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.