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January 4, 2011

The Posh and their Dosh

By Spear's

Who said the rich are different? Like the rest of us, they can be mean as well as generous, cruel as well as kind, foolish as well as wise — especially when it comes to money, says Rupert Phelps
CURRENTLY THERE IS a vogue to write about the noble philanthropic urges of the rich. Examples are given of enormous gifts and pledges to charity but little thought to the effective disinheritance of children, who may conceivably view such actions as very far from noble.

Many of the most famous rich, especially in America, have signed up to the Giving Pledge, and various explanations range from a Carnegian ‘The man who dies rich dies disgraced’ to observations on the potentially toxic aspects of great inheritance. But how widespread is this? How selfless, caring and burgher-like are the world’s über-rich?

A usual picture drawn is of a middle-class family around a kitchen table having ‘a meal’ together, and warm-hearted sensitive parents (who are also significant wealth owners) nursing fears about their children’s welfare and normality, all behind enlightened brows furrowed by modern concerns. Perhaps writers are unaware of the still existing staff hierarchies and family position that remain in many houses.

What about the real values of some of the really successful wealth owners and creators? Might these include desperation for a son at Eton, a yearning to see said boy a little later in a tunic of a regiment of the Brigade of Guards, or the desire that a daughter make a good match and marries someone with an established handle to their name?

Even in articles about the family office (FO) sector, examples are invariably from an upper-middle or middle-class home. It is incredibly rare for mention to be made of the upper classes, by named example or general outlook. Most FO articles set out a ludicrously noble and enlightened view, devoid of human failing, or even just simple old-fashioned pride. A good example is a goal in a family constitution stating: ‘Raising children with a strong work ethic is key.’ Contrast this with a boy’s being told ‘You are a Howard’ (for instance), and then receiving some illumination as to why he is different, perhaps superior and expected to behave in a better-bred manner than others.

The simple fact is that status and money as they increase are more likely to lead to arrogance and unpleasantness. Riches don’t alter human characteristics, for they are immutable, but they do amplify them.

Writing on philanthropy can be utopian. The actions of the multibillionaires in the public eye (Buffett, Gates, Soros, Ellison) are certainly not representative even of the top end of the wealth spectrum, if one imagines that to range from, say, $500 million to $5 billion, so their activities (including the Giving Pledge) are in some respects irrelevant.

Doubters may suggest that the surge in recent years in philanthropy on the part of the rich may be motivated by other factors than a noble spirit. The latest World Wealth Report produced by Merrill Lynch and Capgemini points out that social responsibility, social networking and tax benefits may be just as important as altruism and charity in prompting involvement in philanthropy.

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If potential heirs have a shred of human instinct they are likely to feel, at least in part, dispossessed, especially if not the children of wealth creators. Hilton Hotels patriarch Barron Hilton is giving 97 per cent of his $2.3 billion personal fortune to charity, leaving around $69 million for his heirs. Other examples are Warren Buffett giving away 99 per cent of $47 billion (ie $470 million left) and Larry Ellison 95 per cent of $28 billion (ie $1.4 billion left).
THE POINT IS not to deride charitable giving to worthy causes, which must be upheld and applauded, but to portray the realities of rich people’s behaviour. In this quarter the human features of avarice, vengefulness and arrogance are often tempered by kindness, forgiveness and modesty. But both sides, seamlessly meandering betwixt each other, may be writ very large indeed.

The 2007 ‘War on Greed’ protests outside the Park Avenue apartment of Henry Kravis (a lavish host and art collector) brought to mind Dr Johnson’s comment: ‘You cannot spend money in luxury without doing good to the poor. Nay, you do more good to them by spending it in luxury, than by giving it; for by spending it in luxury, you make them exert industry, whereas by giving it, you keep them idle.’ Similarly, the Bellocian duty of Lord Finchley was ‘to give employment to the artisan’.

Had Lords Conway, Leicester, Scarsdale and Lyttelton chosen not to consume, nor to be a patron, England would be bereft of Ragley, Holkham, Kedleston and Hagley. Lord Leicester spent about £90,000 (by his death in 1759) in building Holkham, which would equate to about £6.7 million today. That actually seems rather good value to employ such luminaries as Campbell, Brettingham, Kent and Burlington, when the government-commissioned Rogers Millennium Dome cost more than ten times this sum.

Does this thesis dare to suggest that it would have been a less beneficial use of Leicester’s resources to have spent none of that money on Holkham and all of it on poor relief and other charitable causes? Yes, in part, it does. Increased wealth brings increased responsibility, both to consume and to be a patron of the arts. One drives growth and industry, the other enriches and beautifies our environment. Surely our humanity is dependent on a balance of both.

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