Upper Class

This article presents an overview of the upper class in the United States, which can roughly be described as less than the top 10 percent of the population in terms of net worth. This upper class has grown in terms of wealth since the 1980s due to at least three substantial trends that can be grouped together under the term financialization. It is difficult to identify a contemporary, distinctly American social or class-based "aristocracy" as distinguished by elite financial status, but studies of the wealthy specifically in terms of social characteristics have become increasingly common among both academics and investigative journalists. Interpretations of the role of the upper class in society vary and include perspectives from Marxists to those who espouse a cyclical theory of elite politicians to functionalists.

Keywords Anomie; Affluenza; Conflict Theory; Functionalism; Easterlin's Paradox (or Prosperity Paradox); New Rich; Old Money; Power Structure Research; Plutocracy; Scitovsky Reversal Paradox

Stratification & Class in the US > The Upper Class

Overview

Sociologists’ views on how to define the upper class differ, but most agree that they represent between 1 and 5 percent of the wealthiest households. Until the 1980s, the wealthy and the upper-middle class could be distinguished by their respective sources of income: the wealthy often received their wealth from investments and/or inheritances, whereas members of the upper-middle class typically earned a salary. Both returns on investments and salary levels among the wealthy have increased significantly. Investment remains a key source of wealth, but in the United States some salaried workers, particularly executive officers and hedge-fund investment managers, can earn multimillion-dollar salaries (Frank, 2007). Despite changes in American tax policies that benefit the upper class, the wealthy are paying a higher total dollar-amount in taxes than they were in the 1970s and 1980s because they are making substantially more pre-tax income (Gross, 2007). In 2013, the top 1 percent of American earners paid 30 percent of the nation’s federal taxes; however, the wealthiest 1 percent of Americans control 39 percent of the country’s wealth. In contrast, though the upper-middle class pays a smaller dollar amount than the wealthy, a larger proportion of their earned income goes to taxes (Phillips, 2002, p. 132).

Further Insights

It is estimated that by 2014 the number of millionaires in the United States had rise to 9.63 million, and the number of billionaires had increased to 571 (Hamilton, 2014; Willett, 2014 ). It is believed that in the technology sector, as many as sixty new millionaires emerged daily during the boom periods of the 1990s. According to data from the US Internal Revenue Service (IRS), income from stocks increased from $75 billion annually to $446 billion annually between 1980 and 1998 (Phillips, 2002). The top 1 percent of earners received more than half of the income gains in United States between the 1980s and the 2000s, while the assets of the richest Americans as compiled in the Forbes 400 more than tripled (Phillips, 2002)

Other, indirect measurements also indicate that the upper class grew between the late twentieth and early twenty-first century. In the 1990s, there was a large increase in second-home mortgages, a new record level for real estate sales over $3 million, a high level of sales of homes that cost $10 million or more, and an 11 percent increase in the sales rates of luxury retailers (Bernasek, 2006). In 2014, the national per capita spending on luxuries was about $465 per year (Paton & Sanderson, 2014). It is believed that the majority of people in the United States spent a fraction of this amount, and that a small minority spent a much greater portion of it. The "acceleration point" for lavish spending tends to appear within households with a net worth of about $10 million or more; below that level, spending and savings patterns are often much more cautious (Herring, 2004).

In short, the post-1980 period was the largest period of individual wealth creation and economic expansion in American history. Total net worth doubled to $42 trillion and stock values quadrupled while home values increased by 50 percent in the 1990s. At the same time, though, bankruptcy rates increased fourfold. Personal income rates rose at only half the rate of consumer spending, and investment bankers identified substantial overconfidence in market performance and a correspondingly high level of expectation for returns on investments (Fitch, 2000). The global financial crisis of 2008 destroyed more than one-fifth (22 percent) of accumulated American wealth in just one year. The wealth loss of 2008 was unprecedented in post–World War II US history, greatly exceeding the previous record year of 9.14 percent lost wealth in 1974 during the oil shock. The recovery from the global financial crisis of 2008 saw a widening gap between the country’s socioeconomic classes. In 2012, the incomes of the top 1 percent of Americans rose nearly 20 percent, compared to a 1-percent increase for the remaining 99 percent of Americans. As of 2013, 95 percent of all income gains reported since 2009 had gone to the 1 percent. Also in 2012, the wealthiest Americans earned more than 19 percent of the country’s household income, the biggest share since 1928, when income inequality was stark.

