The death of the idle rich Today's wealthy are defined by the amount they work

Finally, at the top of the pile, there’s the clash between “old money” and “new money”, which has long been a staple of English literature. The rise and fall of fortunes was an obsession of 19th century authors, but the definitive showdown comes in a 20th century novel, The Great Gatsby by F Scott Fitzgerald. Newly out of copyright, the great American novel of the 1920s East Coast elite has become the most popular book about class in our own age, and yet it is telling just how alien its ruling elite are compared to ours.

Published in 1925, Gatsby was not at first a roaring success. Indeed, it didn’t acquire its classic status until after Fitzgerald’s premature death in 1940. In our own time, however, it exerts a grip on the popular imagination. In particular, it has formed our double image of who we think the rich are: the snobby, aristocratic elites versus flashy, free-spending social climbers.

The novel’s main setting is Long Island, New York — where the two classes live side-by-side — or very nearly. The nouveaux riches live in the village of “West Egg” — which is across the bay from “East Egg”, the exclusive abode of the establishment. Of course, in a young country like the US old money is never that old, and compared to Europe, the whole of America is West Egg. Nevertheless, it takes only two generations to give old money its defining feature: which is that it is passed down from one generation to the next.

Inheriting wealth means not having to work for it — and that is, or rather was, the ultimate signifier of class. To be unmarked by the sun — and the labour that others perform from dawn to dusk — is what made the rich look rich. In old portraits, the wealthy and powerful are pale and soft, and were careful to present themselves as such. No tanning or toning for them.

New money, by contrast, is earned not inherited — and earning involves working, which is what peasants do.

Therefore when Jay Gatsby arrives on Long Island, it is not to work, but to play. In throwing the most lavish parties, in serving the finest wines, he isn’t just displaying his wealth, he is emulating the establishment by entering into what was once exclusive to them: a life of leisure.

Our conception of the rich as idle is deep-seated. Karl Marx divided the world between capital and labour — the owners and the earners — and he was neither the first nor the last to do so. In recent decades, this view of capitalism has made a comeback, alongside growing inequality. In his 2014 bestseller, Capital in the 21st Century, Thomas Piketty argued that returns to capital, if left unchecked, will outstrip earned incomes and thus swallow up an ever larger share of the economy. As a result, those without wealth will find themselves at ever greater disadvantage.

It’s certainly true that younger people today are less likely to own their homes than their parents’ generation were at the same age. Furthermore, their employment opportunities are more concentrated in fewer, pricier locations. Thus, every month, they lose what’s left of their salaries (after tax and loan repayments) to their landlords.

To rub it in, the media — and social media — are saturated with images of rich and famous showing off their luxurious lifestyles. Is it any wonder then that the world of The Great Gatsby seems as relevant to us today as it ever was?

That’s especially true given that contemporary inequality has an inherited component. A comparison of different countries shows a correlation between income inequality and intergenerational social immobility — i.e. the more unequal a society, the lower its social mobility. It’s a relationship that economists call the “Great Gatsby Curve”.

But do we really live in the world that Fitzgerald so vividly portrayed? Other economists, while deeply concerned about rising inequality, challenge the idea that the capitalist system can be neatly divided between owners and earners. Foremost among them is Branko Milanovic. He shows that Americans in the richest 10% of the population for wealth are increasingly likely to be those in richest 10% for wages too. Since 1980, the proportion of top decile of wage earners who are also in the top decile for capital income has roughly doubled from nearly 15% to almost 30%. Milanovic calls this phenomenon homoploutia, from the Greek words for “same” and “wealth”.

Homoploutia appears to go hand-in-hand with another long-term trend, which is the tendency of the rich to work longer hours than they used to — longer hours, on average, than the rest of the population. Therefore the idea of the idle rich is increasingly out of date.

We can see this reflected in high-status lifestyle choices — to the extent that leisure is acknowledged at all it is within a “work hard, play hard” ethos. Even if your job doesn’t involve physical exertion and actual sweat, you can make up for it in the gym. You must make up for it, in fact, to avoid a low-status belly. Meanwhile gluttony is just as frowned upon as sloth. By all means show off what you eat, but unlike the groaning boards of yore, it had better be lean, green and healthy — not fat, brown and greasy.

Having a big house does retain its prestige — some things will never go out of style — but we see dramatic changes in home fashions too. In his diaries, Alan Clark once referred to Michael Heseltine as someone “who bought all his own furniture” — an old money insult directed at a self-made man (although Clark’s inheritance had only come from the thread industry in 19th-century Lanarkshire). The irony is that, today, those who do inherit antiques no longer want them. This can be seen in the long-term decline in the price for so called ‘brown furniture’ — rejected by the cultural elites in favour of the modern and minimalist.

The stately homes of the past are now owned by the National Trust and visited by pensioners, while the high status homes of the present look like open plan offices. That’s not just a preference for space and light — it’s a reflection of the centrality of work in the lives of today’s rich.

So does that mean that the inequality of the 2020s is less harmful than the inequality of the 1920s?

Writing for CapX, economist Ben Ramanauskas argues that the incomes of the working wealthy are primarily derived “not from physical or financial capital but rather from human capital” i.e. “they earn their wealth by using their skills adding value to their firms.”

That sounds good, doesn’t it? Much more equitable than old-style aristocrats counting the profits from land their ancestors probably stole anyway. Except that human capital can be hoarded as easily as physical or financial capital. The “old money” class did it through snobbery and restricted admission to elite institutions; today’s ruling class is more subtle in its tactics, preserving an illusion of meritocracy, but still gating-off access to opportunity through rocketing tuition fees, unpaid internships and sky high rents. New social codes, like the ability to navigate the minefields of wokeness, constitute a further barrier to outsiders.

It’s become fashionable to argue that we should shift the burden of taxation from income to wealth, and you can find advocates for it on the Right as well as the Left. The logic is that wealth is idle while (earned) income is the reward for effort. Therefore, by taxing the former, we can produce a more equal society without compromising incentives for hard work.

It’s a nice theory and there’s much to be said for it — especially the taxation of rising land values. However, its incentive framework rather depends on the wealth owners and income earners being different groups of people. In a state of growing homoploutia that is increasingly not the case. Furthermore, categories like ‘income’ and ‘wealth’ are not quite as distinct as they’re cracked up to be. If you can afford the right lawyers and accountants, they are headings that can be juggled with to produce the most tax efficient outcomes.

Wealth without income is fragile. It is like a dead tree: it may be taller and thicker than its neighbours, but without fresh life things won’t stay that way. Storms rip away branches, with no new growth to compensate for the loss. Parasites feed upon the heartwood, with nothing to resist them. Before long, the whole tree comes crashing down, never to rise again.

Traditional family fortunes rarely persist. Sooner or later, old money sells out to new money or disappears altogether. And thus, the argument goes, we might as well let the taxman do the job before some feckless inheritor does. But in a modern economy, wealth does not just sit around waiting to be harvested like so much dead wood. It is under increasingly active management — just as the rich have become more active themselves. For cash-strapped governments, the idle rich are a disappearing resource.

The idea of taxing owners more, and earners less, promises a lot more than it can deliver. Instead of placing so much weight on this shaky distinction, policy makers would do much better to consider what capital is used for.

Is it being used to invest in breakthrough technology or to finance share buybacks? Is it funding new enterprise or inflating property prices? Are the super rich incentivised to increase economic productivity and social usefulness, or merely to cement their own social position? If it’s the latter — and we might have a sneaking suspicion it is — then they may as well spend their time sitting around drinking vermouths for all the difference it makes.

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