In a post about “rich whiners,” Matthew Yglesias argues that what richies really want is respect. Yglesias writes:
I think rich businessmen would be happier if we could go back to 1950s-style, more egalitarian distribution of pre-tax income. The richest people around would still be the richest people around, and as the richest people around they would live in the nicest houses and drive the nicest cars and send their kids to the best schools and in other respects capture the vast majority of the concrete gains of being rich. But they’d also have a much better chance of gaining the kind of respect as civic and national leaders that they crave. They want to be seen as the “job creators” and the heroes of the economy, not the greedy exploiters of the masses. But in order to have heroes of the economy, you need a broadly happy story about the economy—one where living standards are rising across the board and prosperity is broadly shared.
This is an appealing argument but I’m skeptical. My impression is that, back in the 1950s, the culture heroes included sports starts, authors, broadcast and movie stars, etc. Some politicians and union leaders too, and various others. But nowadays, lots of rich people are heroes of one sort or another: Steve Jobs, those guys at Google, various gossip about tech billionaires, Donald Trump. Even the supervillians at Goldman Sachs get some respect—it’s kinda cool to be a supervillian. There’s the Forbes list of billionaires. Not to mention Michael Bloomberg and Mitt Romney. And it’s not just cos these rich guys have done cool things like Google maps. Warren Buffett is a hero too, mostly from doing a very good job at accumulating money.
If you’re superrich and your goal is to be viewed as a hero, I’d say that the current era from the mid-90s through now has been a good time to do it. They call this the New Gilded Age for a reason. In contrast, I have the sense that the 1950s was a great time to get respect for local rich guys: the owner of the local factory, the proprietor of the local newspaper, etc. Back then, if you were running a moderate-sized business, you could be a real big shot.
I’m not quite sure how this could be studied more systematically but maybe it’s worth looking in to.
I think is is always a mistake to ask if people would prefer money or respect when they can have both at the same time. The real issue is one of social engineering — if we think giving more money to rich people pays off with more money for everyone later then the current social arrangement can be a good plan. The problem is that not everyone believes in “trickle down” effects (which are by their nature very hard to estimate) and if you believe the opposite (which is what a naive reading of the data would say) then you are going to be mad about the current social wealth structure.
What makes this even trickier, is that if more equal wealth increases net economic growth, it may still make the very rich less well off. So it is not an equilibrium that is easy to get to via clear steps.
The delicate feelings piece is odd. It is like the victors in a contest wanting the losers to respect them for winning. I look at the post-Civil War US as an example, or even a losing sports team, and see this as quite unlikely.
Last time I checked the 50s and 60 were full of revolutionary fervor. A significant minority wanted rich people shot or in a gulag. Hardly a model for respect.
With few exceptions, my guess is that the very rich don’t feel secure these days…no time to risk heroism when the grounds keep shifting and rumbling…
My vague recollection from my 1970 days as an obsessive reader of the Guinness Book of World Records is that the Wealth records seemed kind of boring in that era: the highest current annual income was the Chairman of GM at about maybe $1.1 million. The richest guy (J. Paul Getty?) had about a billion dollars. The records from before 1930 were much more spectacular.
Back then, famous leaders of business tended to be salaried employees of big corporations who got lots of nice perks, but weren’t — unless they inherited a lot (like Henry Ford II) — immensely wealthy themselves. John Kenneth Galbraith talked a lot back then about how stockholders didn’t have much power over corporate managements. It was very hard for even a company founder like John D. Rockefeller to win a proxy war against an incompetent CEO.
But, when I was at UCLA MBA school in 1980-82, the hot new idea — as exemplified by Michael Milken over on Rodeo Drive — was maximizing stockholder wealth.
H. Ross Perot, whose Electronic Data Systems made him very rich in the late 1960s, was a transitional figure. At the time, he could be pigeonholed as a Pushy Rich Texan (an anomalous type during an era when business leaders outside of Texas tended to be buttoned-down), but in retrospect he fits in the then-nascent Billionaire Tech Entrepreneur category.
“I’m not quite sure how this could be studied more systematically but maybe it’s worth looking in to.”
The Forbes 400 goes back to 1982 and New York Times wedding announcements back to 1981 can be analyzed by keywords:
weddingcrunchers.com
But we really want to look at the 1950s.
One thing I’ve noticed is that a lot of prestigious country clubs are located in all sorts of formerly prosperous industrial cities. In the middle of the 20th Century, there were local elites large enough and rich enough to build and maintain world class golf courses all over the Northeastern quarter of America. Akron, OH used to host a famous tournament called the World Series of Golf.
But the golf courses built after WWII by committees of local corporate executives and the like are now derided as kind of boring. They didn’t move enough dirt. Now, architecturally distinguished golf courses tend to be a Rich Man’s Folly, rather like in the early days of American golf before the Great Compression of wealth in 1930-1970.
In either case we see how positional externalites are enormous, an enormous factor in utility. I’ve long called them the pink elephant of economics.
For a good quick article, see this from Cornell economist Robert Frank:
http://www.robert-h-frank.com/PDFs/WP.1.24.99.pdf
Aside from admiration, certainly the super-rich could be vastly better off with 1950s tax progressivity putting a trillion more per year into basic scientific and medical research and other public works. You’re still at the top, but now you and your children are far more likely to survive cancer, maybe get the advance to eat as much as you want without getting fat, have that every day back pain cured, have a lot more energy and better mental health,…
It also matters what your social circle is. To take another – less grand – example, consider investment analysts or consultants at places like Goldman and McKinsey. Across most of society these jobs may not hold much prestige or respect, but within the social group these guys come from – friends from some top institution – partner at a Wall Street firm is like “the next thing”.
So all the arguments about “stigmatizing” things like investment banking won’t work just because of how alienated a lot of people are from society itself.
I think this can be extrapolated to business titans of today as well. One reason the 1950s exhibited the kind of “leader” type people Yglesias mentions might be that said people were forced into interaction with people as a whole in a way they aren’t today.
It’s also more informative to look at the affluent and rich more than the superrich where individuals like Steve Jobs irrationally change your perspective on things. N is too small.