Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else Read Free Page B

devised a variation on the theme, a thesis it calls the “consumer hourglass theory.” This is the notion that, as a consequence of the division of society into the rich and the rest, a smart investment play is to buy the shares of super-luxury goods producers—the companies that sell to the plutocrats—and of deep discounters, who sell to everyone else. (As the middle class is being hollowed out, this hypothesis has it, so will be the companies that cater to it.)
    So far, it’s working. Citigroup’s Hourglass Index, which includes stocks like Saks at the top end and Family Dollar at the bottom, rose by 56.5 percent between December 10, 2009, when it was launched, and September 1, 2011. By contrast, the Dow Jones Industrial Average went up just 11 percent during that period.
    T HE F IRST G ILDED A GE
     
    On February 10, 1897, seven hundred members of America’s super-elite gathered at the Waldorf Hotel for a costume ball hosted by Bradley Martin, a New York lawyer, and his wife, Cornelia. The New York Times reported that the most popular costume for women was Marie Antoinette—the choice of fifty ladies. Cornelia, a plump matron with blue eyes, a bow mouth, a generous bosom, and incipient jowls, dressed as Mary Stuart, but bested them all by wearing a necklace once owned by the French queen. Bradley came as Louis XIV—the Sun King himself. John Jacob Astor was Henry of Navarre. His mother, Caroline, was one of the Marie Antoinettes, in a gown adorned with $250,000 worth of jewels. J. P. Morgan dressed as Molière; his niece, Miss Pierpont Morgan, came as Queen Louise of Prussia.
    Mark Twain had coined the term “the Gilded Age” in a novel of that name published twenty-four years earlier, but the Martin ball represented a new level of visible super-wealth even in a country that was growing used to it. According to the New York Times , the event was the “most elaborate private entertainment that has ever taken place in the metropolis.” The New York World said the Martins’ guests included eighty-six people whose total wealth was “more than most men can grasp.” According to the tabloid, a dozen guests were worth more than $10 million. Another two dozen had fortunes of $5 million. Only a handful weren’t millionaires.
    The country was mesmerized by this display of money. “There is a great stir today in fashionable circles and even in public circles,” the Commercial Advertiser reported. “The cause of it all is the Bradley Martin ball, beside which the arbitration treaty, the Cuban question and the Lexow investigation seem to have become secondary matters of public interest.” Then as now, America tended to celebrate its tycoons and the economic system that created them. But even in a country that embraced capitalism, the Martin ball turned out to be a miscalculation.
    It was held at a time of mass economic anxiety—in 1897, the Long Depression, which had begun in 1873 and was the most severe economic downturn the United States experienced in the nineteenth century, was just gasping to an end.
    Mrs. Martin offered a trickle-down justification for her party: she announced it just three weeks beforehand, on the grounds that such a short time to prepare would compel her guests to buy their lavish outfits in New York, rather than in Paris, thus stimulating the local economy. The city’s musicians’ union agreed, arguing that spending by the plutocrats was an important source of employment for everyone else.
    But public opinion more generally was unconvinced. The opprobrium—and, on the crest of the wider public anger toward the plutocracy the Martins had come to epitomize, the imposition of an income tax on the super-rich—the Martins faced as a result of the ball prompted them to flee to Great Britain, where they already owned a house in England and rented a 65,000-acre estate in Scotland.
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    The Bradley Martin ball was a glittering manifestation of the profound economic transformation that had