The Superrich Are Different

By Michael Kinsley

You can understand why Leona Helmsley might want a $45,000 silver clock modeled after a building owned by her billionaire husband, even if you wouldn't want one yourself. What's harder to understand is why she would bother breaking the law to get it. That, in fact, is part of her lawyer's answer to official charges that the Helmsleys cheated the Government of $4 million in taxes by wrongly charging off sundry personal gewgaws as business expenses: Would people so rich risk jail for an amount so (relatively) small?

Maybe Mrs. Helmsley did it as a public service. After all, her calamity has brought pleasure to millions. The sacrifice of plutocrats on the altar of public scandal is a treasured ritual of the American civil religion. And the Helmsleys were already among the least sympathetic of the wealth celebrities coughed up by the Reagan era. He is a landlord: 50,000 apartments, along with other real estate. She is the self-proclaimed "queen" of his hotel chain, famous for being nasty to the help, and a walking exaggeration of every cliche about the second wife as a social type. The obvious diagnosis of what ails the Helmsleys -- greed -- doesn't explain much, either morally or practically. Few of us lack greed. And, in our economic system, there is nothing wrong with greed. A variety of diagrams and mathematical formulas is available to show how capitalism usually channels individual greed into productive activity that's good for society as a whole. But, if anything, the Helmsleys ought to be exempt from the forces that stimulate greed in the rest of us. They're already worth an estimated $1.4 billion. They're 67 and 79 years old, with no children. They give to charity generously, but not obsessively. Although the Helmsleys try harder than most other superrich, there's no way they're going to spend what they've already got. So why cheat the Government to get more?

Indeed, the question of what may have motivated one superrich couple to break the law is less interesting than the question of what motivates all of them to keep on accumulating, legally or otherwise. A central assumption of supply-side economics -- the dominant economic theology of the past decade, which produced large tax-rate cuts for the wealthy -- is that people are % motivated by rather fine calculations about the reward for further effort. Supply-siders are the chiropractors of capitalism, believing that small manipulations of the incentive structure can produce enormous changes in economic behavior. That may be true for those of us who have some use -- if not real need -- for everything we earn. But is it true of those at the very top of the economy?

The classic work on the motivations of the rich is Thorstein Veblen's The Theory of the Leisure Class (1899). Veblen, who invented the term conspicuous consumption, argued that the rich don't accumulate wealth in order to consume goods. Just the opposite: they consume in order to display their accumulation. "The possession of wealth confers honour; it is an invidious distinction. Nothing equally cogent can be said for the consumption of goods, nor for any other conceivable incentive to acquisition, and especially not for any incentive to the accumulation of wealth." The rich also display their wealth, Veblen argued, by not working: "conspicuous leisure." In all societies, he wrote, "the upper classes are exempt from industrial employments, and this exemption is the economic expression of their superior rank."

But Veblen may need updating. How to explain people who accumulate more than they could ever possibly consume, and keep on working anyway? Many of the superrich (including Sam Walton, at $8.7 billion the richest man in America) pride themselves on living simply and expecting their heirs to do the same. They have no possible use for more money. Some have businesses to which they bring a missionary zeal, but can missionary zeal be brought to real estate syndications and leveraged buyouts -- the prototypical new fortunes of the 1980s? Although some may plead force of habit or lack of imagination, most would deny any explanation that mundane. Why do they keep it up?

Well, Veblen could not have anticipated the cult of commerce, which has made working more chic than idleness. The way you put your billions on display is to bustle like a billionaire businessman, not in a futile attempt to spend them. It is her job as queen of the Helmsley hotel empire, not the spending power of her accumulated wealth, that Leona Helmsley has skillfully converted into today's favorite currency of fame.

What's more, the wealth tabulations that are now a running feature of publications like FORTUNE and Forbes have made it possible to display accumulated wealth beyond the natural limits of conspicuous consumption. Veblen would feel vindicated to know that after some initial resistance, many rich people now happily supply the details of their fortunes to the staffs compiling these lists. Harry Helmsley ranks 65th in the world according to FORTUNE. And -- who knows? -- another $4 million here and there could make all the difference between 65th and 64th.

But surely, if competitive accumulation for its own sake is the point for the very rich, then we needn't worry too much that their productive energies might be sapped by higher tax rates. To take an extreme example, if every billionaire's fortune were cut by half overnight, their relative rankings would be exactly the same, and they'd still have more money than they could ever spend.

One Reagan tax cut that got little attention was a major 1981 reduction in the estate tax. Veblen would say this is the wrong approach to encouraging the greed of the superwealthy. Instead, when a very rich individual (say, $100 million plus) dies, the Government should audit the fortune and announce its relative ranking at a special press conference, as a service to "invidious distinction." Then it could, in good conscience, take a large chunk as a service charge.