Each day brings fresh data pointing to a deepening US recession, which the rich cannot fail to notice.
Hidden wealth - it's the new must-have
NEW YORK // Lucyann Barry, a personal shopper and stylist for the super-rich, helped a client spend US$75,000 (Dh275,000) on clothes in three hours just a few months ago. The same client told her recently: "Now is not the time for excessive consumption." "Stealth wealth" was how Ms Barry described the shift among high net worth individuals towards a more discreet manner of spending. Less money is being spent on super-frivolous items, like yet another $5,000 handbag, and more on understated and utilitarian pieces, she said.
Each day brings fresh data pointing to a deepening US recession, which the rich cannot fail to notice. Last Friday, figures showed more than half a million jobs were shed in January, the deepest fall in 34 years and bringing the unemployment rate to 7.6 per cent. "The downturn is hitting every level of society in New York. Even the super-wealthy will have a neighbour who lost his job at Lehman Brothers and bring the troubles close to home," said Ms Barry, referring to the investment bank whose collapse last September signalled the start of severe financial turmoil.
"This country is ready for something new. The election of President Barack Obama indicated a move towards inclusiveness, not exclusivity. People don't want to be singled out, which means a new definition of status and brands," she said. George W Bush, the former president, was much derided when he urged US residents to "go shopping" as an answer to terrorism as well as economic decline. Now, it seems people are not just shunning conspicuous consumption but feel shame when they do enjoy themselves.
Investment bankers' slide in society from masters of the universe to masters of the dole queue has been accompanied by fear of the politics of envy and class war in some quarters. "I'd almost rather say I'm a pornographer," a retired Wall Street executive told The New York Times. "At least that's a business that people understand." Mr Obama's recent move to limit executive pay to $500,000 at banks that take government bailout money was received well by most Americans at a time when T-shirts emblazoned with "I hate investment bankers" are on sale.
"Anecdotally, we've noticed that this general sense of shame has been descending upon New York's society for some time now," said last week's New York Observer, which chronicles fashionable movers and shakers. "Companies and sponsors are afraid to host parties in fear of seeming insensitive. Socialites and celebrities are similarly hesitant to attend them. And for those still going out, seeming as if you might actually be having fun is absolutely, positively unacceptable."
The newspaper also reported that the mega-rich were using "hushed listings" to quietly signal if their multimillion-dollar Manhattan apartments were for sale, instead of publicly advertising as they used to. A venture capitalist, a widowed philanthropist, a pharmaceuticals mogul and a lingerie billionaire were those said to be selling real estate very quietly. "Some of the prices are so egregious and greedy," a real estate broker told the newspaper. "Why would you put the thing on, have friends speculate on why you would or wouldn't be selling? You do it quietly, and if someone gives you the right number, then great."
The coping strategies of the rich during difficult times remain in a different stratosphere compared to those less wealthy. For example, CoGoJets, a plane chartering company, says on its website that clients can save 50 per cent to 90 per cent if they use its "jetpooling" service and share a trip. A recent steep decline in overall consumption has left some analysts worrying about the "paradox of thrift" because if nothing takes the place of that spending, the recession could get worse. Paul Krugman, the Nobel Prize-winning economist, described "how individual virtue can be public vice, how attempts by consumers to do the right thing by saving more can leave everyone worse off."
Mr Obama's stimulus package of about $780 billion in spending on public works to kick-start the economy is the focus of fierce ideological battles in Congress between tax-cutting Republicans and liberal-spending Democrats. Away from politics, retailers were preparing for more belt-tightening akin to a "financial hangover". The market for high-end luxury goods, in particular, was likely to fall into recession this year, according to the consulting firm Bain & Co.
On the brighter side, bargains abound and few believe the great American pastime of shopping will fade away but rather the new "recessionistas" will develop a heightened consciousness for when they do buy. Ms Barry has seen an increase in the number of clients who consign their barely worn designer clothes, shoes and handbags for sale through her appointment-only showroom, and more of them are donating the proceeds to charity.
Her international clientele include women in the Middle East who have bought her vintage Chanel jewellery and clothing. The average price of a new Chanel jacket is $6,000 but only costs a quarter of that at Ms Barry's boutique. "We used to have excessive spending when there was a lot of money around and the focus was on labels and status. It's good to have a correction," said Ms Barry, who used to provide trends and brands analysis for companies. "But there's this whole other group of women who have emerged who are buying consignment in order to treat themselves."