Our new Gilded Age

A high-net-worth individual, or HNWI, is defined as someone with more than a million pounds in investible assets, excluding their main residence. To qualify as an ultra-high-net-worth individual, you need twenty times that in the bank. According to the 2022 World Wealth Report, the UK is home to more than 600,000 HNWIs and UHNWIs. As the sociologist Caroline Knowles points out in Serious Money, her peripatetic new survey of moneyed London, this extreme concentration of wealth in private hands is no accident. Successive UK governments have passed up the opportunity to introduce restrictions on the sale of property to overseas buyers. Instead, the UHNWIs – the piratical private-equity investors and hedge-fund managers, the oligarchs and Qatari oil magnates – have been welcomed with open arms, on the highly dubious basis that “a rising tide lifts all boats”. The presence of the very rich enriches us all. The thrust of Knowles’s walking tours of Mayfair, Belgravia, Chelsea and Notting Hill is how little that idea is borne out by the evidence. For the vast majority, the rising tide is more likely to drown us.

Most of the UK’s HNWIs and UHNWIs live in London. Knowles begins her explorations in Shoreditch, the formerly deprived area of ​​East London where young finance workers from the neighborhood Square Mile go out drinking before retiring to their luxury concierge apartments in new-builds such as Shoreditch Exchange. There she meets “Quant” – all of Knowles’ interviewees are given pseudonyms alluding to their ways of life or predilections – who moved into financial risk assessment after the crash of 2008 made such forecasting more profitable. (“Here is another lesson in how to make serious money”, comments Knowles. “At the expense of others.”) Quant’s analytics are used to assess the advisability of investments overseen by fund managers, who typically take a 2 per cent fixed fee plus a 20 per cent “incentive fee”, paid out if the value of the portfolio exceeds a predetermined threshold. Even 2 per cent of a multibillion-pound portfolio can mean “a huge amount of money for a very small number of people”. Financial London gets rich by skimming tiny percentages off unimaginably large sums of money. Ultimately, this gives the lie to the Reaganite platitude of the rising boat. Knowles quotes the UCL economist Mariana Mazzucato, who views the practice of fee-skimming as fundamentally extractive, circulating money “among a wealthy few” rather than generating wealth in the larger economy. It is classic “’rent-seeking’, taking unearned income from unproductive activities”.

In the City, Knowles meets “Banker”, who works with private-equity funds that earn high returns for investors not only by scaling up successful small businesses – the way Pret a Manger came to dominate the high-street sandwich sector – but also by taking controlling interests in struggling companies and seemingly running them into the ground, as happened with Monarch Airlines and Debenhams. The remains are then picked over profit. Thus “the predatory practices of private equity shape high streets across the United Kingdom”. The only winners here are the funds and their investors. From the purpose-built offices of Shoreditch and the City, Knowles walks west to Mayfair, Belgravia and St James’s, where smaller private-equity and hedge-fund operations lurk behind the stuccoed façades of Georgian townhouses. Here, hedge-fund managers like “Genius” – Knowles takes the name from the term used by the judge presiding over his divorce settlement – ​​generate high returns for their investors by acting with breathtaking ruthlessness. In one notable instance, despite owning only 1 per cent of the shares in a bank, Genius put a motion to the AGM that the entire concern should be put up for sale. “You should go to hell”, replied the management. Seventy per cent of the shareholders backed the motion and the bank was broken up by three financial institutions. Genius’s firm took home £1 billion from the deal.

Again and again, Knowles’s stories attest to a money machine devoted to nothing but its own perpetuation. She cites “no less a figure than UK Financial Services Authority Chairman Adair Turner”, who has described banks as engaged in “’economically and socially useless activity’.” Big finance is a closed system designed by bankers to redistribute money among themselves. And to what end? The way Knowles tells it, having loads of money is not much fun at all. Jean-Paul Sartre described being rich as an “inherently nervous condition”; the plutocrats Knowles meets, along with their stay-at-home wives and spoilt children, are paranoid, bored or prima donna-ish to the point of mental breakdown. A Colombian woman who organizes VIP services in top-end London hotels tells Knowles that she once had to turn down a request to refloor a suite with turf: “the guest was bringing their dog and the dog would only use the toilet on real grass” .