Only a small percentage of the wealthy are celebrities, and as of 2011, about 31 percent of the very wealthy, as measured by those on the Forbes 400 list, were considered "old money" (Kaplan & Rauh, 2013, cited in Sumo, 2013). Old-wealth families started falling off the Forbes 400 list of the most wealthy after the 1980s as they were replaced by those with far greater wealth. However, those older families have tended to at least double their net worth in the newly deregulated economic market (Phillips, 2002). The "new rich" are frequently lawyers, real estate developers, technology sector entrepreneurs, scientists who have successfully marketed their innovations, financial professionals, and small business owners who have taken advantage of private equity and venture capital to sell their businesses to larger ones (Uchitelle, 2007).

Issues

There are a number of pop-sociological studies of the lifestyles, behavioural patterns, and spending habits of the wealthy. These include studies of the impact of wealth on the behaviour of the ultra-rich, the way the rich actually live their lives behind closed doors, and the philanthropic activities of the wealthy.

Anomie & Affluenza

The term anomie was first used by sociologists to describe the sense of normlessness felt by many people in modern society (Durkheim 1897). Emile Durkheim contended that without social support structures, such as those found in small villages, certain religious communities, and close-knit families, individuals would lose their sense of how to behave in society. Contemporary theorists in the fields of sociology, psychology, and economics have taken the study of anomie to its logical conclusion in what they term affluenza. This condition is characterized by feelings of inadequacy and insecurity in the subject's ability to attain the "American dream." Thus, traditional norms have been replaced by those of capitalist economics. This is most often manifested in lavish spending in an effort to "keep up with the Joneses." Afflluenza affects members of the upper class most commonly by causing them to, despite their wealth, experience feelings of dissatisfaction, inadequacy, and anxiety.

Upper-class affluenza is particularly noticeable among the suddenly wealthy (such as lottery winners), affluent adolescents, and those who inherit wealth. Lottery winners tend to revert to their former levels of happiness about two months after their windfalls (Levine, 2006b). They are likely to experience social or other adjustment problems about two years later due to, for example, a loss of motivation and the changes in lifestyle that accompany sudden wealth. Even more surprisingly, larger windfalls actually increase the winners' likelihood suffering from these problems. This situation, in which perceived self-worth does not correspond with financial worth, is termed "sudden wealth syndrome." Sudden wealth gained through stock market investments or an entrepreneurial endeavour can cause similar problems.

Madeline Levine (2006a; 2006b) found that upper-class affluenza also affects the children of the wealthy. While counseling affluent adolescents, she found that they tended to experience higher levels of anxiety and depression and were more prone to eating disorders and substance abuse than adolescents in the general population and even adolescents in low-income households. For instance, she found that rate of depression among affluent female adolescent was 22 percent, three times the national rate for adolescent females (Levine, 2006b). Self-mutilation, or "cutting," was also more prevalent in this group than in the general population. According to Levine, though they were aware of their privileged position, these adolescents derived no satisfaction from it. They also generally lacked creativity, spontaneity, enthusiasm, and even the ability to feel pleasure; generally, they were unable to provide a reason for their condition (Levine, 2006a). Levine attributed their problems to parental overinvolvement, arguing that because these adolescents' parents could and did intervene in their children's minor, everyday problems, the adolescents did not develop the resources, resilience, and self-reliance to solve their problems themselves. As a result, Levine said, these adolescents developed a "false self": they conformed to family and community standards rather than develop an individual identity through a trial-and-error process, introspection, or defiance of parental authority. As a result, their identity tended to become linked with grades and possessions, such as clothes and electronics, while independence, character, and "psychological resources" stagnated (Levine, 2006b).

