Cross-posted from The Global Sociology Blog.

The book I want to start this conversation on social class is Robert Frank's Richistan - A Journey Through The American Wealth Boom and The Lives of the New Rich. It is an ethnographic overview of the lifestyles of the new superrich. What does Richistan mean? According to Frank,

"Today's rich had formed their own virtual country. They were in fact wealthier than most nations. By 2004, the richest 1 percent of Americans were earning about $1.35 trillion a year - greater than the total national incomes of France, Italy or Canada.

And with their huge numbers, they had built a self-contained world unto themselves, complete with thwie own health-care system (concierge doctors), travel networks (Net Jets, destination clubs), separate economy (double-digit income gains and double-digit inflation), and language ("who's your household manager?"). They didn't just hire gardening crews; they hired "personal arborists." The rich weren't just getting richer; they were becoming financial foreigners, creating their own country within a country, their own society within a society, and their economy within an economy.

They were creating Richistan." (3-4)

Richistanis are the new rich. Those who did not inherit their wealth but started off as part of the middle or upper-middle class. They tend to get rich significantly younger than previous generations of multimillionaires. And they are also more diverse demographically and politically: that is, they are not necessarily Republicans or social conservatives.

Being a world onto itself, Richistan has its own social ladder where Frank identifies four major social classes: lower, middle, upper Richistanis and Billionaireville.

Lower Richistan has about seven million households that make between $1 and $10 million. Half of their wealth comes from income. They are highly educated professionals who have benefited from rising wages at the top of the social ladder. However, they are the working class of Richistan and the gap between them and the classes above them is growing. According to the data, the average income for the top 1% grew by 57% between 1990 and 2004, but it grew by 85% for the top .1%. So, to keep up, lower Richistanis are spending and borrowing heavily. About 20% of them spend all their income. Politically, they are the most conservative of Richistan

Middle Richistan is composed of the roughly 2 million households who make between $10 and $100 million. We are still in the salaried class but with a greater share of wealth coming from investments and small business. Middle Richistani are more liberal (most of them voted for Kerry in 2004) because they emphasize the need for quality education, environment and technology. They are also big spenders and their inflation rate is around 11%. They too need to spend dramatically to keep up with the class above them: Upper Richistan.

Upper Richistan is composed of the thousands of households who make more than $100 million and this money comes from business and investments. Most Upper Richistanis made their fortunes starting their companies and selling them to giant corporations. They are increasingly joined by CEOs and hedge fund managers.

It is at this level that life becomes more complicated has Upper Richistanis have to hire armies of service workers of various kinds to manage their gigantic estates and households. Upper Richistanis have outsources most housekeeping functions to hired staff and enjoy the spendings (like an average $107,000 annual spa bill). It is at this level that people realize they will not be able to spend all their money over their lifetime.

Then comes the Upper crust: billionaireville. There were 13 billionaires in the US in 1985, there were more than 400 in 2006 but maybe as many as 1,000 (some like to stay under the radar). This is the social class that has done the best over the past 10 years by doubling their fortunes sinced 1995.

After these basic statistical facts, Frank takes a closer look at the lifestyle of Richistanis, including their impact of the structure of the labor market, for instance. Richistanis are heavy consumers of luxury goods and services and as their numbers expand, so does the corresponding markets. Case in point, butlers are making a comeback as a well-paying career track:

"The vast new population of Richistanis, with their huge homes, multitude of toys and large lifestyles, has created new demands for household help. Maids, nannies, personal assistants and private security guards are proliferating. Catering to the rich - once considered dead-end service work - is now a hot career track. And of all the occupations, the butler has seen the most dramatic transformation in skills and pay." (19)

So, we're not talking about Mr Belvedere here. We are talking about "household managers": people who coordinate the array of service workers that serve the rich. People who can use computer software to create schedules, pay bills, coordinate the different vendors and service providers and basically relieve the rich of the housekeeping burden. For that, they get paid around $90,000 a year. And they're more likely to be women.

