Stocks are plummeting. Employers don’t want to hire. The compromise bill that Congress passed after a nasty, drawn out fight to cut the federal debt is not likely to lead to any meaningful change. Are we returning to the dark days of 2008?
Oh, and commenters in the UK suggest that the riots across their country have been prompted in part by frustration over poverty, unemployment, deep cuts to social programs and the growing division between their society’s entitled and disposed.
I know that commie, socialist me has likewise grumbled about income disparity in our country. I went so far as to recently feature the words of the ancient Greek writer Plutarch in one of my Quotes o’ the Day: “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.”
This quote made me think about the vice president of the Walnut Creek branch of an international commercial real estate company. An acquaintance works at this branch and said the vice president proudly drove to work recently in his new Porsche, which set him back close to $200,000. I thought, this vice president is an ostentatious, insensitive jerk. His company is apparently bleeding money, has gone through several rounds of layoffs and has held off giving raises to non-sales employees for several years.
Well, I realized the serious errors in my thinking yesterday, including about that vice president, when I came across this article in the New York Times: “Even Marked Up, Luxury Goods Fly Off Shelves”
Yes, that’s right.
Even with the economy in a funk and many Americans pulling back on spending, the rich are again buying designer clothing, luxury cars and about anything that catches their fancy. Luxury goods stores, which fared much worse than other retailers in the recession, are more than recovering — they are zooming. Many high-end businesses are even able to mark up, rather than discount, items to attract customers who equate quality with price.
When I read this paragraph, I thought, ‘what the f----?’
The luxury category, which includes such brands as Tiffany’s, Louis Vuitton, Gucci, BMW, Mercedes-Benz and Porsche, are enjoying robust sales. “In July, the luxury segment had an 11.6 percent increase, the biggest monthly gain in more than a year.”
But I read on and learned that apparently it’s good that the rich are able to buy a $9,000 Chanel coats, $2,495 thigh-high suede boots at Saks, a 16-ounce jar of facial cream at Bergdorf Goodman, or a top-of-the-line German car for $200,000. It’s good they don’t have to wait for $860 designer shoes to go on sale at Nordstrom.
While the free spending of the affluent may not be of much comfort to people who are out of jobs or out of cash, the rich may contribute disproportionately to the overall economic recovery.
“This group is key because the top 5 percent of income earners accounts for about one-third of spending, and the top 20 percent accounts for close to 60 percent of spending,” said Mark Zandi, chief economist of Moody’s Analytics. “That was key to why we suffered such a bad recession — their spending fell very sharply.”
So, if we want to stay out of a second recession—if we’re not already there—we should encourage and praise those who still have the money to spend, spend, spend. For these wealthy consumers who buy things just because they want them, not because they or anyone really needs them: they will save our republic.