Global Policy Forum

In the Shadow of Wealth

By James Fallows

The way a rich nation thinks about its poor will always be convoluted. The richer people become in general, the easier it theoretically becomes for them to share with people who are left out. But the richer people become, the less they naturally stay in touch with the realities of life on the bottom, and the more they naturally prefer to be excited about their own prospects rather than concerned about someone else's.

All aspects of the convolution now affect our politics and culture, in a form with no exact precedent. The last time the United States self-consciously thought of itself as rich, in the early 1960's, discussions of how the wealth should be shared were under way even before real prosperity arrived. Welfare programs, with all their subsequent mixed effects, were expanded. But so were Social Security benefits, which along with Medicare converted the over-65 age group from the poorest to the richest cohort of Americans within a generation. Before that, America's last significant wave of individual fortune-building, the original Gilded Age, a century ago, touched off decades worth of struggles over the distribution and domestication of that wealth: union battles, antitrust laws, muckraking exposes, the rapid growth of public education, laws establishing minimum wages and maximum hours and even the income tax.

Before, whenever we had wealth, we started discussing poverty. Why not now? Why is the current politics of wealth and poverty seemingly about wealth alone? Eight years ago, when Bill Clinton first ran for president, the Dow Jones average was under 3,500, yearly federal budget deficits were projected at hundreds of billions of dollars forever and beyond, and no one talked about the "permanent boom" or the "new economy." Yet in that more straitened time, Clinton made much of the importance of "not leaving a single person behind." It is possible that similar "compassionate" rhetoric might yet play a part in the general election.

But it is striking how much less talk there is about the poor than there was eight years ago, when the country was economically uncertain, or in previous eras, when the country felt flush. Even last summer, when Clinton spent several days on a remarkable, Bobby Kennedy-like pilgrimage through impoverished areas from Indian reservations in South Dakota to ghetto neighborhoods in East St. Louis, the administration decided to refer to the effort not as a poverty tour but as a "new-markets initiative."

What is happening is partly a logical, policy-driven reaction. Poverty really is lower than it has been in decades, especially for minority groups. The most attractive solution to it -- a growing economy -- is being applied. The people who have been totally left out of this boom often have medical, mental or other problems for which no one has an immediate solution. "The economy has sucked in anyone who has any preparation, any ability to cope with modern life," says Franklin D. Raines, the former director of the Office of Management and Budget who is now head of Fannie Mae. When he and other people who specialize in the issue talk about solutions, they talk analytically and long-term: education, development of work skills, shifts in the labor market, adjustments in welfare reform.

But I think there is another force that has made this a rich era with barely visible poor people. It is the unusual social and imaginative separation between prosperous America and those still left out. This is not the embattled distance of the "Bonfire of the Vanities" period, with its gated communities and atmosphere of urban armed camps. It's more like simple invisibility, because of increasing geographic, occupational and social barriers that block one group from the other's view. Prosperous America does not seem hostile to the poor, and often responds generously when reminded. But our poor are like people in Madagascar. We feel bad for them, but they live someplace else.

I recently worked for several months on a temporary project inside a large software company. During the business day I mixed with people who were generally younger and invariably richer than I was. I liked nearly all of them and soon adjusted to the view from the bottom of their economic ladder. I envied some of the things their money let them do or buy, but I rationalized that I was happy with the life I normally lived. Although I've wound up with more money than I ever expected when going into journalism, these surroundings allowed me to congratulate myself on the Gandhi-like antimaterialism I had displayed in making my career choice.

Because I had a long commute I often stayed late to wait out the traffic. Around 9 p.m. I'd hear a knock on the office door. A woman in her 60's, wearing a stiff-fabric vest with the logo of an office-cleaning company, stepped into the room to empty my wastebasket and collect Mountain Dew cans from the recycling bin. She would say something I could barely understand, and I would nod back. It seemed that she was Russian. She walked as if her feet hurt. She did not have the bounce of the people I saw during the day. She kept making her rounds until about midnight.

Eventually I started leaving the office to go home as soon as I heard her a few doors down. I was willing to read articles about the travails of the working poor or the adjustment problems of older, unskilled immigrants. I just didn't want to watch her limp.

