Like Hollywood, many industries are coming to be dominated by "stars" who can command multi-million pound earnings. What are the consequences of the rise of the "super-rich"? Will there be a revival of philanthropy?by Diane Coyle / August 20, 1998 / Leave a comment
Published in August 1998 issue of Prospect Magazine
Newspaper readers have recently been offered a new source of sensation: a sombre-looking bloke in glasses and beard, from London EC4. Not Melinda Messenger, but Gavyn Davies. Not sex, but money.
The occasion for this interest was the announcement that the New York investment bank Goldman Sachs is to transform itself from a partnership into a company quoted on the stock market, putting between ?50m and ?100m in the hands of each of its 34 London-based partners. The most prominent of these is Davies, its chief economist, a long-standing Labour supporter and friend of Gordon Brown.
Davies’s appearance on the front pages was another reminder of the return of the “super-rich.” The number of very, very rich people is probably as high now as it has been since the mid-19th century. Hollywood stars and the giants of rock music, opera and sport were the early pace-setters in the amassing of multi-million pound annual earnings. Now the rewards (and penalties) of stardom have spread to entrepreneurs, barristers, tax lawyers and investment bankers, putting Gavyn in the earnings and publicity premier league alongside Gazza. Why is this happening now, what are its effects and what, if anything, should we do about it?
TECHNOLOGY and the super-rich
The prediction that the modern economy would produce a new layer of superstars was made a few years ago by two American academics, Robert Frank and Philip Cook. In The Winner-Take-All Society they build on the earlier work of Sherwin Rosen, describing how technology allows a few stars to corner most of the earnings available in a particular market. Take the film industry. At any time there are only a few actors who can command millions of dollars to appear in a new film; only a few who are household names across the western world. The second rank comes far behind them in earning power, and behind them trail the resting members of the profession, scraping by on waitressing and the odd commercial. The range of income is extreme; distribution is an extraordinary pyramid with a tiny tip and a wide bottom.