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“If you prick us, do we not bleed? If you tickle us, do we not laugh? If you poison us, do we not die? And if you wrong us, shall we not revenge?”
Those searing words of Shylock in Shakespeare’s The Merchant of Venice haunt me as I read the explosive report sitting in my lap. On Wednesday the Harrison Group and American Express Publishing releases their 2012 Survey of Affluence and Wealth in America at the American Express Publishing Luxury Summit unfolding at the Breakers in Palm Beach. Penta was given an exclusive look at the survey in advance. It’s a sobering document.
While the report studies all affluent earning more than $100,000 year, I am only going to zero in on the section of the report dealing exclusively with the top 1%, 390 of the 1,268 surveyed that had more than $450,000 in annual income. Here, first, their definition of the One Percent: they have median annual household income of $750,000, median assets of $7.5 million, and there are 1.2 million of them across the country.
Let’s put that annual income level in perspective. The presidents of august educational institutions like Mountain State University of West Virginia and Chapman University of California make $1.8 million and $1.5 million a year respectively. So it’s important the public realize the much-derided 1% is a rich group, yes, but they are nowhere near the 400 über-rich, the Larry Ellisons and Donald Trumps that make up the wealth mythology floridly living in our imagination.
In actual fact, the 1% look a lot more like “regular folk” than most of us really realize. According to the survey:
– 67% grew up in a middle class or poorer household.
– 85% made their wealth in their lifetime.
– 76% describe themselves as “Middle Class” at heart.
– 3% is the sum total of their assets that they inherited.
“This is the triumph of the Middle Class,” says Jim Taylor, Vice Chairman of the Harrison Group. “Even when older, the [One Percent] don’t lose the degree with which they see themselves as the repository of the Middle Class. That means hard work. That means the value of education. That means the value of family and luck.”
Indeed, it’s important to understand most of these “Middle Class” millionaires rose to financial prominence by striving to create a business or idea or product of excellence. The wealth was a byproduct, came to them suddenly and unexpectedly, usually through a liquidity event, such as a big bonus at a major company, or a private equity buyout of the firm they built from scratch.
But here is what is so sad about the Amex-Harrison report: hammered in the financial markets and hammered by the public, this Middle Class made-good, these engines of economic growth for the nation, have dug themselves into the bunker, battered both emotionally and financially. They are hoarding cash, avoiding almost all risk, shunning their communities and hunkering down with a few select friends and family only.
They are, in a word, disengaged.
In 2007, the One Percent had a savings rate of 12%; in 2011, that savings rate had jumped to 34%. So no surprise their savings doubled between 2007 and 2011, from $250 billion a year to $550 billion a year. The percentage of those savings going into “personal savings and money markets,” earning low returns but relatively safe, has jumped from 24% to 54%. Conversely, and more disturbing, is the fact the rate invested in “financial products and markets” has plummeted from 76% to 46%.
That is not good for the nation. These people are, by definition, risk takers, and yet they’ve stopped taking financial risks. They are, in the words of the report, “irrationally defensive.” Taylor warns that “this is tremendously risky for the country. They’re putting their money under the mattress. They’re terribly nervous.”
Why should the public care? Very simply. Investment doesn’t follow job creation; new jobs are the result of risk-takers making investments.
It gets worse. For those who perceive themselves as “Middle Class” at heart – repositories of all those hard working and family values that added greatly to our nation’s fabric – it is a great shock to suddenly be vilified as social villains. Their response, understandably, is to pull back, to become ever more emotionally isolated and withdrawn from the public arena, precisely when they are most needed to be engaged with society.
In Q1 of 2010, 62% of the One Percent surveyed felt it was “important for me to join in social events in my community.” By the same quarter in 2012, that figure had plummeted to 44%. These very affluent folk are so circling their wagons that even their interest in socializing “with people who have achieved a similar level of success as I have” has fallen from 75% to 67% during the same period.
A staggering 92% agreed with the statement, “More and more I find I am preferring to spend my time with my very closest friends and family.” (Compared with 82% for the general population.) It’s an isolation that’s been steadily growing every quarter. In a related response, hanging out with “close friends and family” in the current year was a specific “goal” for 54% of those questioned in Q1 2011. Just a year later the figure had jumped to 62%.
It’s almost like, after several years of being blamed for all the ills in the nation, the One Percent are washing their hands of the rest of us, now too afraid to even be seen in public: 25% are “extremely/very concerned about being scorned for being in the top percent in the economy.” Cara David, Senior Vice President at American Express Publishing, warns against a nation where “success is not something you want to aspire to.”
So let’s take a deep breath. We must respect the Wall Street protestors for acting as a kind of conscience for the nation, their chants and drumming a kind of cri de coeur that all is not well with the nation. But we should also recognize that Witch Hunts are also very much a part of the country’s DNA, and the demonizing of the wealthy has finally reached a dangerous tipping point for the nation.
“We somehow have to change the storytelling about the wealthy in this country,” says David. “The more and more they pull back – it’s not good for anybody. We need the wealthy to be active and out and not be hiding. And those that aren’t [wealthy], need to have more appreciation for those that are.”
The chanting Wall Street protestors, the populist politicians, the media pundits who somehow think it is good sport to hunt down the nation’s wealthy with the soapbox equivalents of elephant guns, need to understand how they are collectively destroying the environment. It’s a simple fact: bio diversity is the sign of a healthy eco-system; kill off the elephants and we all die.