The computer-financial complex, with strongholds in Silicon Valley, San Francisco and Seattle, and connections to New York, Boston, Austin and elsewhere, has been both principal source and spiritual symbol of this era of wealth. Relatively few Americans actually work in the "information technology" business, ranging from chips to computers to the Internet. But it has created the billion-dollar fortunes of recent years, and it has buoyed the stock market and therefore the wealth of mutual-fund America in general. Economists are now ready to concede that by cutting costs and raising productivity in "normal" businesses, from automaking to medical care, information technology has allowed the economy to keep growing without inflation, which in turn has lowered unemployment rates and created work for people who had not found jobs before.

Tech wealth has the same disproportionate, commanding-heights effect on today's culture as Wall Street's takeover-and-junk-bond complex had 15 years ago, and as the biotech-financial complex presumably will 15 years from now -- and as the mass-production economy had at the start of the 20th century, and as the boom in cars, highways and real estate subdivision had after World War II. Therefore it is disproportionately significant that for reasons of geography, personal background and working style the tech wealthy have very little sense that they live in the same country as anyone who is poor. The new millionaires are not a representative sample of the rest of the country, but they are a leading indicator.

The routes to tech wealth are more varied than they may look from outside this fevered economy. From Allentown or Cleveland it may seem as if 20-year-olds in Silicon Valley simply drive up to a venture-capital office and drive out with a carful of money. In fact, that's only one of the business models. Tens of thousands of people have become millionaires through what has been, at least for the decade, the most predictable path to wealth in U.S. history: they have signed on with Microsoft; earned their stock options; and assumed that by the time the options vested four and a half years later, they'd be worth a million dollars or more. The simplest way to figure out how much a Microsoft employee is worth is knowing when he joined the company, and therefore how many rounds of options-granting and stock-splitting he has been through.

This route to wealth presumably can't last forever, since it has depended on Microsoft's stock value doubling on average every 15 months through the 1990's. Yet while it has lasted it has not only created three of the five largest fortunes in the world (Bill Gates, Paul Allen and Steve Ballmer), and several more in the billions, but has also allowed people to start thinking, quite early in life, about what they will do when they become rich. "A surprisingly small number of people expect to stay with the company in the long run," says Eric Fox, 27, a software developer who came to Microsoft straight out of Yale six years ago (and who says he has no plans to leave). "The standard thing is to say that you expect to be here two more years, or five more years" -- or until you hit "the number," the amount of wealth people have in mind as allowing them to quit. It is apparently not a matter of the work being unendurable, or even unpleasant, that causes so many Microsoft employees to talk about the time when they will leave; it is the near certainty of their having enough money, soon, to allow them to decide what they would "really" like to do. I have heard widely varying estimates of what "the number" typically is. A man in his 20's said $1 million, and a man in his 40's said $15 million.

The highly publicized wealth of Internet start-up companies has been less predictable than Microsoft's, and more like that of the Klondike era. Everyone is trudging up the mountain together, like the prospectors going over Chilcoot Pass in "White Fang," and some of them end up frozen and broke while others are stumbling across lumps of gold. In an upcoming book called "The Leap," Tom Ashbrook, who quit a job as deputy managing editor of The Boston Globe when he turned 40 to start a Net company, describes his night sweats as he wondered if he'd have to sell the family house, take on loan-shark debt and by implication drive his wife away in order keep his experiment going. (At the last minute he found nearly $25 million in venture capital, and now has more than 100 employees.) "This is not trickle down -- it's all or nothing, you get it or you don't," says one woman who lives and works in Silicon Valley, and whose husband is a prominent technology C.E.O. "You make your first million, then 5, then 10, and the numbers just get crazy. They're almost unbelievable. I remember being told about five years ago, if you don't have $25 million you're not a player -- now that number sounds very small. If you have $250 million, well, you need to be a billionaire. The ripple effect of this on a society is large and alarming. It's like looking at the robber barons, but thousands of them."

There are other routes to wealth too -- for instance, being a venture capitalist who places bets on 10 new companies, assuming that if even one succeeds the returns will be immense. These cultures and subeconomies of course are full of individuals with (nearly) as wide a range of philosophies and goals and outlooks as the rest of the world. But they have several things in common that mark the era and, I believe, have a spillover effect on the rest of American life.

