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A
Peep into Richistan
By—Girish Mishra
People
are acquainted with Hindustan, Pakistan, Uzbekistan, Tajikistan
and so on. In the early years of the 1980s, ‘Khalistan’ was
hotly discussed in India. Certain extremist elements in Punjab
had started an agitation for a separate homeland of ‘Khalistan’.
One can locate them on the map of the world and identify the
areas that were to constitute ‘Khalistan’. One, however, cannot
point out the geographical location of the new entity Richistan
that Robert Frank of The Wall Street Journal claims to have
recently discovered. His discovery is radically different from
that of Christopher Columbus in the sense that it is abstract
and unlike the American continent newly born and populated.
Richistan’s culture and life-style are completely recent. The
new entity, being abstract, can only be felt and imagined. If
one looks around, one may find Richistan in nascent form in many
countries, including India. This abstract country is only two
decade old, yet it has established its unchallenged dominance in
America and is becoming, day by day, influential in other
countries where it is fast coming up.
Frank in his book (running into 277 pages) has tried to find
answers to certain important questions: Who constitute this
country? How have they become fabulously rich? How is money
changing their lives and how are they influencing the lives of
the people living beyond the boundaries of Richistan?
Frank finds that the present day rich, unlike the old rich, have
set up their own virtual country, which is wealthier than most
countries of the world. “By 2004, the richest 1 per cent of
Americans were earning about $1.35 trillion a year—greater than
the total national incomes of France, Italy or Canada.” The
residents of this virtual country have built “a self-contained
world unto themselves, complete with their own health-care
system (concierge doctors), travel network (Net Jets,
destination clubs), separate economy (double-digit income gains
and double-digit inflation), and language….” The rich are
getting richer by every passing year and they have their own
country, society, economy and culture.
The route they have travelled to acquire ever growing wealth is
different from what the old rich followed and is “driven by vast
pools of money sloshing around the world.” In other words,
various dimensions of this route need to be investigated to know
how the Richistanis have reached where they are in a large
number. The answer lies in a convergence of three forces,
namely, new technologies, a rise in financial speculation and
government backing to free market, leading to a freer flow of
goods, investments and information around the world This began
in the 1980s when the rise of information technologies, growing
dominance of capital markets and economic deregulation by the
government combined to bring about a surge in the number of the
wealthy. “The share of wealth held by the top 1 per cent jumped
to 30 per cent in 1989, and has since risen to 33 per cent.”
Along with concentration of wealth, its creation has also
accelerated, so much so that half of America’s wealth has been
created in recent 10 years. It needs to be noted that
inheritance has not played any significant role in the case of
the neo-rich, but just like the olden days, fraudulent ways and
methods have played a significant part in enriching quite a
number of Richistanis. Globalization, coupled with blind
adherence to the 10-points of the Washington consensus, has
provided unrestrained scope for gathering ever-increasing
wealth. Thus a new generation of rich people have come up, who
“have made more money, more quickly, from more sources than any
previous generation… As a result, Richistanis have redefined the
way people become wealthy in America. They’ve also redefined the
very meaning of the word “rich”.” Frank goes on to add: “One of
the defining characteristics of Richistan is its diversity.
Almost anyone, anywhere can make a fortune today with the right
idea. The river of cash flowing around the world is so large
that it’s spilled into areas of the economy that most of us have
never even heard of.”
The emergence of Richistanis have changed the connotation of
‘the leisure class’, as defined by Thorstein Veblen in 1899 in
his The Theory of the Leisure Class. It is no longer an idle
class for the Richistanis are too young to retire and too
concerned with keeping up with their peers. In other words both
the ‘snob’ and ‘bandwagon’ effects are all the time visibly
operative. Since most Richistanis operate in financial markets,
which are full of uncertainties, they cannot relax their guard
lest they would lose their wealth and be expelled from Richistan.
Thus the new leisure class is workaholic. “They don’t have the
time or patience to putter around the croquet or sip away the
hours in the polo box like Old Money. In an economy driven more
than ever by competition and innovation, the people who succeed
tend to be those who thrive on risk, reinvention and brutal
hours. Richistanis are younger than the rich of the past, and
far more likely to be working or running their own businesses.
They climbed their way up from the middle class and continue to
define themselves by their 18-hour days and outsized
productivity.” Further, “For Richistanis, work has become their
play, and play has become their work. Yachts and jets are now
loaded with communications gear to allow the rich to keep
working even if they’re floating in the Mediterranean or soaring
above the Atlantic.” Laptops are their constant companions.
