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Remembering the plight of the rich
Sunday, December 24, 2006 Spare a thought, this Christmas season, for the plight of the rich. They are caught in the season of high fever, a luxury fever. Many of our neighbors have been spending time trying to figure out their gifts this holiday season. This three- quarter- pint Fire Hydrant Cocktail Shaker? A Bulgari watch? The Assioma Collection, perhaps? Certainly, we are in the grips of a luxury buying spree that rivals the Gilded Age a century ago. Cornell economist Robert Frank has argued that the spending patterns of the super-rich affect us all. While the Gilded Age touched only a relative handful of families, Frank believes that our current consumption binge touches people all along the income spectrum. We see the cascading impacts in larger houses, more expensive cars, even, Frank points out, $5,000 luxury gas grills. The profligate spending of the super-rich ups the ante for everyone else. The problem is that, except for the super-rich, family incomes have not kept pace. While those at the top of the economic heap have done spectacularly well, the median American family has gained virtually no ground at all during the past two decades, and the earnings of those in the bottom fifth have actually declined more than 10 percent in purchasing power. Middle- and low-income families are financing their higher spending by a lower rate of savings and sharply rising debt. As yesterday's New York Times points out, they are turning to pay day lenders, with damaging results. There are other dimensions to consider. Surely, we should see that luxury spending, at the very least, makes the super-rich feel better. Not so, apparently. These may be the best of times materially, "a time of elephantine vanity and greed" observes Garrison Keillor, but they are not the best times for the human spirit. As the latest issue of the Economist points out, material wealth does not translate easily into well-being. Our becoming much better off over the last four decades has not led even the most wealthy among us to an increased sense of well-being. Why has well-being appeared so elusive, especially for the super-rich? Not to be unfair, but let's focus in more personal terms on the Ratner family in Cleveland. Why have stories of Albert Ratner's ranting and Sam Miller's manipulations become so much a part of Cleveland's "back story"? Why, recently, did Albert Ratner summon Cleveland's planning and economic development leadership to a multi-hour meeting simply to pontificate about Cleveland's inability to get much of anything right? (Could the explanation be, just possibly, inept business leadership?) Surely, Ratner and Miller are among the wealthiest in Cleveland. Why do they appear so unhappy? My guess: We are seeing too much of suffocating arrogance, civic leadership that has burned through ethical boundaries, and, ironically, money without a meaningful mission. Rumor has it that the Ratners and their partners invested between $20 and $24 million this past year in an inept campaign to legalize casinos for Cleveland. They boldly promoted false hope, despite strong evidence to the contrary, that the benefits of casinos in Cleveland would outweigh the costs. They lined up politicians, lawyers, pollsters, ad agencies, the Plain Dealer, and the Levin College at CSU to support their claims. They even made an unseemly public buy-off of opponents in Cincinnati. Few people were fooled. As one of the most thoughtful analyses offered by the editors of the Courier in Findlay, Ohio noted: "Issue 3 is just not worth it." The editors of the Toledo Blade put the matter more bluntly: "The prime concern of the issue's supporters is not to ensure that kids go to college but to make money - lots and lots of money." In the end, the Forest City campaign came across as deceptive, self-absorbed and cynical: "elephantine vanity and greed". (Reading what editors across Ohio said about Issue 3, we can hear the echoes of George Bailey in It's a Wonderful Life: "You sit around here and you spin your little webs and you think the whole world revolves around you and your money. Well, it doesn't, Mr. Potter! In the... in the whole vast configuration of things, I'd say you were nothing but a scurvy little spider.") Let's step back a moment and explore some alternatives with a simple thought experiment. What could have happened if the Ratners had chosen to invest their money differently? How do you suppose that Clevelanders would view the Ratner family now if they had instead devoted their riches to another course to help their hometown? How could they have used $24 million in other ways to strengthen our economy? Well, hungry children are not busy learning. They could have provided an endowment to the Cleveland Food Bank that would cover about half of the Food Bank's operating costs. Learn more. Or, they could have supported the emerging Cleveland Literacy Cooperative. A recent report by Center on Urban Poverty and Social Change at Case Western Reserve has concluded: "Approximately half of the adults aged 16 and over in Cuyahoga County do not have the minimum literacy skills necessary to function effectively in society." (Read more about our serious literacy challenges in Cleveland here. Learn about what the Cleveland Foundation is doing here.) Or, the Ratners could have leveraged the fine work already taking place in early childhood initiative of Cuyahoga County: Invest in Children. Data from the Federal Reserve Bank in Minneapolis shows that investments in early childhood education are one of the best economic development investments we can make. Read more. And the prestigious Committee for Economic Development promotes this strategy aggressively. Read more. Or, an endowment for OneCommunity would have enabled us to accelerate the deployment of wireless throughout Cleveland's inner ring suburbs. Learn more. Or, they could have provided matching funds to the recently awarded Third Frontier grants at CSU and the Clinic. Or, they could have explored how Mayor Bloomberg in New York is aggressively accelerating innovations to assist low income residents in his city. Read more. Or, they could have followed the example of the wealthy citizens of Kalamazoo and created a Cleveland version of Kalamazoo's Promise to provide a college education to every child who graduates from the Kalamazoo public school system. This bold initiative will change the way economic development is practiced. Read more. Already, civic leaders in Pittsburgh are exploring how they might follow this model. Read more. If the Ratners and their partners had chosen to invest their money in another way...how would Clevelanders now feel about them? More important, how would they now feel about themselves? Would we all be better off if they had chosen to invest $20+ million more responsibly? Almost certainly. Moving to a higher realm of civic responsibility calls for a new discipline of wealth, the type of discipline that Warren Buffet exemplifies by giving away the bulk of his fortune. It requires thinking in new terms about business investment, venture philanthropy, our community and the connections among the three. But more important, on a personal level, authentic civic leadership for our city requires seeing Cleveland in a new way. Garrison Keillor's insights help us understand our opportunities: "Even in a time of elephantine vanity and greed, one never has to look far to see the campfires of gentle people." It is around those campfires that we find the good life in Cleveland. The future of our city is forming there. posted by Ed |
Comments:
Wonderful post, Ed.
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I love that ridiculous movie for it's idealism. I cry every time I watch it - and you can find me watching it an embarrassingly high number of times - but as I get older, I think I cry more because of sadness that so few people seem to be able to take that idealism and carry it with them and let it inform their choices enough to make a difference. Still, I always believe, maybe next year, the next day or the next time. Happy New Year. |
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