The wealthy barely ever see the other 99 per cent, says Edward Amory in his new column on reputation management, and that’s no good for them or society
TODAY IN EUROPE, even if you’re not Bob Diamond, the mere act of being wealthy is a reputational risk. There is no excuse, no explanation, no mitigating circumstances for making the fatal error of having substantially more money than other people.
Of course, this is nothing new. Moneylenders have never been popular — Jesus turned them out of the temple. Perhaps he was trying to distance himself from the Old Testament, in which the tenth commandment does a valiant job of protecting the rich against the envy of others, who are not allowed to covet their neighbour’s house, wife, manservant, maidservant, ox or ass.
But today it’s different. Even by Europe’s past standards of envy and covetousness, we are in the wake of the credit crunch unusually unenthusiastic about the wealthy.
One clear reason for this lack of enthusiasm is that income inequality is at a historically high level. The economist Branko Milanovic gave a recent lecture explaining that in 2006, the 400 richest Americans had an income equivalent to the world’s 640 million poorest people, roughly two-thirds of the population of Africa. He went on to point out that 80 per cent of global inequality was the result of either geographical location or parental wealth — the inescapable result of fate.
People have noticed. As Warren Buffett says, ‘The rich are always going to say that, “You know, just give us more money and we’ll go out and spend more and then it will all trickle down to the rest of you.” But that has not worked the last ten years, and I hope the American public is catching on.’
Another key difference today is that, compared to almost every other era of great wealth accumulation and inequality, there is a low level of contact between the rich and the rest of the world.
The great agricultural landowners and feudal potentates of earlier eras mixed daily with the poor. The industrial magnates of the 19th century employed millions in their factories and were required to think about them. But much modern wealth comes unencumbered, the result of clean and clinical financial transactions. So a wealthy person today can move from their gated community to their private jet or the first-class section of the plane, from their favourite restaurant to their children’s private school, without encountering the losers in the income inequality equation.
This in turn perhaps explains why, with a few exceptions, the rich are supremely indifferent to the unpopularity that comes with their wealth. Of course, those who depend on the enthusiasm of the public for their money — entertainers, retailers — may feel differently, but the majority of the truly wealthy shrug and move on.
There are many enormously generous people, especially in the US — Americans give over $200 billion a year in philanthropy and 81 of their best-off families have signed the Giving Pledge — but most of them are motivated by their own personal purposes, not by fear of a poor reputation.
Are they right? Does the insulation of their wealth mean the wealthy should not worry about their reputations? I hope not. First, countries like France, Britain and Italy need to create role models that persuade our children to become entrepreneurs, build businesses and create jobs. And for that, envy is not sufficient: talented young people must empathise with and be inspired by successful entrepreneurs and yearn to join them.
REPUTATION IS ALSO important because when the rich become unpopular, taxes on success go up. François Hollande’s tax plans are driving many of the wealthy out of France. Even in Britain politicians who should know better are contemplating a wealth tax. This is because being mean to the rich is exceptionally popular.
Aggressively progressive taxes are bad news not just for the rich — not everyone can be domiciled in the Cayman Islands or cope with life on the banks of Lake Geneva — but also for everyone else. They mean less investment, less growth, less innovation, less effort. Everyone loses when the rich are unpopular.
Finally, all this wealth is the creation of capitalist economies, but the eventual triumph of capitalism is no longer quite as certain as it appeared when the Berlin Wall fell. The future of capitalism in democracies is dependent on its reputation, and that reputation reflects the public’s perception of the rich, the most obvious beneficiaries of Adam Smith’s invisible hand. It’s not the reputation of the rich we should be concerned about, but of capitalism itself.
A hundred and fifty years ago, a young Benjamin Disraeli worried about ‘two nations between whom there is no intercourse and no sympathy… The rich and the poor.’ Capitalism has no future in a world where those two nations remain permanently divided. The unpopularity of the rich is a reputational risk to us all.