Easterlin's Paradox

Research has shown that while in developed nations the wealthy clearly report higher levels of personal satisfaction than the poor, increased national wealth tends not to result in greater overall levels of happiness. This circumstance is known as Easterlin's paradox (Wolfers, 2008). It states that having wealth above the sustenance level tends not to lead to substantially greater happiness. Moreover, "hedonistic adaptation" to higher levels of comfort requires a person to maintain a high level of comfort in order to prevent a decline in happiness (Frey & Stutzer, 2002; Levine, 2006b). An earlier version of Easterlin's paradox was developed by economist Tibor Scitovsky, who argued that human consumption ought to be measured qualitatively as well as quantitatively. Distinguishing between "joyless" consumption and "joyful" consumption, he claimed that humans can adapt to some types of consumption, making the pleasure derived from them fade, but not other types of consumption, which are continually pleasurable. Thus, spending money on items that promote beauty, novelty, or variety is more likely to result in happiness than spending on material comfort. Scitovsky was an early proponent of the idea that wealth can result in an overall loss of contentment. Scitovsky contended that luxurious material consumption causes a decline in the satisfaction one derives from occasional and partial gratifications of the desire for material comfort. An increase in income also tends to result in an increase of expectations, and those expectations are better met through more intellectually or emotionally engaging forms of consumption (Scitovsky, 1992 [1976]; Frey & Stutzer, 2002). In this regard, Scitovsky seems to have anticipated the emergence of affluenza in contemporary society. Subsequent studies have tended to confirm the Scitovsky's theory. Cross-national studies have shown that although economic productivity in Ireland is significantly lower than in it is Germany or Japan, indicators of personal happiness are significantly higher in Ireland than in German or Japan (Levine, 2006b).

Philanthropy

Contrary to what may be assumed upon initial consideration of the affluenza phenomenon, the upper class do not simply spend their resources on themselves. Members of the upper class often turned to philanthropy to augment their professional accomplishments or give back to their communities. The Rockefeller Foundation, for instance, has supported research on health care, urbanization, agriculture, and the environment since 1913. Similarly, many philanthropic organizations have been founded to combat poverty and the spread of AIDS, and still other members of the affluent choose to donate to their alma maters (Uchitelle, 2007). Warren E. Buffett is perhaps the most famous living philanthropist. In 2006, the billionaire-investor announced that he would donate $42 billion to philanthropic causes. And though his giving exceeds that of others, Buffet is by no means alone: according to the Chronicle of Philanthropy’s “A Look at the 50 Most Generous Donors of 2013,” in 2013 total contributions from the top donors, aside from Buffet's, totalled roughly $7.7 billion. Nevertheless, according to a study titled “How America Gives,” in the same publication in 2012, middle-class Americans typically give a far bigger share of their discretionary income to charities than upper-class Americans. Households earning $50,000 to $75,000 gave an average of 7.6 percent of their discretionary income to charity, compared with an average of 4.2 percent for those who make more than $100,000. Furthermore, wealthy individuals who live in predominantly wealthy neighborhoods tend to give a smaller share of their incomes than wealthy individuals living in economically diverse neighborhoods. When more than 40 percent of taxpayers in a ZIP code earned annual salaries of more than $200,000, the wealthy residents’ charitable donations fell from an average of 4.2 percent to an average of 2.8 percent of discretionary income.

Ethnographic Studies of the Upper Class

Ethnographic studies of the upper class have been relatively uncommon due to the highly private nature of elite society. Generally, ethnographic studies intended to provide context-specific information about cultural behavior have primarily involved studies of poverty-related groups. However, Case (1994) sought to test the conclusions of the relatively few ethnographic studies of the American upper class. Her study of New York City's Jockey Club, though somewhat limited, confirmed earlier findings that members of the upper class are generally affable and accessible to researchers, though it also noted that upper-class society is distinctly hierarchical in social, as distinguished from strictly institutional, terms (Domhoff, 1974; Domhoff, 1975; Case, 1994). This conclusion seems to suggest that multiple hierarchies exist within organizations, rather merely across different institutions.