Money begets purposelessness, particularly in the case of inherited wealth. An assistant to a billionaire’s son notes the “suffocating vacuity” and “emptiness” of lives spent making social occasions – invariably with other, identically aimless members of the super-rich – “last and shape the day”. Parties become an entirely recursive – and exhausting – means of establishing and maintaining one’s status. The spectre of transactionality – are they just after my money? – engenders a profound isolation, entrenched by security arrangements that are as extensive as they are largely absurd. London is not Iraq or Afghanistan. Former SAS soldiers are hired to drive the super-rich to their hair appointments or to carry out “pre-location sweeps” at fancy restaurants. “Spontaneous travel” is discouraged because it causes “severe security concerns”. Like so much in the world of the UHNWIs, security is self-perpetuating, seemingly provided for no other reason that, apart from propelling the CEOs of the security companies to UHNWI status themselves, it stands as a marker for the vast wealth it purports to protect.

Private tutoring operates in much the same way. In A Class of Their Own, a lightly comic memoir of the years he spent teaching the offspring of billionaires, Matt Knott exposes a rarefied subculture where the lessons-up of school education – invariably private, and already eye-wateringly expensive – with one-on-one at home is understood as indispensable. In Knott’s view, it is also pointless, “a leg-up to pupils who didn’t really need it.” For the super-rich, a private tutor is as much a status symbol as the blacked-out SUVs and armed security details described in Knowles’s book. Knott is retained by “Maria Kerzakhova” (all names here are pseudonyms), a Russian oligarch’s wife, to prepare their son for his Eton List Test. On a flight to Florida, where they are due to spend the summer, Maria leans over to the family’s art adviser. “Victor”, she says. “Matt went to Cambridge.” Knott is a “branded accessory”, much like Maria’s Gucci handbag. “There was no point,” he writes, “unless the brand name was prominently displayed.”

Aside from the status they confer, private tutors are crucial weapons in the arms race of admissions preparation. Competition for places at the UK’s top independent schools has been driven to new heights by international demand. It’s hard to get into St Paul’s. The result, as Knott sees it, is a level of pressure on children, sometimes of questionable academic ability, that denies them their rightful “sense of freedom and curiosity”, and casts “everything as a competition… a mindset that would color not only the rest of their lives, but anyone else they encountered”. Tutoring the kids of the super-rich, Knott comes to realize, is not about expanding “their child’s horizons”. It is about “treading water, maintaining the status quo”, the unfair advantage that will see the next generation, irrespective of their abilities, inherit their parents’ hollow privilege.

Knott’s comic technique largely relies on the breathless run-on resolving on a mildly surreal (and frequently scatological) observation. Here he is on the Moscow restaurant owned by Maria and her husband: “Appliqué silver swirls adorned the walls, while a centerpiece fountain got diners in the mood with what can only be described as an eternally vomiting swan.” Knowles is super by comparison. In the tradition of the great literary walkers, from Walter Benjamin to Will Self, her insistence on crossing the city on foot is, in an important sense, an act of resistance, an embrace of urban realities in defiance of the sad confinement of extreme wealth , its smoked-glass segregation. Knott is granted a glimpse of this in Florida, as he is driven into town from the Kherzakhovs’ compound in West Palm Beach. “Entering the city, we passed a gay bar packed with a lively Friday night crowd. It was so easy in the company of clients to convince yourself that this was your reality, nowhere more so than in a gated community that literally shut out any intrusions from the outside world. But the moment you looked around, you caught glimpses of the life you were missing.”

Nat Segnit‘s most recent book is Retreat: The risks and rewards of stepping back from the world2021

Browse the books from this week’s edition of theTLSat the TLS Shop

The post Our new Gilded Age appeared first on TLS.

Leave a Comment