The bubble world of the super rich

Issue 

Richistan, A Journey through the 21st Century Wealth Boom & the Lives of the New Rich

By Robert Frank

Piatkus, 2007

263 pp.

Wall Street Journal reporter Robert Frank stumbled across an interesting statistic while researching an article in 2003: the number of millionaire households in the USA had doubled in the period from 1995.

A million dollars doesn't mean what it used to, says Frank, but, startlingly, at every level of wealth — households worth US$10 million, $20 million, $50 million — all the populations were doubling.

Frank immersed himself in the world of these super-rich and quickly felt like a foreign correspondent. He had discovered Richistan, one of the richest countries in the world!

The richest 1% of the US population earn about $1.35 trillion a year, more than the total national incomes of France, Italy or Canada.

They inhabit a self-contained world with their own health-care system (called "concierge doctors"), travel network (Net Jets, exclusive destination clubs), separate economy (with double-digit income gains and double-digit inflation) and language ("Who's your household manager?").

"Gardeners aren't good enough; they hire 'personal aborists'!"

Capitalism has been surviving through "financialisation" since the generalised rate of profit decline started in the 1970s. The massive artificial creation of credit, corporate globalisation and speculation in "financial vehicles" has created a virtual river of money sloshing through global stock exchanges around the clock. Richistanis have skimmed off some of this wealth for themselves.

Frank is at his weakest in explaining the source of all this wealth, but very good at exposing the shallowness of the lifestyles that it supports and the sheer scale of the fortunes these people have cornered for themselves — which eclipse past famous fortunes.

Half of the total wealth in the US has been created over the past 10 years, he says. "Rockefeller's $1 billion would be worth $14 billion today — less than the net worth of each of the five offspring of Wal-Mart founder Sam Walton."

But Richistan itself is divided by class jealousies: Lower Richistan, "the sprawling suburbia of Richistan", with 7 million households worth between $1 million to $10 million per year are the paupers.
Desperate to impress those above them, Lower Richistanis spend and borrow for shiny new BMW's, nannies etc. About 20% of them spent all (or more) of their income in 2004.

The prices of posh consumer items they crave are inflating at 6% year, twice the inflation rate of the United States. These people are set to be creamed by the US credit crunch.

Middle Richistanis (population: 1.4 million) have net worths between $10 million to $100 million. Again, their competitive consumption patterns have created inflation — for people worth over $30 million inflation is 11%.

Upper Richistan, with just a few thousand families, is where households are worth $100 million or more. Their lives are incredibly complex, says Frank. They create "family offices" to serve their everyday needs. "Upper Richistanis rarely open their own mail or pay their own bills, which may explain why the average annual spa bill in Upper Richistan is $107,000."

Then there is Billionaireville, the elite village, which expanded its population from just 13 in 1985 to 400 in 2006.

When Richistanis feel blue there are special personal development groups open only to people with a minimum $10 million personal worth. They can bare their souls and feel human just like, well, real human beings.

A constant worry is how to pass on the wealth to their spoiled brat children, the "aristokids", without it being lost within weeks. An estimated $15 trillion will be passed down to Richistani heirs before 2052.

The parents' fears can be boiled down to two words, says Frank: Paris Hilton.

Thank goodness there are rich-friendly psychologists running Financial Life Skills Retreats for pimply teen Richistanis.

But there are other fears. As Raymond Champion, instructor at the Starkey Mansion Butler Boot Camp explains to trainee servants for the super-rich: "They're health freaks. These people are very successful and, guess what, they want to live forever. These are very germ-orientated people. Get used to it. Germs are huge in this world."

Having visited this world through Franks' book, I am left thinking that the germs are not yet big enough.