November 23, 2005
ROBBER BARONS
It may be beyond passé - but we'll have to do something about the rich (Jonathan Freedland, The Guardian, November 22nd, 2005)
If you want to be deeply unfashionable, just read on. If you want to enter terrain so wildly out of date that mere mention of it has become taboo, then you've come to the right place. Brace yourself. Late last month two bankers strode into Umbaba, one of London's most modish watering holes, and asked the bartender to fix them a drink. Not any drink, you understand, but the most expensive cocktail he could concoct. He set to work, blending a Richard Hennessy cognac that sells at £3,000 a bottle, Dom Perignon champagne, fresh lemongrass and lychees - all topped off with an extract of yohimbe bark, a West African import said to possess aphrodisiac powers. He called it the Magie Noir - and he charged £333 a glass. The bankers ordered two rounds for their table of eight. Their final bill for the night: £15,000.Those same men, or their colleagues, may well have invested £200,000 in a Bentley or Aston Martin, or they might have paid celebrity hairdresser Nicky Clarke £500 for what the salon describes as an "aspirational haircut". They are the customers sought by the London estate agent who offers a three-bedroom flat in Kensington as a "starter home" for £2.25m. They are the target reader of the newly launched Trader magazine, with its ads for private jets or five-storey yachts (complete with submarine).
This is the world of the super-rich, financiers pulling in salaries and bonuses in the millions, and sometimes tens of millions, of dollars. They are partners in hedge funds and private-equity firms - buying, selling and gambling in jobs that most mortals barely comprehend. They spend money on vast estates or wild fancies. Sometimes the splashing out is literal: a favourite pastime is spraying champagne in the manner of a formula one winner. (In August one London banker fizzed away £41,000.)
Nothing new in all this, you might say. The rich, like the poor, are always with us. But that would be wrong. Robert Peston, City editor of the Sunday Telegraph, estimates that this year no more than 200 to 300 hedge-fund managers will carve up $4.2bn of pure profit between them. These sorts of payouts are on a scale unimaginable in the past, at least outside the handful of individuals who either invented a new product or owned a tangible resource: Bransons or Rockefellers. That they should come, as regular as a salary, to those who, by their own admission, create nothing is a new development. (And buying up once-public companies in their entirety is essentially a new field.)
It is the sharpest edge of a striking trend, one that shows the truth behind that lefty slogan about the rich getting richer. When Margaret Thatcher came to power in 1979, just under 6% of national income went to the top 1%. That figure stood at 9% a decade later, but under Tony Blair it has risen to at least 13%: a tiny group taking nearly an eighth of our collective wealth.
Does it matter? Some will insist not; only envy could make us begrudge a young man spending five figures on a drinks bill. As long as we're getting by, who cares if Joe Banker can buy a Ferrari the way the rest of us buy a pint of milk? In the years after Thatcherism and the fall of the Soviet Union, we're meant to have moved on from such concerns. Only the tragically retro, those trapped in a Scargillite time warp wearing a Citizen Smith beret, still care about such things. When the prime minister was asked in 2001 whether it was possible for anyone to earn too much money, he caught the spirit of the age when he replied, "Not really, no. Why does that matter?"
I know it's frightfully old-fashioned, but I beg to differ. For the story about the £333 cocktails emerged in the same week as Shelter reported that children were being forced to sleep in kitchens, dining rooms and hallways because of cramped housing affecting 500,000 families in England alone. Of these, three in four said that the lack of space was damaging their children's education or development; many spoke of depression and anxiety. And the scale of the problem has remained unchanged since 1997.
To my mind, there is something deeply wrong here. If one man can spend £15,000 plying his pals with a syrupy cocktail, while another lays out blankets for his child to sleep in the kitchen then we know the system is broken.
It took him a few paragraphs to get there, but thankfully Mr. Freedland’s eventual reference to “the system” betrays a fevered leftist and frees us to run off and leave him to play with his abstracts. But is there not a point here that separates libertarians from social conservatives rather sharply? Endless prattling about freedom, hard work (?!) and the fruits of one’s labours won’t change the fact that, as sure as G-d made the little green apples, if our culture permits the rich to wallow unsanctioned in ostentatious, near-contemptuous self-indulgence and excess, and ceases to demand and enforce duty, charity and self-restraint, there will eventually be a popular reaction of unpredictable destructiveness that no constitution in the world will forestall.
Posted by Peter Burnet at November 23, 2005 6:04 AMSo what's the lowest amount you should pay for a cocktail, after which it becomes "ostentatous, near-contemptuous self-indulgence and excess?"
Posted by: Brit at November 23, 2005 6:37 AMCommunist scum like Freedland disgust me. To these animals, the 20th century never happened, and they'd do it all again.
Human filth.
Posted by: Amos at November 23, 2005 6:47 AMBrit:
$5.95 (CDN) at Harry's sports bar down the street. Anything more justifies revolution.
C'mon now, dear. You aren't going to deconstruct me out of this one. You know very well what I'm saying. If you want to play Taki and join the beautiful people, fine, defend them as our guardians of liberty if you will, but don't tell me I'm wrong because there is no objective definition of excess.
Posted by: Peter B at November 23, 2005 6:56 AMPeter:
I just wonder what you're suggesting - regulation? Do you have a solution, or are you just lamenting the uglier elements of human nature?
Of course those cocktail-swilling guys are vulgar buffoons, but seriously - what can you do?
I think the key to avoiding a revolution is to make sure that everyone has at least a shot at generating their own obscene wads of cash, and so every man has the inalienable right to make a vulgar buffon of himself.
Posted by: Brit at November 23, 2005 7:13 AMFools and their money ...
What better use for all that swag than spending it?
After all, somebody had to make the cognac, champagne and Aston Martins.
