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Rise of the super rich

Age of austerity? Pfff

Rise of the super rich
09 November 2011

We’ve all dabbled in graffiti. Who hasn’t pledged eternal love on a park bench or etched their initials in wet cement hoping that, one day, it’ll send a futuristic Tony Robinson into a spasm of archaeological ecstasy? Few of us, however, have carved our name into our own private island in letters so enormous that Robinson and his bearded cyborg assistants will be able to read it from their moon colony.

For ‘few’ read ‘one’: Sheikh Hamad bin Hamdan Al Nahyan, Abu Dhabi royal, multibillionaire and owner of Al Futaisi island in the Arabian Gulf. In July, as if worried he might somehow misplace his island, the sheikh spent a reported £13.75m having ‘Hamad’ carved, two miles long and a kilometre high, into its landscape. Huge letters, indeed, but this extreme name-tagging represents something even bigger: an epidemic of extravagance spreading among the world’s wealthiest people.

‘Occupy’ what you like, protestors: it won’t make any difference to the mega-rich. As the world drowns under a wave of austerity and poverty, they are boarding their gilded mega-yachts and heading full-steam to the bank, spraying the salty seawater of decadence into the eyes of the common man as they go. They operate on a different planet, a different plain of existence, to other human beings, flitting between multiple, international homes to avoid the rules of any one nation; some are even wealthy enough to buy their own country and make their own rules. The audacity results in three questions: How are they doing it? Why are they doing it? And just how far will they go?

According to US business magazine Forbes, there are now a record 1,210 billionaires on the planet with a combined personal wealth of around £2.82tn — a figure larger than the gross domestic product of Germany. In 2007, before the recession, there were 946 billionaires worth a total of £2.19tn. With Joe Public’s belt being tightened to the point of bisection, it’s a perverse trend.

“As a group, they’ve managed to firewall their wealth from external shocks,” says Stewart Lansley, author of two books on the mega-rich, Londongrad and The Cost Of Inequality. “While taking an initial hit, collectively the richest are richer now than before the crisis. Many financiers made fortunes by betting on the direction of events. And while 90 per cent of what they make is reinvested to earn more money, they’re also spending extravagantly.”


Examples are everywhere. At sea you have the yachts. Russian banking and fertiliser magnate Andrey Melnichenko spent just shy of £200m on his Philippe Starck-designed ‘A’: a vessel which looks more like an albino nuclear submarine than a boat. Features include £25,000-a-piece bath knobs and an annual maintenance bill of £12.5m.

‘A’ is a mere bath toy, however, compared to Eclipse — the behemoth that cost fellow oligarch and disposer of Chelsea managers Roman Abramovich an estimated £1bn. Eclipse boasts a disco, mini-submarine and missile defence system and, at 163.5 metres, is the world’s largest yacht, edging out the Dubai (owned by Sheikh Mohammed of, you guessed it, Dubai) by an amusingly slight 50cm.

If you prefer private jets, then Saudi Prince Al-Waleed bin Talal’s your man. His fleet includes the only privately-owned 747-400 and a £154m custom-built double-decker Airbus A380, fitted with Jacuzzi, 15-seat boardroom and the seemingly de rigueur missile defence system.

And for land-lubbers, there’s Indian business magnate Mukesh Ambani’s 27-storey Antilia home in Mumbai. Considered to be the world’s most valuable house at around £625m, it provides a 50-seat cinema, parking for 160 cars, three helipads, a room with a snow-machine and stunning views of the Mumbai slums below.

“The spending’s irrational,” says Dacher Keltner, a professor of psychology at the University Of California, Berkeley. “We’re a hierarchical species, so it’s keeping up with the Joneses. Where we may try to have a better lawnmower than our neighbour, they do it with jets. But we’re not born to be selfish. We’ve just become more materialistic in the past 30 years. There’s a sense that these people feel entitled to these things.”

OK, they may like to use their diamond-encrusted Bank Of Dubai credit cards (a real thing) to buy silk toilet paper and mink toothbrushes (possibly invented by us), but surely billionaires have a heart, too? What about Bill Gates, Warren Buffett and Mark Zuckerberg’s ‘giving pledge’ to donate half their wealth to charity? Sadly, they’re in a tiny philanthropic minority. Despite illuminating glitzy charity events with their expensively maintained smiles, science says the mega-rich prefer to have their cake, eat it, and then build a high-security pantry to keep everyone else’s grubby mitts off the leftovers.

“The richer you are, the less of your money you give away,” says Keltner. “A study we did for the Psychological Science journal showed that, on average, the wealthy give away 2.7 per cent of their money, while the less wealthy give away 4.2 per cent. It’s because there are two powerful triggers to empathy: the need to rely on someone else, and being under threat. The richer you are, the less you experience these triggers.