How did the Richistanist get rich (and they got rich fast)? Frank divides them into five categories based on the source of their fortunes:

The Founders: those who started their own companies and then went public (Gates, Dell, etc.).

The Stakeholder: executives with stakes in a private company that cashed out when it went public and made like bandits (that's what happened when UPS or Microsoft went public, dozens of executives found themselves very wealthy).

The Acquired: entrepreneurs who sell their firms to another company or buyer for cash or stocks. And we know that the trend in consolidation and concentration has increased and accelerated.

The Money Movers: such as hedge fund managers.

The Salaried Rich: CEOs of large corporations and top-level executives (either through compensation or golden parachutes). It is well established that the compensation of American CEOs has reached stratospheric heights since the Reagan days.

For most of the 20th century, becoming rich was incremental (scraping and saving). No longer. The Instapreneur becomes the coin of the realm. An Instapreneur can start a company, take it public and cash out within a few years. Instapreneurs do not build companies to last for generations. They create them to generate liquidity events: big payloads happening quickly. And then move on to creating their next company. With the explosion of retirement and pension funds, there is so much money looking for investments wealth acquisition is both quick and enormous.

There are other factors at work as well here: monetary and fiscal policy under Reagan and Bush shift the tax policy heavily in favor of the very wealthy, at the expenses of the rest of the other rungs of the social ladder:

"All these factors - the river of money, new technologies, globalization, and market-friendly governments - have come together to create a new generation of rich people. They have made more money, more quickly, from more sources than any previous generation of wealth. As a result, Richistanis have redefined the way people become wealthy in America. They've also redefined the very meaning of the word "rich"." (49)

In 1995, to make it to the top 1% of Americans, you needed to make about $3 million. Today, you need about twice that and you would still be a Lower Richistani. To make it to the Forbes 400 list in 1995, you needed $418 million. Today, you need to be a billionaire. However, there is one thing that Richistanis have not been able to avoid: the inherent volatility of global markets. However, their immense fortunes provide safety nets in themselves so that should they lose even 80% of their fortunes, they would still be enormously rich.

And then, of course, Richistanis redefine the expression "big spender". The chapters dedicated to the consumption practices are nauseating and clearly give a new meaning to Thorstein Veblen's conspicious consumption. Richistan men may not like to wear the traditional business suit and prefer slacks and polo shirts, but they do like their toys big, luxurious and incredibly ostentatious. Yachts getting closer in sizes to supertankers. Take Larry Ellison's Rising Sun: 450 feet, more than 80 rooms on five stories, gyms and swimming pools, and twin-hulled landing craft to carry a four-wheel drive Jeep ashore. The richest .5% of this country consume at the cost of $650 billion / year. Excessive does not even begin to cover it.

A great deal of such consumption is to establish status, of course and the competition is stiff and increasing. So, Richistanis are constantly trading up, 100-foot boat for a 250-foot boat, a Mercedes for a Bentley, private jets and hyperluxury goods. Take the case of shadow boats:

"A shadow boat is a floating garage that tags along with the main yacht and carries all the extra 'toys' like cars and smaller boats. It's a kind of yacht for your megayacht. The Paladin [Socprof note: check out the website], now owned by a Saudi, holds four to six cars, several motorcycles, jet skis, a submarine, and a helicopter. It's also got a decompression chamber, a walk-in freezer, gym, and night vision cameras.

The company that built the Paladin is about to launch a new model called the city of Vegas,, with six state rooms, a helicopter deck and, for those boaters who don't like the open water, a full-sized swimming pool." (126-127)

And the descriptions of Richistan real estate are of the same type. Mansions with bowling alleys, ice skating rinks and Zamboni (with its own cottage). And then, there are the private jets:

"For some private-jet owners, the world seems to rest on whether they have the proper wood grain on their cabin finish. One of Roth's customers was a woman who owned a Gulfstream IV [Socprof note: around $20 million] and insisted on picking out the exact log that would be used to make her interior moldings.

