisingly, the index has been increasing in value since its inception.18 While I will not reproduce the list of goods and services in its entirety here, a small sample of the index reveals what follows in Table 4.1.

  The cheapest item on the full list is a subscription to Forbes at US$60, while the most expensive item listed is the Sikorsky helicopter at US$15.5 million. But while these items give us an idea of the luxury
goods and services the affluent consume, many of the items listed are only benchmarks, while other goods and services the mega-rich consume are not listed. As an example, I will consider the arms race in yachts, along with the boom in private submarine sales.

  Without a doubt, the Hatteras 80 MY is a luxury yacht, boasting an overall length of 79 feet, 10 inches. But while the yacht may look impressive to most, it does not come close to the global fleet of mega-yachts. Writing in Forbes magazine, the editor of Boat International spelled out the current trend:

  TABLE 4.1 Selected items on the Cost of Living Extremely Well Index, 2012

  Item

  Cost in 2012 ($)

  Price change from 2011 (%)

  Coat (natural Russian sable)

  265,000

  10

  Facelift

  18,500

  0

  Motor yacht (Hatteras 80 MY)

  5,125,000

  −3

  Washington Hospital Center (1 day)

  2,716

  6

  Plane (Learjet 40XR)

  10,838,000

  2

  Helicopter (Sikorsky S-76D)

  15,500,000

  5

  Caviar (Tsar Imperial, 1 kg)

  13,600

  0

  Source: www.forbes.com/sites/scottdecarlo/2012/09/19/cost-of-living-extremely-well-index-our-annual-consumer-price-index-billionaire-style/.

  When we at ‘Boat International’ first produced our Register, back in 1990, superyachting was still in relative infancy. Indeed, to get on the Top 100 list in 1990, your yacht needed to be just 147 feet in length (44.8 metres). Nowadays, your yacht would have to measure at least 240 feet in length (73 metres). That entry point is set to rise again in 2013, with 12 new yachts due to be delivered in the coming months, all of which will make the updated Top 100 list, knocking out a dozen smaller ones, and raising the bar to 246 feet (75 metres) (Thomas 2012).

  How long the race to build the world’s largest private yacht will go on is anyone’s guess. When I first started writing this book, the world’s largest super-yacht was the Eclipse at 533 feet and 2 inches long. It is only slightly bigger than the yacht called Dubai, measured at 531 feet, 6 inches and owned by Sheik Mohammed bin Rashid al-Maktoum – the head of the ‘royal’ family of Dubai and prime minister and vice president of the United Arab Emirates. Eclipse is owned by Russian oligarch Roman Abramovich and features two pools, a submarine, 18 luxury suites for up to 36 guests, three helipads, three launch boats, a working crew of 92, armour plating and bullet-proof glass. If this is not enough, the yacht also features a German-crafted missile defence system. And this is not Abramovich’s only yacht; he owns four others.19

  But just as Eclipse was being passed to its proprietor, the owner of Dubai announced that he would retrofit his yacht to regain the title of world’s largest private yacht. The megalomaniac project was in vain. In April 2013, a 590-foot yacht called Azzam made its way out of its Hamburg port and into the world record book. The cost? US$605 million for the yacht and about US$60 million a year to staff and maintain the vessel.20 The owner is the president of the United Arab Emirates, Khalifa bin Zayed bin Sultan Al Nahyan. And while not everyone can afford to command the construction of the planet’s largest yacht, the number of yachts currently under construction gives us a considerable indication of how the newly rich are spending their fortunes.21 Since 2006, 6,295 yachts have been purchased with 692 ordered for construction in 2013. The yachts range in size from 80 feet to 250 feet and above; the total length of all the yachts under construction in 2013 was 25.8 kilometres.22 This figure does not include the Australian mining multimillionaire Clive Palmer’s plan to build a replica of the Titanic (Harris 2013). So even in the midst of the global financial crisis and the age of austerity politics, the conspicuous consumption of yachts continues. And there are some early signs that it is moving on to private luxury submarines.