Unlike the old rich, the residents of Richistan constantly
suffer from fear of falling because both financial markets and
technologies are all the time undergoing rapid changes. If they
relax their watch and fail to act correctly, they are vulnerable
to losing their wealth in no time. This constant fear of falling
is due to the fact their wealth is tied to stocks, options,
derivatives and other free-floating assets, subject to violent
fluctuations in their prices. As against this, the old rich had
their wealth in tangible assets, such as land, houses, cars,
trucks, factories, finished goods and raw materials, whose value
could not evaporate over night.
There is an unceasing tension between the old and the new rich.
The former look down upon the new rich as uncouth and upstart,
devoid of manners. This prompts the Richistanis or the neo-rich
to patronise charitable work and activities connected with arts,
culture and literature. They try to associate themselves with
public institutions active in the spheres of health, education,
sports, etc. There is another difference between the two. “While
Old Wealth prided itself on modesty, tradition, public service,
charity and sophisticated leisure, Richistanis pride themselves
on their middle-class ethic, self-made fortunes and big
spending.” Further, “While Old Money was known for its outward
thrift and inner opulence… Richistanis like to flaunt their
wealth. And never before have so many flaunted so much.”
Richistanis consume not to satisfy their needs but not to be
left behind their peers. In fact, goods and services demanded by
them are status symbols. With enormous amounts of money at their
disposal, they are really conspicuous consumers. Demand for
luxury goods has been increasing very rapidly. With most of the
GDP going to the Richistanis, the pattern of production is fast
changing with greater emphasis on such goods as go to satisfy
their demand. “According to one study, the nation’s richest
half-percent consume at the rate of $650 billion a year—equal to
the total household spending in Italy. All that spending is
pushing up prices in Richistan. The inflation rate for
millionaires soared to 6 percent in 2004, compared to about 3
percent for the broader United States. For those worth $30
million or more inflation rose even further, to 12 percent.” The
growing share of the national pie going to Richistanis, leading
to a radical change in the pattern of production has
implications for what has been known as realization problem. The
Great Depression was found to be a reflection of “realization
crisis” and the way out came in the form of the Keynesian
prescription. Consequently, the role of the state in the economy
increased and it metamorphosed itself into a welfare entity. It
is claimed, with the emergence and growing dominance of
Richistan, all this has changed. State has to give up its
welfare activities and leave everything to market forces.
Privatization, deregulation and financialization have become the
new mantras. Capitalism will face troubles but not owing to
realization difficulties, they will originate in the financial
sector.
Frank has referred to Ajay Kapur of the Citigroup, who has come
up with his theory of plutonomy to explain why the American
economy has not faced any severe realization crisis in recent
times. In a plutonomy, “the wealthy account for a greater share
of national wealth, spending, profits and economic growth when
compared with other developed countries. …the top 20 percent of
income earners account for as much as 70 percent of consumption
in the United States. Like it or not… spending by the rich was
propping up the economy, even as the middle and lower classes
were struggling.” Further, “In this new plutonomy, with “rich”
consumers and “everyone else,” companies that serve the rich are
prospering. From department stores to hotels to automakers to
homebuilders, businesses in every industry are adapting to an
increasingly hour-glass-shaped economy, selling to the
status-seeking rich, and the penny-pinching middle and lower
middle classes.”
The trickle down effect manifests itself in two ways. First, the
spending by Richistanis benefits the lower classes when a
portion trickles down to them. Second, along with this there is
a trickle down in aspirations. The lower classes try to ape the
Richistanis and hope to join them at some distant date. Thus
they do not seem interested in changing the class correlations.
In America, peasantry has given way to farmers and the nature
and character of the working class has changed leading to the
weakening of its political power.
Richistanis have been fast increasing their dominance over, not
only economy, but also society and politics. The media, whether
print or electronic, are at their beck and call and eager to
earn their goodwill. “Whether they’re funding campaigns or
running for office, Richistanis are emerging as a major force in
American politics. They’ve conquered the business world, and now
they want power.”
The emergence and the growing prosperity of Richistan have been
making the American society more and more unequal. Median
incomes for American households have been falling. “By almost
any measure, America is becoming a more unequal society. The
richest 1 percent of Americans control more than 33 per cent of
the total wealth, and their wealth is now greater than the
bottom 90 percent of Americans. The share of national income
held by the top 1 percent of earners is now the highest since
World War II.” While the Richistanis enjoy tax reductions
granted by the Bush administration and spend on luxuries, public
health, education, roads, bridges and environment are not
properly cared for because of the lack of resources at the
disposal of the government.
If we look around, we see Richistan in nascent form in India
too. Parts of New Delhi, Mumbai, Bangalore, Hyderabad, Pune,
Kolkata, Chennai, Gurgaon and so on may be physically in India,
but, otherwise a part of American Richistan. This has serious
implications because it encourages corruption and criminal
activities as the people left behind want to ape the life style
of the neo-rich and for that they want money by hook or by
crook.
Girish Mishra,
E-mail: gmishra@girishmishra.com
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