How the Class Divide Divides Us
The Velvet Rope Economy

How the Class Divide Divides Us

New York Times economic specialist Nelson D. Schwartz details how luxury services for the rich undermine democracy and leave everyone else in a Darwinian struggle.

Socioeconomic fault lines

New York Times economic specialist Nelson D. Schwartz explores how businesses and public institutions separate American haves from have-nots. The haves dwell in superior circumstances and, he asserts, neither notice – nor concern themselves with – the profound friction everybody else faces. These socioeconomic fault lines isolate Americans by class as they fray social cohesion.

Kanish Tharoor of The New Republic clearly explicates the book’s themes: “Schwartz’s tour of the modern economy is a study of not just how the market carves consumers into separate tribal groups, but of how it can create countries within countries whose borders – however velvet – are incontrovertibly real.”

Few efforts outside of academia have done work that parallels Schwartz’s investigation. One exception – which Amazon readers named a “2020 Best Book in Business and Leadership” – is Billionaire Wilderness: The Ultra-Wealthy and the Re-Making of the American West by Justin Farrell. It, too, contrasts the almost unbelievable privilege of the super-wealthy with the all too believable privations average Americans face. Tellingly, the publisher is Princeton Studies in Cultural Sociology – an academic press. Writing in accessible, lay language, Schwartz reveals insidious truths that sociologists and economists have studied for some time. He uses revelatory and easily identifiable examples.

Children growing up in poor neighborhoods are less likely to complete college, earn less once they enter the workforce and are more likely to become single parents.Nelson D. Schwartz

One of his most shocking points is that for 90% of Americans, income has been flat since the 1970s. Income rose for the remaining 10%, and soared for the richest 1%, especially the top one-tenth of 1%. Commercial services that cater to the rich and give them lavish perks earn larger profit margins per unit and don’t need to scale up.

“Benign envy”

Schwartz shows how marketers balance “benign” and “malicious” envy; the former causes customers to spend more money and the latter makes them angry about what they’re missing. He offers the following insight: The smaller the most elite level of customers is (such as platinum-class frequent flyers, for instance), the more superior its members feel. When marketers create a secondary elite tier, it heightens status perceptions among those at the top level and creates status envy at lower levels. The other result is that people at the top level pay attention only to the secondary tier. 

Parks, perks, docs and schools

Schwartz explains that Disney parks now offer luxury levels for extra fees, though Walt Disney himself didn’t allow tiers. Park VIP tours “make lines disappear” at $435 to $625 per hour. Alternatively, high-paying visitors can reserve attractions, and stand in shorter lines. However, at Disney, every admission ticket lets the visitor reserve their turns three attractions, so all visitors have some use of this advantage. 

Schwartz provides another annoying but pervasive example of privilege: On Houston’s Katy Freeway – as on major highways in at least 40 other US cities – drivers can pay an extra toll to use the faster, high-occupancy vehicle (HOV) lanes, nicknamed “Lexus Lanes,” allowing them to avoid the worst of the traffic jams that plague ordinary commuters.

Mission Bay Hospital of the University of California, San Francisco, has important medical specialists and most of its patients have private insurance. Here, “the higher reimbursement rates of privately insured patients make up for the low reimbursement rates offered by government plans.”However, at the public Doctors Medical Center (DMC) across the bay, only 10% of ER patients had private insurance, 10% had none and 80% had government plans.Hospitals segregate patients by income, so public facilities in poor, segregated areas have a 20% higher chance of closing, as Doctors did. Its former location, Schwartz notes with some poignancy, is now a casino parking lot.

As a society, we need to recognize that we’ve let public institutions like hospitals, fire departments, state colleges, airports and libraries suffer from decades of underinvestment. Rebuilding them would blunt some of the extremes in inequality.Nelson D. Schwartz

Outside a hospital setting, some people pay up to $100,000 per year for “concierge” medical services from their private physicians. As an example, Schwartz presents Californian Dr. Jordan Shlain, whose subscription fees cover office visits, house calls, tests and in-house procedures. It’s little wonder, the author points out, that the wealthiest 1% of Americans live 15 years longer than the poorest.

To the good, Schwartz discloses the astonishing fact that New York University waived med students’ tuition in 2018 to free students from debt and enable them to pursue less lucrative medical specialties that need physicians. The response to this open-handed program was overwhelming.

Schwartz also explores the surprisingly unequal worlds of neighboring Manhattan’s public schools, PS 191 and PS 87. The Parent-Teacher Association (PTA) at PS 87 raises more than $1.5 million a year, while the PTA at PS 191 raises $30,000. Academic performance has improved at PS 87 and declined at PS 191. In contrast, Portland, Oregon pools a portion of PTA revenues exceeding $10,000 to spread the benefits.

Blues in the hills

Schwartz finds a telling example in Thramer’s Food Center, which once was the heart of its Blue Hill, Nebraska community. But in 2017, Dollar General moved to town, appearing as it has in many low-income areas. Dollar General doesn’t sell fresh produce or meat, but it undercuts Thramer’s on other groceries.

By targeting low-income consumers in rural America and poorer sections of big cities, dollar stores have found fertile ground.Nelson D. Schwartz

Schwartz reminds readers that revenues of locally owned stores generate a “multiplier effect” as they recirculate in the community. National chains send their profits to headquarters and shareholders.

“Interested in… inequality”

Schwartz insists throughout that an egalitarian approach without velvet ropes can be profitable. Southwest Airlines, the industry’s most profitable carrier, has one class of fliers. Stores without tiers – Starbucks, Best Buy, Target – remain top performers.

As the public sector is replaced by private services aimed at the elite, the very foundation of the republic is eroded.Nelson D. Schwartz

Schwartz is too much a creature of The New York Times to vest this infuriating, galvanizing report with his personal emotions. He keeps a welcome lid on his outrage and lets readers find the injustice. He argues often and persuasively that this enactment of privilege undermines democracy, social bonds, mutual trust, education, law enforcement and the future of the United States. He maintains that the best defense against these erosive forces is a clear understanding of how they work, and that he provides aplenty.

Jason Furman, former Chairman of the White House Council of Economic Advisers, wrote accurately, “Nelson D. Schwartz’s book uses vivid and detailed reporting to advance an important, novel and ultimately scary argument about the ways that inequality is changing our economy.”

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