Robert Heller of www.thinkingmanagers.com looks at how the Age of Affluence has given way to an Era of Opulence.
Opulence is the New Affluence
John Kenneth Galbraith, the late, great economist, created a sensation in 1958 with his bestselling book The Affluent Society.
In the book he drew attention to the relative increase of private affluence at the expense of the living standards of the masses, the latter relying on state services while the affluent enjoyed private aeroplanes, private education and private medical care.
Decreases in taxes for the affluent meant the resources of the public sector were stretched further and further and therefore the services became increasingly inadequate.
Since then, the wealth gap has widened further, both between nation states and individuals. Current estimates suggest that 1% of the world’s population accounts for 60% of global wealth.
The consequences of this division are twofold. The mass markets which most of yesteryear’s great companies were built on offer less attractive rewards today than the specialised markets, where higher earners can keep on spending.
Also, the nature and size of the new affluent have changed in ways that greatly distort traditional economic relationships. The wealth of the few who dominate the affluent economies in the West depends on the poverty of the many in the East who are forced into working for low wages.
The shift has been one from Affluence to Opulence. Millionaires abound but multi-millionaires and billionaires are where the new action is.
However, this has little to do with increased economic efficiency or business brilliance. Logic does not play a big role in the determination of executive pay. In the Age of Opulence, justifying the rewards of managers by hard and successful work is an irritation – a waste of time and effort.
The real objective is to reach a status where you can negotiate even larger fortunes.
The rules regarding capitalist competition are changing in basic and frightening ways. The warnings of future dangers are not heeded as we enter uncharted territory. History suggests that the Age of Opulence is sowing the seeds of its own decay.
About the author