New York City's Jockey Club is a social organization that was initially organized around the goal of preserving the integrity of horse racing. As of the early 1990s, it was largely made up of members of the business elite. The club members' involvement in horse racing became less common than their participation in educational, medical, financial, charitable, and cultural organizations. However, their meetings still usually occurred at race tracks. Membership usually lasts for life and is based on hereditary involvement. Nomination from a club member and the absence of dissent from any member are required for admission (Case, 1994). Although Case emphasized that many members of the Jockey Club were approachable, accommodating, and charming over the long-term interviewing process, she added that, as a nonelite scholar, she felt like a distinct outsider while explaining the study and collecting information. Mutual respect and deference, however, appeared to be the key to her success, and indeed the characteristic traits of her subjects (Case, 1994). Though the club's chairperson declined to participate in the study, Case did succeed in interviewing twenty of the club's ninety-nine members. Half were over the age of seventy, and half were considered to be "old money." Most owned their own business. Throughout the study, all of the participants seemed to feel obliged to respond politely to any inquiry, and Case concluded that this trait is nearly codified in upper-class society. Further, she found that, within the culture, argumentativeness is impermissible, and deference to age and the male class is expected, although the latter form of deference appears to be weakening somewhat. However, criticizing club rules was not uncommon among the participants (Case, 1994).

Case (1994) concluded that though it may be true that the upper class resists interaction with other classes, this resistance can be overcome through patience, persistence, and good manners. She also found that there were also hierarchical cliques within the club. This finding confirms the conclusions of earlier studies: that the upper class is primarily organized not around institutions but rather around social networks and kinship (Case, 1994).

Viewpoints

Functionalism

American sociologists set out to understand issues of class in the early 1900s. During this period, sociology was dominated by a perspective known as functionalism, which contends that all aspects of society exist for a reason. Thus, schools, businesses, families, religious organizations, and socioeconomic classes all exist for socially functional reasons. From this perspective, certain individuals are rich and powerful because they have special qualities that make them better able to govern society, and others are poor so that the less desirable jobs will be done.

European scholars of the same period took a very different approach to understanding issues of class dynamics. They most often adopted a perspective known as "conflict theory," which states that the history of society has been dictated by conflict between the powerful and the powerless. From this perspective, the upper class are most likely to pursue social agendas that will maintain the status quo and, thus, their power and prestige in society.

The social tensions in the United States during the 1960s caused major theoretical shifts in sociology. Functionalism fell out of favour with many sociologists, and those who remained loyal to the paradigm were forced to change many of their notions. Many sociologists during this period, especially those studying class, shifted from the functionalist perspective to the social-conflict perspective. Most studies of class after 1960 have been conducted by conflict theorists.

C. W. Mills & The Power Elite

The sociologist C. W. Mills provided perhaps one of the most radical critiques of the upper class with his 1956 book The Power Elite. In it, Mills argued that the business elite essentially controls government at both the national and local levels and, as such, makes important decisions for the nation. Further, he argued that the "meritocracy" is an illusion and that multiple social and political deterministic forces create the elite rather than vice versa (Domhoff, 2007). Mills's critics have argued that his claims are often exaggerated or even conspiratorial at times, but he has nevertheless had an enormous influence on power structure research. The Power Elite is often identified as the first account of the "structure and distribution of power" in the United States in the "postideological" and postmodern era (Summers, 2006, ¶4). In contrast to the Marxists of his time, Mills argued that power resides in organizations as social entities rather than in individuals or in the ownership of private property (Domhoff, 2007; Mills, 1956).

Kevin Phillips's Wealth and Democracy: A Political History of the American Rich (2002) has extended Mills's work (Summers, 2006). But whereas Mills argued that the growth in power of the business elite, the government, and the military was constant, Phillips has claimed that plutocracy goes through cyclical advances and declines. A probable explanation of Mills's view is that he died in 1962, before the civil rights movement, and that the power of the elite had grown substantially during his relatively short life (Summers, 2006). Philips, in contrast, takes in the history of the Republican Party and points out that, during certain periods of time, it favored certain anti-plutocratic measures (Phillips, 2002, p. xvii). He also highlights certain elite politicians like Thomas Jefferson, Theodore Roosevelt, and Franklin Delano Roosevelt who have acted against the interests of their own class by enacting anti-plutocratic legislation such as the anti-trust measures of the 1900s and the New Deal of the 1930s. However, in other areas, Phillips follows in Mills's footsteps. Like Mills, he has argued that laissez-faire capitalism, the favored doctrine of the business elite, is not a sound economic policy and that a strict governmental system of policy intervention or support is necessary to maintain any complex economic market (p. 93).

