This Monday’s New York Times included a story about the reach of the Great Recession even into the wealthy classes.
The story focuses on families whose children attend private New York City schools with tuitions that run as high as $40,000 per year. Even families who receive a scholarship for part of their children’s tuition are probably wealthy by the standards of most people; we’re talking about families who are in or near the “1 percent.”
As amazing as it may seem to most of us for whom $40,000 would be a stretch for a year at college, let alone a year in grade school, there have always been many private school parents who have not only paid full tuition for their children but have gone beyond that to give to their children’s schools’ endowment or annual fund.
The New York Times story describes how this group of parents has shrunk dramatically in the last five years:
[There] is an increasing stratification of wealth, even in the private school population. In recent years, fund-raisers and school heads say, more revenue is coming from a smaller group of parents and what used to be the “80/20 rule” -- 20 percent of the parents give 80 percent of the money -- has become the 90/10 rule, or even the 95/5 rule.
If the Occupy Wall Street movement focused attention on the perceived excesses of the 1 percent, private schools are leaning on the wealth of their own 5 percent to try to win a bigger piece of their philanthropic pie (the back-of-the-envelope assumption is that families with more than $5 million in assets often give away up to $500,000 annually).
These data are only anecdotal, but the suggestion that the fraction of parents who feel able to give significant gifts to their children’s private schools has dropped by three-quarters from 20 percent to 5 percent is truly remarkable. That’s a bigger drop in numbers of donors than most other charities experienced during the Great Recession.
Why should others care about the increased stratification of wealth at these lofty levels of society? After all, it’s hard to feel sorry for families still able to afford private school education in New York City when so many families across the country have lost their homes and retirement savings.
The interesting question of general interest concerns what happens to these people whose fortunes unexpectedly declined in the last five years as their fortunes recover with the economy. Will they act again on their former philanthropic tendencies, not only towards private schools but towards other philanthropies that benefit their wider community and less wealthy neighbors?
That great philosophical psychologist of ancient Greece, Plato, took up these concerns in his most famous text, the Republic. Plato argued that when men who took their wealth for granted and used it to fund civic projects suddenly lose their status and wealth, the shock and newly discovered fear of a loss of privilege may turn them into what Plato pejoratively calls “oligarchs” (from the Greek word oligos, meaning “few,” or the “few wealthy”). Oligarchs are driven by the pursuit of wealth for its own sake rather than for the goods it can supply themselves and others, and they are hostile to the middle and lower classes rather than philanthropically sympathetic to them. Oligarchs are not inclined to be philanthropists and to support civic ventures; they are narrowly focused on their own wealth and security.
As Plato’s arguments suggest, the increased stratification of wealth among the very wealthy may only enhance the focus on the pursuit of wealth among the top classes of American society, diminish their philanthropy, and strengthen the example that the top classes set for other Americans that the way to get ahead is to focus exclusively on the pursuit of wealth. If Plato is correct, the Great Recession and its resulting increased class stratification at the top of American society may harden the hearts of those whose status has declined and permanently diminish their philanthropic spirit.
Editor's note: This post has been updated to include a revised final sentence.
Photo credit: chefranden via Visual Hunt / CC BY