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WWVS (What Would Veblen Say?)

Daniel Gross had the smart idea of turning to the writings of Thorsten Veblen, one of America's greatest, and first, political economists, for some insight on the current meltdown. Veblen, he decides, is still right about the eccentricities of the wealthy. But his "Theory of the Leisure Class" has been shot through with holes by an upper crust that can't stop checking its e-mail:

In the contemporary money culture, to be at leisure, to be idle, is to be irrelevant. After Bank of America acquired Merrill Lynch, John Thain, the former chief executive of Merrill, was pushed out, in part because he insisted on going skiing at Vail over Christmas and wanted to attend the World Economic Forum in Davos amid the company’s continuing crisis. A great many people can afford not to work and could spend their time shuttling between multiple homes, eating fabulous meals and playing golf. Yet they continue to work around the clock. Of course, the private jet, the BlackBerry and the Internet allow people to do all of the above. But among Type-A, self-made members of the leisure class, there’s a sort of reverse prestige associated with leisure. At Davos, which is filled with conspicuous consumers, the only people who ski are the journalists.

Veblen, in other words, was right about the culture of conspicuous consumption, where acquiring ever more impressive material goods served "as a means of reputability to the gentleman of leisure.” But he was less attuned to the rise of conspicuous achievement, where the hours worked and the awards accrued served as a means of triumph. In part, though, that's because the rich in Veblen's day looked rather different from the rich in ours. They were, for lack of a better term, the lazy rich. This graph from Emmanuel Saez's "Income and Wealth Concentration in a Historical and International Perspective" tells the tale well:


Veblen, who died in 1929, saw a large overclass that earned most of its wealth through returns on capital. Essentially, their money made money for them. Which gave them time to hang about and conspicuously consume. In the period after his death, that overclass shrank substantially, first because the Great Depression battered them and then because the New Deal disadvantaged them. But by the start of the 21st century, they were back. At least in terms of wealth concentration. Their money, however, wasn't coming from capital returns. It was coming from wages and salaries. They were -- gasp! -- working.

By Ezra Klein  |  July 8, 2009; 10:07 AM ET
Categories:  Charts and Graphs , Economy , History  
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Conspicuous consumption has become a middle-class phenomenon. The truly rich wouldn't dream of fussing over brand names or vacation spots the way McMansion dwellers do. The real luxury of our decade is having the connections and the expensive education to reach the top of one of a select few professions.

Posted by: csdiego | July 8, 2009 11:16 AM | Report abuse

Over simplification. There are the very rich, who tend to be CEO's and traders and the like and make in the $100+ million range. They "work" and make sure that others see how hard they do it, but it's not like standing on your feet for eight hours checking out goods at Walmart, or digging ditches. Mostly they talk to others and act as "fixers"

There are upper class, who make, say between $150K - $500K. The stock brokers, lawyers and others whose lifestyles appear in the press. Looking busy is their status symbol, hence their programmed lives and those of their kids.

Then there are the truly wealthy, say the Walton family - worth about $100 billion. This is a small class, perhaps several thousand people in the US. They still make money the old fashioned way - from capital. The Walton's make over $1 billion per year just from the dividends on the Walmart stock they own, and pay a 15% tax rate on it (adjusted for AMT, but with other loopholes).

It is this class that wields outsized influence compared to its numbers. This group funds the majority of the conservative think tanks, especially those which favor lower taxes and less regulation. Places like Cato, Heritage, Hoover, etc. Look them up in Source Watch and you will see the same backers over and over: Coors, Scaife, Koch, Mars, etc.

They are wealthy enough that we don't know what they do with their time or money. They can afford to be made invisible. The harm is not just the accumulation of wealth and the distortions of social priorities, but the subversion of democracy. A system where money votes not people will eventually fail.

Posted by: robertfeinman | July 8, 2009 11:18 AM | Report abuse

It appears from the chart that business income, the income derived from risking capital, producing goods and services, is on the rise.
This is good news, not bad. While the left is jealous, we should, instead, look in our own pockets and ask ourselves if we are better off with lots of business investment since that's where the jobs are and that's where actual production occurs.
I'm interested in MY finances.

Posted by: WrongfulDeath | July 8, 2009 12:07 PM | Report abuse

Actually I think this may be a result of the industrial revolution. In the 19th century, a man lived off his labor, his capital, or his wits. The first made you working class, the second made you a gentleman, and the third made you a scoundrel, at least in popular discourse. However, the growth of cities and new professions was already starting to make the third class respectable. For example, when Sherlock Holmes tells Watson that he's still "living by his wits" as the world's first consulting detective he's poking fun at the idea that respectable people live only off their capital.

In the wake of the financial crisis, however, it might behove us to remember that those who lived by their wits, as opposed to their returns on capital or their honest labor, were considered scoundrels.....

Posted by: Diana15 | July 8, 2009 12:07 PM | Report abuse

Interestingly, in his book "Good to Great", Jim Collins notes that the common thread among CEOs in companies with long-term high performance are not the high-profile jet-setting types who work 24/7. Those CEOs are usually the ones at the helm when a company sees some remarkable popularized growth, only to come crashing down later.

Thankfully we had the Regan Revolution to ensure the redistribution of wealth could head back in the direction of the Gilded Age.

Posted by: Jaycal | July 8, 2009 3:29 PM | Report abuse

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