For one: Money doesn't matter, at least not in the normal way. Estimates vary of when this effect kicks in, as you stop evaluating extra assets in terms of the leisure, possessions, choices or other things you can buy and instead think of them mainly as markers of how you stand relative to others at the top. One young software developer, new on the job, said that he thought $200,000 a year would be the level at which no conceivable choice could be constrained. A venture capitalist has jokingly introduced the concept of the Fundamental Economic Unit, or F.E.U. This is the amount of money you will spend without thinking about it, because taking the time to shop around would just not be worthwhile. For a commuter the F.E.U. might be $3.50 for a fancy espresso whose raw ingredients cost 25 cents. I have heard discussions among software millionaires about an F.E.U. of half a million dollars, for a home bought on a whim.

The founder of an Internet company says that every dollar earned up to $300 million is positive, but beyond that point, since it mainly becomes a gauge for comparison with others, it increasingly reminds you that others have more -- like coming in fifth in the Miss America contest. Rob Glaser, who is the founder of RealNetworks, an Internet audio company, and whose personal holdings are now valued at more than $2 billion, says, "For many of the people who have had the good fortune to achieve extreme wealth, it may now be a scorecard, or one of the things that sort of motivates them and helps them keep track, but it is more of an introduced phenomenon than an inherent one." That is, people who came into the business in the 1980's thought it would be interesting, and found that it made them rich. For many new arrivals, he says, sheer wealth are the draw.

A world where money is a marker and all comparisons are directed upward makes it hard to understand people for whom a million dollars would be a fortune, or those for whom $10,000 would be the difference between affording college or not, not to mention those for whom $246 is a full week's earnings, before tax, at the minimum wage. The titans of earlier eras were forced into an awareness that there was a proletariat. Andrew Carnegie and J.P. Morgan had to consider at least the existence of a working class willing to strike over a dollar's difference in weekly pay. The financial-engineering wave of the 1980's also gave leveraged-buyout artists the same uneasy exposure to working America that bomber pilots have to the civilians below, since reorganizing a company often meant liquidating jobs. With the tech economy the connection is faint. "If you were manufacturing cars, you had no choice but to deal with a large blue-collar work force of comparatively uneducated people," says Charles Ferguson, a writer and consultant who founded a software company and sold it to Microsoft for well over $100 million. "If you are a Net entrepreneur, you don't have to give a damn."

A young man who had worked exclusively at one software company told me, "Speaking for myself, I really don't know people who aren't comfortable." He pointed out that no matter what country his workmates came from, they all had surprisingly comparable professional-class upbringings. "I've dealt with very few people whose position is different from mine." That is why, he said, when he saved up enough money he wanted to quit and teach high school.

"Because of the intensity of the work, you tend to operate in a cocoon," says Glaser of RealNetworks. Like other Americans, but even more so, people in fast-growing tech companies work long hours, are on the phone or in their cars when not working, largely socialize with those they know from work and are so desperate to make time for their spouses, children and friends that they feel they have very little left over for anyone else. "Inside that cocoon you tend to be oblivious to the role the surrounding ecostructure plays in your success. From inside the cocoon you see only the cocoon. It is unfortunate but understandable that people who have achieved these results have an insular view of why they have achieved it -- and why others haven't."

The tech establishment has solved, in a fashion, a problem that vexes the rest of America -- and therefore thinks about it in a way that seems to prefigure a larger shift. The hallway traffic in any major technology firm is more racially varied than in other institutions in the country. (It is also overwhelmingly male.) But the very numerous black and brown faces belong overwhelmingly to immigrants, notably from India, rather than to members of American minority groups. The percentage of African-Americans and Latinos in professional positions in booming tech businesses is extremely low, nearing zero at many firms. "Where I grew up in Missouri, I never met a Jewish person," says Reed Koch, 40, a manager at Microsoft. "Then I went off to college" -- Reed College, in Oregon -- and the culture was 40 percent Jewish. Suddenly I was exposed to something that was part of the national culture, but until then I'd had absolutely no awareness of." He drew the analogy to the racial situation in the rich tech world. "If you go 10 years and extremely rarely in your daily life ever encounter an American black person, I think they disappear from your awareness."

People in the tech world inhabit what they know to be a basically post-racial meritocracy. I would sit at a lunch table in the software firm with an ethnic Chinese from Malaysia on one side of me, a Pole on the other side, a man from Colombia across the table and a man born in India but reared in America next to him. This seems, to those inside it, the way the rest of the world should work, and makes the entrenched racial problems of black-and-white America seem like some Balkan rivalry one is grateful to know is on the other side of the world.

