Conspicuous consumption is contagious


There goes the neighborhood!

When someone wins the lottery, it can be bad news for his neighbor’s finances. A new study from the Federal Reserve Bank of Philadelphia examines the relationship between lottery winners in a particular Canadian province and bankruptcies in the same province — it found that neighbors of lottery winners are unusually likely to go bankrupt, and the larger the lottery prize, the more likely bankruptcy becomes.

Specifically, every $1,000 in lottery winnings translates to a 2.4 percent higher probability of a nearby neighbor declaring bankruptcy.

The researchers have an explanation for why this happens, too. When people declare bankruptcy in Canada, they have to disclose all their major assets — things like houses, cars, boats, and motorcycles — to the courts. The researchers found that the larger the lottery prize, the more money bankrupt neighbors spent on big-ticket vanity purchases — and the more likely they were to run out of money.

The clever study is one of the first to provide statistically rigorous evidence for a claim that seems plausible but is hard to prove: that rising inequality causes people to spend beyond their means in an effort to “keep up with the Joneses.” This is the idea that when someone’s wealth suddenly increases, her neighbors — and probably her friends and relatives — feel pressure to spend more to avoid being upstaged. Ultimately, this kind of competition can leave everyone worse off.

Never lived in a neighborhood where this was a problem. Most times, you struck it rich – you moved out of where I lived. 🙂

158 families own the 2016 presidential election — or so they think

They are overwhelmingly white, rich, older and male, in a nation that is being remade by the young, by women, and by black and brown voters. Across a sprawling country, they reside in an archipelago of wealth, exclusive neighborhoods dotting a handful of cities and towns. And in an economy that has minted billionaires in a dizzying array of industries, most made their fortunes in just two: finance and energy.

Now they are deploying their vast wealth in the political arena, providing almost half of all the seed money raised to support Democratic and Republican presidential candidates. Just 158 families, along with companies they own or control, contributed $176 million in the first phase of the campaign, a New York Times investigation found. Not since before Watergate have so few people and businesses provided so much early money in a campaign, most of it through channels legalized by the Supreme Court’s Citizens United decision five years ago.

The majority of it guided by ideology not economics. BTW.

These donors’ fortunes reflect the shifting composition of the country’s economic elite. Relatively few work in the traditional ranks of corporate America, or hail from dynasties of inherited wealth. Most built their own businesses, parlaying talent and an appetite for risk into huge wealth: They founded hedge funds in New York, bought up undervalued oil leases in Texas, made blockbusters in Hollywood. More than a dozen of the elite donors were born outside the United States, immigrating from countries like Cuba, the old Soviet Union, Pakistan, India and Israel.

But regardless of industry, the families investing the most in presidential politics overwhelmingly lean right, contributing tens of millions of dollars to support Republican candidates who have pledged to pare regulations; cut taxes on income, capital gains and inheritances; and shrink entitlement programs…

In marshaling their financial resources chiefly behind Republican candidates, the donors are also serving as a kind of financial check on demographic forces that have been nudging the electorate toward support for the Democratic Party and its economic policies. Two-thirds of Americans support higher taxes on those earning $1 million or more a year, according to a June New York Times/CBS News poll, while six in 10 favor more government intervention to reduce the gap between the rich and the poor. According to the Pew Research Center, nearly seven in 10 favor preserving Social Security and Medicare benefits as they are.

RTFA. Please. A solid piece of research.

I doubt it will hold any surprises; but, it may also reinforce your resolve to continue the change that the majority of Americans endorse. Even if that bothers the nouveau riche.

Luxury of the traditional few vs. the modern in India


Lalgarh Palace suite of the new luxury train, Royal Rajasthan on Wheels
Daylife/Reuters Pictures

Mukesh Ambani is recession-proof.

He is among the richest men in India and worth billions. His interests span mobile telephony, supermarkets and oil refining. He is building a skyscraper of a mansion, with 27 stories stretched to the height of 54, in Mumbai. He has the private plane for quiet reading time, the helicopter for the tight weave of Mumbai traffic, the Zimbabwean wildlife getaways for family bonding…

How about a custom-stitched Brioni suit? Actually, Mr. Ambani prefers a white short-sleeved shirt and dark pants, like Indian bureaucrats wear. Fine Bordeaux wines? He prefers coconut water. Gucci loafers? He prefers those rounded black shoes worn by the $300-a-month salarymen on the train. Fancy restaurants? He prefers street snacks; the first time he dined at Nobu in New York, he suggested to a companion afterward that they go ‘‘eat’’ now.

Mr. Ambani is the furthest thing from the average Indian, and rather far ahead of the rest of the Indian elite. But he distills an Indian personality trait that may be the great dilemma for Western luxury brands here.

Those brands have built flagship stores in India and have begun to sell. But sales have seldom lived up to expectations, and it may be because India’s affluent classes are bipolar on matters of luxury: with a little of the renouncing, homespun ascetic in them, and a little of the mansion-building maharajah. Luxury brands are locked in the awkward middle, peddling things that are, strangely, both too luxe for India and not luxe enough.

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India’s newest temples – luxury malls to indulge the new elite

India’s small-town industrialists have been travelling to New Delhi, the capital, in their safari suits and gold Rolex watches to shop for handbags, watches, and shoes from luxury brand showrooms. On the streets of Bombay, Fendi strollers and Prada diaper bags are currently the most coveted items for some of the new mothers in India’s new elite…

India, today has the fastest growing number of dollar millionaires in the world. The 2008 Forbes List of Billionaires featured 53 Indians, the highest ever figure in Asia.

And in Vasant Kunj, a suburb in south Delhi, one “super-mall” promises to offer the new elite consumers exclusively luxury brands especially designed for India’s rich and famous. DLF Emporio.

DLF Emporio is a temple to self-indulgence; the rich can stroll past the imposing imperial palms, through courtyards where Mughal fountains tinkle and under the gold leaf ceilings in what is intended to be a brand heaven. “They need a Chanel bag or Armani tie to show the world their status. It’s the easiest way of distinguishing themselves from the crowd,” says Priya Tanna.

Technopak, a New Delhi-based retail consultancy group, estimates that 1.8 million Indian households earn $100,000 or more a year and spend about $10,000 per year on luxury goods.

And there are plans to build even bigger malls.

These are gated compounds of consumption. The rich are “sealed off from the sight and smells of the poor.” The malls symbolise the rigid segregation of Indians based on wealth.

Please understand – these people are not evil. They let themselves become symptoms of contradictions impossible to maintain in a healthy society.