Dumhoff (2006) has taken a somewhat different view, arguing that while Mills's account the business elite's influence on the political process is still accurate, Mills overestimated the power of the military elite by portraying it as comparable to that of the business elite. He has also claimed that Mills underemphasized or ignored other important trends such as the efforts of white-dominated universities and churches in promoting the civil rights of nonwhites; the degree to which the media forms public opinion; and the conflicts between unions and civil rights groups. Dumhoff (2006) also claimed that Mills underestimated the influence of Congress and the Supreme Court in shaping public policy and exaggerated the political apathy and disorganization of "mass society" (Summers, 2006).

Also taking up C. W. Mills's critique of the power elite, New York Times correspondent David Cay Johnston has written extensively on how the business elite manipulate government regulations for their own benefit at the expense of small-business owners and the general public. He cites Wal-Mart as a prime example, saying that the company urges local governments to lease it land until it can buy the land, pay for store construction through tax-free municipal bonds, and allow the company to use sales taxes to pay off the cost of the building. According to Johnston, this scheme hurts local economies by depriving schools and fire and police departments of tax dollars and by putting locally owned stores at a disadvantage since they have to pay the market rate for their business expenses (Whitehead, 2008). The libertarian Cato Foundation's finding that about $98 billion in government subsidies is provided to businesses annually would seem to support Johnston's claims (DeHaven, 2012). However, like some of Mills's colleagues, some of Johnston's colleagues disagree. A fellow New York Times contributor has criticized him for emphasizing the extremes of corporate profit-making and ignoring the contributions that corporate America makes to the nation's economic well-being (Chait, 2008).

Terms & Concepts

Affluenza: A psychological condition defined by feelings of inadequacy and insecurity about attaining the "American dream." Affluenza affects members of the upper class most commonly by causing them to , despite their wealth, experience feelings of dissatisfaction and anxiety about their social status.

Conflict Theory: The theoretical perspective that views society as a constant struggle between groups for power.

The Easterlin Paradox: The Easterlin paradox, also known as the "prosperity paradox," describes the apparent failure of levels of self-reported happiness to match rising levels of real earnings. The paradox resides in the fact that although the more affluent tend to indicate a greater level of happiness than the less affluent, overall levels of happiness largely remain static as economic productivity increases.

Functionalism: The theoretical perspective that views social institutions as the means through which individuals fulfill their social needs. Each part of a society has its own specific function which contributes to the overall operation of society. In this view, certain people are very rich and others are very poor because the roles they play as a result of their economic positions serve the overall functionality of society.

New Rich: Those members of the upper class who were not born into wealth, but instead acquired it during their lifetimes.

Old Money: Those members of the upper class that have attained their fortunes through inheritance and often sustain their lifestyle with income generated from investment revenue.

Power Structure Research: Power structure research attempts to systematically examine the process through which political power is exercised. This vein of scholarship is associated with C.W. Mills's controversial book, The Power Elite (1956). Mills identified "three monopolies" that function in an anti-democratic manner: corporations that demand high levels of conformity; a military "caste system" that isolated recruits from local communities; and a government in which a large number of public servants serve without having stood for election.

Plutocracy: The term plutocracy refers to government by elites in service to the economic interests of elites at the expense of popular sovereignty. Some critics argue that the US government is a de facto plutocracy.

Scitovsky's Reversal Paradox: Claims that spending on activities that produce a sense of variety or beauty result in more happiness than comfort-related consumption.

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Bianchi, M. (n.d.). A questioning economist: Tibor Scitovsky's attempt to bring joy into economics. Department of Economics and Environment: University of Cassino. Retrieved August 25, 2008, from http://areadocenti.eco.unicas.it/mbianchi/JEP.Scitovsky.pdf

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