As the wealth has piled up and the original tech pioneers have aged, more of them have started to think about philanthropy. But the ones who proceed from the assumption that the new elite has something to "give back" turn out to be revealing exceptions to the general rule of emotional detachment. Almost all of them have some distinctive factors in their background that seem to have motivated them to feel tied to a culture many of their colleagues ignore.

Rob Glaser, who founded his Glaser Family Foundation nearly seven years ago, was reared by liberal activists in Yonkers, N.Y. Eric Benhamou, chairman and C.E.O. of 3Com, who has been involved in various civic efforts, was born in Algeria, reared in France and then came to the United States. Patty Stonesifer, a onetime Microsoft executive who now directs the world's largest pool of charitable assets, the Bill and Melinda Gates Foundation, grew up in a family of Dorothy Day-style Catholic activists. Reed Koch began giving money early for care of disabled and retarded children. When he was growing up, as a Quaker, he spent summers working on a farm that cared for such children.

And then there is Paul Brainerd, 52, a tall, lean, Lincolnesque figure, with gangly limbs and a little beard. He started his working life as a journalist, but was eventually inducted into a computer-industry Hall of Fame for inventing "desktop publishing," through the PageMaker program of his company, Aldus. This program allowed personal-computer users to combine pictures, fancy layouts and text to create newsletters or journals without going to a commercial printer. Its success brought Brainerd well over $100 million when he sold the company -- a third of which he promptly plunged into his Brainerd Family Foundation, concentrating on environmental causes. He is now chairman of Social Venture Partners, an effort to coordinate giving by other recently wealthy people.

Brainerd grew up in Medford, a small town in southern Oregon where his parents ran a camera shop and most other people depended on either the lumber industry or the pear orchards. "You could really see it in a town like that, all the direct connections," he says. "Whenever interest rates went up, the mills would close, and the unemployment rate would go to 20 percent. Three or four hundred people had individual charge accounts at my parents' store, and when they were laid off they couldn't pay. My parents would take out a $10,000 loan to buy their inventory for Christmas, and they would sit down and tell us: if the season went well, we could take a vacation, and if not, we'd stay home as they paid off the loan. I feel fortunate to have had that experience to see all the bits and pieces that make up a community and how it works."

It sounds like Jimmy Stewart in "It's a Wonderful Life," but what Brainerd describes was something widespread in America about a generation ago: the ability to imagine large groups of people laid off for reasons beyond their control, an instinctive understanding of how the effects could ripple through a community, the idea that there was a community at all. The living memory of the Depression was the main vessel for this message. I grew up in the prospering 60's but amid constant reminders that my mother's family was ruined during the Depression, and that my father's felt blessed because my grandfather held onto his job. "You take a place like Microsoft, it's made of people who grew up not feeling part of their surrounding culture wherever it was, in America or France or India," says Reed Koch of Microsoft. "They're closer to each other than to anyone else."

The one political issue that deeply embroils the tech world is environmental protection. In part this is because the tech zone overlies some of America's most gorgeous scenery, from Puget Sound to the San Francisco Bay area to the central Texas hill country. But it is also because the most vivid link between the tech elite and the larger community is through the natural environment. A software engineer with $2 million in stock options can't really imagine being laid off. He can imagine ill-planned urban growth ruining a forest where he likes to hike.

hat about the rest of America, denied the billion-dollar fortunes but riding comfortably in technology's lee through a decade of full employment and growing 401(k)'s? We're different from the tech elite, as long as we operate in the realm where money is still real rather than symbolic. Perhaps the very reality of money explains one journalistic oddity: I found it far easier to get people worth $100 million to talk about their wealth than the typical lawyer, consultant or recently promoted corporate manager. Professional models can talk with detachment about their beauty, because it's an established, independent entity -- like fortunes for the newly wealthy, and unlike economic standing for most of us.

Compared with the software elite, the professional- class American finds it easier to imagine financial ruin. Compared with technology employees, people who work in almost any other industry are brought into closer day-by-day contact with the ongoing tangles of black-white racial issues. And compared with the C.E.O.'s who start high-tech companies and the clever programmers and designers they employ, Americans of comparable intellectual power outside the industry spend more time thinking about public policy issues (which would not be hard, since the standard tech official spends almost none). But there is a great similarity between the view from the top and the view from the next few tiers: the increasing haziness and "Oh, yes, now that you remind me" nature of the view of the poor.