“The rich also lose their connection with ordinary people, the richness of normal social interaction. Their lifestyle, going around on jets and yachts, means they never really meet regular people. And when assistants get around the wealthy, they become muted and deferential. Studies of the Bay Of Pigs Invasion, one of the worst presidential decisions in history, showed that people were so in awe of John F Kennedy they weren’t honest with him.”

The stupendously rich are nothing new, of course, and neither is their immodesty. William Randolph Hearst, the inspiration for Citizen Kane, not only built Hearst Castle in California, complete with the world’s largest private zoo — he did it from 1919 to 1947, while the US was fighting the Great Depression and the Second World War.

“Conspicuous consumption was always a feature of the very wealthy,” says Professor Ranald Michie, a historian at the University Of Durham. “Take Julius Drewe, a Victorian who started the Home & Colonial Stores retail chain. A genealogist told him that he descended from a Norman aristocratic seat in Drewsteignton, Devon. When he went there, the Norman castle that he expected to find didn’t exist, so he built one.

“However, the spending differed to today. Victorians built great country houses and filled them with art, or founded universities, theatres and galleries. They were creating a memorial for themselves. There was more scope for altruism, too. They paid very little tax and there was no welfare state, so it was necessary, but they were also more religious, so some might have been trying to save their eternal soul. In fact, I’d probably say the biggest difference between then and now is the fear of damnation.”


With their apparent disregard for the less fortunate and, possibly, any potential divine judgement, the financial and social distancing of today’s mega-rich is clearly worrying; but how far could it go? It seems absurd, but after decades of consuming science-fiction and its love of a plutocratic dystopian future, it’s hard to suppress the image of a world in which the wealthy few have become a separate, all-powerful race, ruling the planet in shiny jumpsuits.

Might we become like the underground workers of Metropolis as they lord it up in their sky-scraping mega-houses? Will they become the genetically-perfected mega-humans of Gattaca while we procreate via the lottery of copulation?

“To some extent, this separation has already happened,” says Lansley. “In the past, the rich were locked into nations, but now they’re not. They have homes everywhere, don’t pay taxes and have lost a sense of loyalty.”

And there are even signs of the mega-rich going beyond this nationless state and creating their own borders; ones which ordinary people cannot cross.

In 2013, Richard Branson’s Virgin Galactic will begin its £125,000-a-pop sub-orbital joyrides, while 2016 should see the opening of the Commercial Space Station, better known as The Space Hotel. This seven-guest, four-cabin module will cost £100,000 per person for a five-night stay, plus an extra £500,000 for the two-day flight there on a Soyuz rocket (don’t worry if you’re budgeting, it’s a return).

There are less-touristic plans, too, such as Sheikh Mohammed’s ‘The World’ development off the coast of Dubai. These 300 private man-made islands, shaped to look like a map of the world, will each come with its own ‘Ome’ — a self-sustainable floating five-bedroom house.

But none have travelled the separatist road as far as Peter Thiel, founder of PayPal. He, along with a group of like-minded individuals, have invested in what they hope will become their own private utopia: a floating country in international waters near San Francisco, free from the laws and taxes of any state, to which they will sail in 2018.

Of course, it’s easy to mock, but there is a serious side to all this: the mega-rich have a tremendous amount of power. Not necessarily the power to vaporise cities or flee Earth, but financial power beyond any government. The amount of money they’re sitting on almost defies comprehension. Financial services organisation for the super-wealthy The Bank Of New York Mellon alone is holding $25.9tn (£16.1tn) of assets. To put that into perspective, the US national debt is $14.8tn (£9.2tn).

“If it spent its money it could change things for the better,” says Lansley, “but it’s holding on to it. It’s more likely to invest in takeovers and private equity, which make money from the transfer of existing wealth rather than create new wealth and jobs.

“In the past century, the number of the super-rich has suddenly risen twice: in the Twenties and the 2000s. Both led to collapses. The collapse of 1929 led to a reinvention of economics — the super-rich took a battering and didn’t bounce back until the late Seventies — but after 2008’s crisis it was business as usual and they’ve more than bounced back. While the workforce’s pay is frozen, executive pay and banking bonuses are at near-record levels. This widening gap is unsustainable. If it doesn’t change, we face an almost permanent recession.”

In which case, the mega-rich’s disinclination to part with their money without the promise of an even bigger sum of money — or something with a missile defence system — in return is far from encouraging for the rest of us. But Keltner does offer one glimmer of hope that might appeal to the mega-rich’s egoistic sensibility. “Evidence shows,” he says, “that giving money away boosts longevity and immunity.” And just imagine how long they could live in exchange for a billion pounds.