Should the rich be allowed to destroy their own wealth?

The restaurant gets publicity, of course, but what does the diner get out of it?

“The whole point of eating Ainsworth’s wings (or the gold-leaf donut that was once sold in Brooklyn, or the maki roll dressed in gilded nori in Tokyo)… is the languid extravagance of destroying value. It’s like making a hot dog out of Kobe beef, or lighting your cigar using an early Picasso in lieu of a match.”

Deliberately destroying wealth is an ancient practice. Examples include the Native American potlatch ceremonies, in which gift giving sometimes degenerated into the burning of valuable objects – as an ultimate display of wealth and power.

Does it matter that the wealthy are doing much the same today? If it does, where is the moral (or semantic) distinction between destroying wealth and merely consuming it?

Writing for Evonomics about the economic cost of wealth inequality, Steve Roth says that the problem with the super-wealthy having so much money is that they hoard most of it:

“…people with lots of money don’t spend it. They just sit on it, like Smaug in his cave. The more money you have, the less of it you spend every year. If you have $10,000, you might spend it this year. If you have $10 million, you’re not gonna.”

Once you’ve got enough money to spend on all the things you need, you can spend the rest on the things you want. But there comes a point after which you satiate these desires too. Any surplus after that is saved. This robs the economy of growth-generating demand – and does further harm if the cash is ploughed into land and other forms of speculation.

So does that mean that vendors of gold-encrusted foodstuffs are doing us a favour by getting idle dollars back into circulation or diverting them from the property market?

Roth thinks not. That’s because supplying the market for absurd luxuries whose only purpose is wealth display diverts attention from the development of useful products that are (or might become) affordable for the rest of us:

“…would Apple be as successful as it is if its business model was based on selling eight-million-dollar diamond-encrusted iPhones? Broad prosperity is what made Apple, Apple. Concentrated wealth distorts producers’ incentives, so they produce, for instance, a million-dollar Maserati instead of forty (40) $25,000 Toyotas — because that’s what the people with the money are buying. Which delivers more prosperity and well-being?”

Note that this isn’t an argument against all luxury goods and services. For instance, mobile phones were once the preserve of the rich, now they are ubiquitous. Arguably that wouldn’t have happened if wealthy ‘early-adopters’ hadn’t established the market.

Conspicuous consumption can therefore be creative. Then again, so can philanthropy – so maybe give that a go as well?

---

Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.

peterfranklin_