KEY POINTS:
* Richistan: A journey through the 21st century wealth boom and the lives of the new rich
* By Robert Frank
* Published by Piatkus
For four years, Robert Frank has held a curious position on the Wall Street Journal. On the in-house publication of the American money markets, Frank is the lifestyle correspondent; his job has been to report on the spending habits of the United States' new rich, the top 1 per cent of earners in the wealthiest nation the planet has ever known.
By 2004, this elite was taking home US$1.35 trillion a year, a figure in excess of the take-home pay of the whole of France, Italy or Canada. But, Frank said, these people had not just been getting richer during the Bush years, they had been creating a separate country, which he calls Richistan; a state within a state closed to those with a net worth under US$10 million ($13 million).
He set out to explore this distant land for his paper in the way that a foreign correspondent might have done, sending back the news from the front.
His first port of call is a boot camp for aspiring butlers - or CEOs of MyDomesticLife - in Denver. Graduate Dawn Carmichael knew she was born to this life after working briefly as a housekeeper for a ranch owner.
"I loved knowing what made him happy," she recalls. "I sectioned his grapefruit every morning just the way he liked it and I always kept the TV tuned to Channel 36, his favourite. I would sometimes ask myself, 'Why is it so important for me to get him the right kind of potato chips? Am I sick?' But then I came here and realised there are many others out there like me. I feel like I found out what I was meant to do."
Carmichael is not alone. The Richistanis do not contrive their laidback, reiki-loving, chino-wearing, family-focused lifestyle without a good deal of assistance. Frank found the expenditure on household staff generally ran to US$500,000 a year but could be double that. A similar amount went on club memberships and one Richistani spent US$250,000 annually on beauty treatments.
It would be easy to think such expenditure had a trickle-down effect or in the words of J.K. Galbraith: "If you feed enough oats to the horse, some will pass through to feed the sparrows." In fact, there is no evidence that the such spending has helped to narrow gaps of inequality. Rather, the economy has become skewed to service this group.
When oil prices rose sharply recently, many analysts were surprised why the American economy did not slow more rapidly.
Analyst Ajay Kapur came up with the notion of a "plutonomy". The top 20 per cent of earners, the inhabitants of Greater Richistan, were immune from such trifling facts as oil prices. Since they accounted for 70 per cent of consumption, the effect of the squeeze on most was hardly felt. (Kapur came up with one other economy where the inequality gap was so high the plutonomy principles had begun to apply: the UK.)
The American plutonomy had also created an unusual inversion in market forces. The more charged for a service or a product, the more likely they were to buy it.
Cutting prices and margins not only began to seem like an irrelevance in 70 per cent of the market, it threatened to be commercial suicide. The fastest-selling watches in Richistan are not Rolexes - they do not make it into the top 10 brands - but Franck Muller, a new brand that realised Rolexes were too cheap. A Muller watch sells for nearly US$750,000.
Who wears Muller watches? In most cases, men who have engineered in different ways their share of the glut of stock-option wealth generated by the explosion of financial markets and new technologies in the past two decades; either through being in the right corporate place at the right time or by managing the investment of absurd windfalls.
Many statistics attach themselves to Richistan. Two telling ones are: Wall Street's five biggest firms paid out US$36 billion in bonuses in 2006 and, while in the seventies the average American chief executive typically took home 40 times the wage of his average employee, he now pockets 170 times that of his typical minion.
Has this outrageous fortune spread happiness in Richistan? The emergence of' wealth support groups suggests not with many anxious about staying ahead of the Joneses.
Worse, the new American elite worries about its children. About "US$15 trillion" will be handed down from this caste of multi-millionaires. How will the next generation cope? Because if they don't, they can best be summed up in two words: Paris Hilton.
- Observer