Posted by: Jeff Guinn at November 23, 2005 7:24 AMDoesn't trickle down theory suggest that with each sip and swallow, our high-rolling, big spending quaffers are phenomenal philanthropists?
(Someone ought to remind Freedland, preferably over a Guinness....)
Posted by: Barry Meislin at November 23, 2005 7:50 AMBrit:
No, of course not, but there are lots of guys like Freedland who would be happy to tax and regulate and the degree to which they will carry the day will be affected by the resentment and jealously of those who can barely afford one during happy hour at the local. Anti-sumptuary laws didn't just spring from the odd grumpy killjoy trying to take all the fun out of life. This gets back to David Cohen's point that limited government requires strong, enforced social conventions. It's one thing to trumpet freedom and choice as political objectives, but when you use them as analytical tools to define and take the problem right outside of predictable human nature, you're just setting yourself for a few nasty surprises.
How about we start with a little loud public disgust and mockery? If that doesn't work, the stocks.
Posted by: Peter B at November 23, 2005 8:44 AMRemember the luxury yacht tax? Damned near killed the boat-building industry.
Posted by: Mike Morley at November 23, 2005 8:58 AMPeter, you have tripped and fallen flat on your face.
The above folks have nailed the important points but I will add that even the author's math is wrong headed. It may be true a "few" are taking a higher percentage of the wealth but the pie is bigger! so all the "poor people" have more than ever before.
Now, if you want to limit the wealth creators you can do that and the Soviet Union did just that but the result was everyone wallowed in the mud.
As to the aurgument that libertarians, by their lack of moral fortitude, will lead us to oblivion, I say this. I fail to see the lack of morality if I fill a bottle with water and sell it to you for a thousand bucks and you pass it around to a bunch of friends that make a big deal about it drinking it. If in that process some of the hired help attending to the party is able to feed their family and get their kids off the kitchen floor, all the better. Overall, this alternative is exceedingly moral.
Posted by: Perry at November 23, 2005 8:59 AMPerry:
No, the point is your economics, however faultless, will only take you so far and then it won't matter. Morality and maximizing the GNP are not the same thing. If this kind of behaviour becomes widespread, high-profile and unchecked, there will be a popular reaction against it and that reaction will be visceral and quite unresponsive to the scholarly works of the CATO Institute. I'm not happy about it, just saying it is inevitable, although when and to what extent I have no idea.
Posted by: Peter B at November 23, 2005 9:24 AMHow 1789................
Or how the world has mostly been...............
Posted by: Sandy P at November 23, 2005 9:29 AMPeter:
But don't you think that there's a difference between the aristocratic society where only the priveleged nobility can dream of 300 cocktails; and the aspirational meritocracy where anyone with a bit of nous and a fair following wind knows they might have a crack at making it to Easy Street?
For example, the British royal family are increasingly required by public opinion to cut down on their more lavish expenditure and do a bit to earn their crust - thus we've seen the culling of the Civil List.
Yet at the same time we have a 'bling' culture, whereby rap artists, sports stars and 'celebrities' are widely admired for their garish displays of wealth, especially when they are percieved to have made it 'from the ghetto' thanks solely to their own talent, hard work and business know-how?
There's little danger of a revolution if the present system gives you a chance of getting to the top of a very big pile.
Posted by: Brit at November 23, 2005 9:44 AMBrit:
I'm not predicitng revolution or anything so dramatic. Do you want to go back to the 70's? one national left-wing government can do lots of damage very quickly.
Posted by: Peter B at November 23, 2005 9:53 AMHow many fewer children would be sleeping under the stairs if 50% fewer rich jerks were spending 50% less on their cocktails?
The answer, of course, is zero and if the number of cocktail drinkers were reduced to zero, the number of children sleeping on kitchen floors would be reduced by the same number, i.e., zero.
I'm a bit confused by some of the comments here. As far as I can tell Peter is saying that the friends & family of these bankers should exert a little social pressure to let them know that such behavior just won't do. Only in the last few decades would this be considered even remotely controversial.
Posted by: b at November 23, 2005 11:39 AMA legitimate question regarding these extravagances is: are these twits deducting them as business expenses? Or claiming reimbursement for them from their employer (and thus from shareholders)? If so, then some remedial steps might need to be taken.
Posted by: HT at November 23, 2005 11:54 AMI find that I am somewhat in Peter B's corner on this one but for only one reason. I worked until I retired for a major corporation. The CEO of this corporation one year received salary and bennies totalling over 275 million dollars. That same year the 190,000 employees were told that they could not get a raise or a bonus becuse there was not enough money. When you think that this man received 1500 dollars per employee and yet that corp could not pay bonuses or raises because they did not have enough money, then I will line up with Peter B. On the other hand if he gets that money and the employees also get a chance at raises and bonuses if they deserve them, then I have no problem.
Posted by: dick at November 23, 2005 1:52 PMThe logic of the situation is clear -- Brit & erp make the case very well.
But even a little egregious behavior like that cited here can go a long way in the wrong direction.
Which means Peter, b, and dick have a point.
Posted by: Jeff Guinn at November 23, 2005 4:18 PMPeter, I have no problem with your sense of disgust at such garish displays of over-consumption, but I really don't see how you can lay any blame at the feet of the libertarian crowd. Were they to blame for the extravagant indugences of the Vanderbilts and Rockefellers and their 1890s pleasure palaces in Newport, where partygoers were given silver spoons and buckets with which to dig precious stones out of a sand-filled trough?
The rich have behaved badly throughout history - there is nothing new here, move along. If you want to propose a luxury tax or anti-sumptuary legislation, be my guest.
Posted by: Robert Duquette at November 24, 2005 4:31 PM