I never knew who Charles F. Feeney was until I read his obituary in the New York Times. What piqued my interest to read beyond the headline was what followed his name “. . . Who Made a Fortune and Gave it Away. . . “
As I kept reading, I learned that Mr. Feeney (who died at the advanced age of 92) did something else more remarkable than having given his fortune away. In his fifties, he abandoned a life of comfort and luxury, including palatial residences around the world, and spent the rest of his life with his wife in a modest rented apartment in San Fransisco. By that time Feeney was a multibillionaire having co-founded a large chain of duty-free shops in airports and then reinvesting his money in venture capital projects. After keeping $2 million for himself, he embarked on giving his $8 billion fortune away, not once disclosing his identity. This dramatic change came after he started “to have doubts about his right to have so much money” and “that money buying boats and all the trimmings didn’t appeal to me.”
Charles Feeney is not the only super rich person that eschewed a luxurious life. Warren Buffet is reportedly known to follow a relatively modest life without the extravagance of so many of his peers. Such individuals are the exceptions that stand opposite to our current model of outlandish spending and supercharged consumerism. We are now at the point where we have lost sight of the line that separates what is enough from what is too much.
In the closing year of the 19th century and at the zenith of the Gilded Age, Thorstein Veblen published The Theory of the Leisure Class in which he wrote about the public display of personal wealth in an attempt to emulate others and signal economic status. The two world wars and the Great Depression destroyed fortunes and tamed spending habits, but eventually the building of immense fortunes and extravagant spending came back roaring in the latter part of the 20th century and continue unabated to our day.
Then along the way, an interesting thing happened. The excessive consumption habits of the rich metastasized to the upper-middle and middle classes. Although many orders smaller on an individual level, consumption by the average person has many of the attributes of “conspicuous” consumption Veblen wrote about. Living in McMansions, purchasing luxury goods, vacationing in plush hotels and resorts, cruising the seas, dining in fine restaurants, all these opportunities of high-end consumption are now within the reach of more and more people who do not belong in the class of the wealthy and superrich. As a result, the very rich had to raise the ante.
By that I mean that in a world where rising prosperity democratizes the consumption of perks previously enjoyed by the wealthy, conspicuous spending requires going deeper into lavish lifestyles. This can take many forms: buying property in taller and taller buildings or very exclusive venues, building bigger and bigger yachts, flying larger private jets and much more.
Here are some examples of gratuitous consumption. Last year 13,000 weddings cost more than $1,000,000 in the US. But the rest of us didn’t do that badly by spending an average of $30,000. The top-floor penthouse at 432 Park Avenue in Manhattan was listed for $169 million in 2021 making it the most expensive property in Manhattan. As the author of this article (in The Atlantic) writes, while the rich reside in ever taller skyscrapers the rest of us have to crane our necks more and more to get a glimpse of the sky. In London and Manhattan many super-expensive properties remain uninhabited for months or years because they are bought to signal wealth not to serve as homes. And who has missed that half billion-dollar yacht that Jeff Bezos built in the Netherlands and then demanding the dismantling of a bridge to make its way to the Atlantic?
Should all that extravagant spending matter at all? While we can debate this question from a moral and cultural standpoint, it matters more for pragmatic reasons. Extravagant spending by the wealthy and excessive consumerism by the rest of us have costly externalities that affect us and the planet. From an environmental point of view, excessive consumerism means the extraction of more natural resources and the use of more climate-damaging fossil fuels. As our footprint increases that of other species recedes and biodiversity declines. A recent study found that the acceptable rise in global temperature by 1.5 degrees Celsius is coming faster than the target year of 2050. We seem to have pinned our hopes of fighting climate change on technology and alternative energy sources. Is that, however, enough without any moderation of lifestyles?
From the viewpoint of how we allocate economic resources, we seem to tolerate a dualism in our society (I am speaking of the US) in which extravagant spending lives side by side with homelessness, polluted neighborhoods, inadequate health care, high rates of comorbidity in our population, and uneven and often inadequate investment in education. In the ongoing discussions in Congress about the debt ceiling and our deteriorating fiscal situation, the least discussed topic is that of taxes. Instead, one side of the aisle eagerly targets expenditures on those items that can make us a fairer and more livable society.
For the sake of preserving the health of the climate and that of our society, public policy needs to address the twin problem of excessive wealth and excessive spending. We know how the enormous fortunes are being amassed. Through the collapse of competitive markets in crucial sectors of the economy and through the preferential tax treatment of high incomes. The United States practically invented progressive taxation. In 1981, the top marginal income tax rate was still 70%. And then the dramatic flattening of tax rates along with easily exploitable tax loopholes allowed the few to contribute so little to meeting our society’s needs.*
To address the negative externalities of excessive spending on the environment, we need to rationalize spending through taxation. It is already done in the European Union. Value Added Tax rates vary across goods and services. In general, gas (bad for the climate) carries a higher VAT than food items. Luxury items carry even higher rates. Failure to reflect the cost of negative externalities is one of the major weaknesses of markets. Taxing harmful spending is one way to correct this.
I have no way to know whether Charles Feeney abandoned his luxurious life to save the planet or because he was overtaken by the moral weight of modesty and moderation. Regardless of why he chose a modest life, what he did was good and sets an example first and foremost for his wealthy peers and for the rest of us as well.
* In the summer of 2021, ProPublica published the taxes paid by wealthy people like Bezos, Buffett, and others. They were shockingly low relative to the incomes and capital gains earned. The data showed that the very richest Americans paid just 13.3 percent of their taxable income in 2018.
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