In part this is a matter of simple party politics. "During the Reagan years, at least you had an opposition party to draw attention to poverty," says Arianna Huffington, the syndicated columnist. "Because there has been a Democrat in the White House who is supposed to care about their issue, a lot of people on the Left have lost their voices."

Jamie S. Gorelick, vice chairman of Fannie Mae, notes an encouraging rise in volunteer social service but says, "I have a pessimistic view, we're not talking about poverty as much as we should be and we don't have the degree of public effort that we should have."

And Bill Shore, executive director of Share Our Strength, which works to fight hunger and poverty, echoes those thoughts: "In a perverse way prosperity hides poverty," he says. "During a recession or hard economic times, you'll read lots of stories about people out of work or homeless people. During a boom it seems unimaginable even if it's going on. Society at large is so consumed with how wealthy it is becoming that it leaves little mind share for anything else. "

To an even larger extent, it reflects either the fatigue or the maturation of thinking about policy. "Since so many people have been absorbed in the work force, the ones that haven't are relatively worse off," says Frank Raines of Fannie Mae. "A lot of the people who are not 'in' yet are having trouble dealing with society. You've got people in very rural areas, Indian reservations, central cities, who have almost no contact with the mainstream society. They don't know what the rules of the game are, how you interview, how you go about seeking a job, what you do if you're late. There's a huge socialization need to bring people into contact with the rest of the world."

Steven Rattner, a former deputy chairman at Lazard Fréres and a prominent supporter of Al Gore, says: "The people I talk with -- well, I guess I wish they thought and talked about it more than they do." But like most other people thinking and talking about the issue, he suggests that the only available remedies are indirect and long-term. "The one thing I'm sure of is that the way to solve the problem is not by taxes. First you understand the problem, which is a shift in the demand for labor. There have been huge increases in the demand for skilled labor, so wages have gone up, and falling demand for unskilled labor, so wages have gone down. Once you agree that that's the main problem, then the solution becomes fairly obvious: you have to train people to compete for better jobs, which will also reduce the supply of unskilled workers and force up wages at McDonald's."

And there is also the distance caused by politics in the deepest sense. "There is a historical puzzle to work out," says Michael Sandel, a professor of government at Harvard. "Today's accumulation of enormous wealth is unparalleled since the last Gilded Age. But the Gilded Age of a century ago brought in its wake a wave of progressive reform and public investment -- in parks, libraries, schools, and municipal projects. Today's gilded age, by contrast, hasn't generated any comparable resolve to ease the effects of inequality by strengthening public institutions."

Underneath all the incidental explanations, Sandel says, lay a shift in the conception of what a "nation" was and what might hold a national community together. "If you look back to the Progressive Era," he says, all of those public undertakings were consciously part of nation building. "Teddy Roosevelt spoke of a new nationalism. Government undertook to regulate big business and the effects of great wealth, in the name of the national interest. There were appeals to a sense of national community, and to the mutual responsibilities of citizens of the nation, that don't seem so readily available today."

And the root of the difference may be, he suggests, that the first Gilded Age attended the growth of a national industrial base and economy, whereas today's second wave largely reflects the emergence of a global economy with global markets. Its beneficiaries pay less attention to national borders when it comes to exploring markets, and seeking finance, and recruiting workers -- and feeling connection to other "citizens." "There is something very abstract and distant about the dependencies of the new economy," he says. "This may have something to do with the difficulty of summoning Americans to a sense of national community now."

And there may be a simpler explanation too. National problems are one thing when considered abstractly -- poverty," "inequality," "racism," problems stated as if they were debate topics. They can be altogether different when connected with human beings -- real or fictional. Tom Joad. Rosa Parks. The little girls blown up in a Birmingham church in 1963. The faces and families that Robert Kennedy discovered in Appalachia in the 1960's and that Michael Harrington, Robert Coles and others of the era depicted in print.

These days, "the poor" are like "the Rwandans," a problem without a name or face. I never knew the name of the Russian woman on the cleaning crew. I didn't want to ask.

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