She flew Roth in her jet to a specialty-wood warehouse in Indiana, where they spent eight hours picking through stacks of lumber. Finally, she found the perfect piece - a satiny burr madrona. The trip cost $30,000, not including the wood." (133)

Or the lady who wanted alligator skin for the toilet seat of her jet. Richistanis are such big buyers of jets that builders cannot churn them out fast enough, which created a market for used ones because the waiting list for Gulfstreams is two-year long. Which has meant private jets traffic congestion over large city airports.

And the list of consumer goods goes on and on, cars, exclusive vacation spots, art, $600,000 watches. Quite frankly, it's sickening. All this compose what Frank terms a Plutonomy where there are the superrich, and then everyone else. Which creates an hourglass-shaped economy.

And then comes the Big Problem with the very existence of Richistan:

"Some economists see a darker side to the luxury boom. The trickle down in spending has been accompanied by a trickle down in aspirations. With so much wealth parading around, the middle class and even upper middle class suddenly feel poor by comparison and are spending beyond their means to try to keep pace." (154)

And not for conspicuous consumption purposes, but simply because it is necessary, for instance, to be able to live in a good school district. The price of entry has been made higher by the Richistanis. This is a thesis developed by economists Robert H. Frank (not to be confused with Richistan's author, Robert Frank). Robert H. Frank has developed this thesis in two of his books: Luxury Fever and Falling Behind.

"[As] Frank argues, the nation's nonrich are wasting their time and money trying to keep up with the wealthy. They are also, he says, ruining the environment and their communities in the process. The race to make more money to keep up with the rich, he says, is the reason Americans are spending less time with children and less time sleeping. It's also the reason Americans feel less happy, since happiness is partly determined by how well we're doing compared with those around us. The race, he said, will get only more destructive as the rich get richer and more numerous. (...)

In sum, the Richistani penchant for profligacy has created new benefits and dangers for the economy. It's supporting new service jobs for waiters, butlers, maids and Bentley dealers. But Richistanis are also helping to push the United States deeper into debt, both through their own borrowing, and through the borrowing of everyday consumers trying to mimic their spending." (155)

[Socprof note: Robert H. Frank makes the argument that contextual economic behavior is evolution-based. Maybe so but the group mechanisms at work here have also been well-studied and established. Not to mention the cultural factors since some of these overconsuming tendencies at the expense of other social goods, such as leisure and vacations are specific to the US, but not to Western Europe, for instance]

The second half of the book is more "The Rich are nice and they've got problems too" type (they never have enough money, they can't keep up with the other superrich, they're afraid that their children will turn out like Paris Hilton. So, they created support groups and specific training for their children). The book focuses on the vast amounts of money (albeit small compared to the size of their fortunes) Richistanis devote to charity, how much they distrust NGOs and often create their own charitable organizations to their own liking, running them like businesses, something they call "high engagement giving".

One characteristics of Richistanis is that they completely buy into the idea that they all made it on their own (Ian Welsh would have a field day with that one... see this post), with no help at all, and especially not through a favorable social structure. So, they distrust institutions and the government to do things right. They want to give their money now and see the results of their giving pretty quickly. They are not interested in created long-term foundations. Anf if they believe in their power to remake markets, they also believe in their power to do charity better (which shows again an ignorance or lack of interest in the structure of non-profit work).

And Richistanis also see themselves as kingmakers. They certainly intend to leverage their economic power into politics, not necessarily by running themselves but by putting their enormous financial clout behind candidates.

"The American wealth boom has created a new generation of rich activists. 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." (185)

And they are more politically diverse (think Soros versus T. Boone Pickens). Single-digit millionaires may have backed Bush in 2004, but the superrich were more likely to support Kerry. And they don't care much for the religious right.

The final word: Richistan is going global as superrich classes are coming out of emerging countries, especially of Asia and South America. More and more, Richistanis will not need strong ties to their countries of origin and they are already able to flex their economic and political muscles on a global scale.

This book is recommended but should definitely be read in conjunction with Robert H. Frank's books as well.

In the end, there is definitely such as thing as obscenely rich, especially in a world where one third of the world's population lives on less than $2/day and does not have access to sanitation.