  Currently, there are an estimated 100 private submarines cruising the world’s vast oceans. They range in size, price and capability, with the cheapest model starting at US$1.7 million. A string of companies caters to their wealthy clients’ demands: Hawkes Ocean Technologies, SEAmagine, Triton Submarines and US Submarines among others. The most elaborate ‘Learjet of the sea’ is currently the Phoenix 1000 proposed by US Submarines. It was commissioned by a wealthy client who later had to cancel the order. According to the company, the vessel ‘would constitute the single largest private undersea vehicle ever built, and arguably, one of the most significant personal transportation devices of the century’. It boasts four floors and 470 square metres of interior space. The price tag: an estimated US$78 million. The marketers at US Submarines know their clientele:

  With 2300 megayachts operational around the world, some costing in excess of $150 million, the stakes in the game of one upmanship are rising. Some yacht owners like the idea of having a larger and more unique toy.23

  Back on land, differential consumption continues in housing. We have already encountered the largest private residence built during the first Gilded Age: Biltmore House. Today, that record belongs to Mukesh Ambani, one of two brothers who inherited their father’s business empire in textiles, petrochemicals and oil and gas. According to Forbes, as of 2014 there are 65 billionaires in India and Ambani is the wealthiest of them all.24 With a population of 1.24 billion, this means that Indian billionaires represent a minuscule 0.000005% of a nation where 400,248,000, or 32.7% of the population, subsist on US$1.25 a day or less.25 Still, Ambani saw fit to commission the largest private residence in the world.

  Called Antilia, after a mythical island in the Atlantic, Ambani’s 27-storey residence towers above Mumbai. It has 400,000 square feet of living space, three helipads, nine high-speed elevators, underground parking for 168 cars, a gym, swimming pool, movie theatre, spa, dance studio, balconies with gardens, an unknown number of guest rooms, a ballroom, snack bar and one entire floor dedicated to servicing Ambani’s private fleet of luxury cars. Ambani’s six-member family (including his mother) will inhabit the top six floors of the building. Antilia is staffed by an estimated 600 people catering to the needs of the family and their guests. At an estimated US$1 billion to US$2 billion, it is not only the world’s largest private residence, but also its most expensive. The residence is also built in a country where the average Indian urban dweller occupies 504 square feet of space and 33% live in less space than US prisoners (Thakur 2008). In other words, Ambani’s home has 794 times more living space than the average Indian dwelling. But then again, Ambani is not status-seeking with the average Indian but with the global billionaire class of which he is a part.

  There are, of course, countless other examples of conspicuous consumption as dominant owners make ever greater returns on the income-generating assets they own. However brief, this sketch suggests that dominant owners aim to consume differentially and that these displays of consumption are primarily aimed at intraclass emulation and status-seeking. Having highlighted this secondary drive as equally important to the symbolic accumulation of money, I now move to the second part of my argument as first identified by Kempf – the argument that the consumptive practices of dominant owners are helping to lock global society into an unsustainable and indefensible quest for perpetual economic growth. This project not only alleviates calls for global redistribution but also threatens populations with environmental collapse.

  ‘The rich are destroying the Earth’

  From the effects of global warming to the recorded loss of biodiversity, the evidence of populations coming under stress or devastation due to unsustainable anthropocentric practices continues to mount (Barry 2012; Dauvergne 2008; Kolbert 2014; Newell 2012). Rather than retrace what other scholars have already demonstrated, this work sides with Kempf’s assessment that ‘the planet’s ecological situation is worsening’ and that ‘we are entering a time of lasting crisis and possible catastrophe’ (Kempf 2008: xvi).26 But who is responsible for the acceleration of
disaster? Kempf argues that the rich – what this book calls dominant owners – are destroying the Earth. He calls them the ‘essential factor’ in the biospheric crisis because they benefit from current social property relations and ‘oppose the radical changes that we would have to conduct to prevent the aggravation’ of the environmental situation (ibid.: 70). Kempf argues that this situation manifests itself directly and indirectly: directly since dominant owners control and benefit from the system of differential accumulation and indirectly in that their intraclass status-seeking urges others to emulate their insatiable and too often wasteful consumptive practices (ibid.: 70). Their mantra of economic growth is one of the ways in which the dominant owners are shielded from having to face up to the consequences of their actions and from having to confront a radical politics of rethinking how the global political economy might work towards a more fair and equitable distribution of resources and life chances: