Frank argues, the problem is that extreme consumption...helps shape norms for the whole society, not just his fellow plutocrats. “The mere presence of ... larger mansions, for example, may shift some people’s perceptions about how big a house one can build without seeming overly ostentatious,” Frank writes.It's one thing for income inequality to worsen, it's quite another to have that unfortunate trend fail to impact those who are not as wealthy in the form of tempering desires and needs and keeping matters in perspective.
That shifting perception combines with the powerful driving force of “relative deprivation.” When asked whether they’d rather have a 4,000-square-foot house in a neighborhood of 6,000-square-foot McMansions, or a 3,000-square-foot home in a zone of 2,000-square-foot bungalows, most people opt to lord it over their neighbors. Indirectly, then, Bill Gates’s construction of a 40,000-square-foot house has caused the middle manager in Tacoma to take out a no-money-down mortgage for his 3,500-square-foot faux colonial.
Between 1980 and 2001, Frank notes, the median size of new homes in the United States rose from 1,600 to 2,100 square feet, “despite the fact that the median family’s real income had changed little in the intervening years.” The end result? Frank methodically presents data showing that the typical American now works more, saves less, commutes longer and borrows more to maintain what he or she views as an appropriate standard of living.
It's not so much Frank's blaming the rich but rather just stating what sadly is: 1) the income gap is expanding, and 2) the have-nots' perceptions are influenced by the haves, as absurd as such comparisons are. In effect, many have become fiscal slaves to their vanity, doing whatever is necessary to obtain material items that are either sheer extravagence or out of their price range, or both.
This helps to explain the resulting record-high debt load accumulated by individuals over the last several years. However with cracks showing recently, the proverbial house of cards could tumble quite soon. The question is will the government allow it to happen sans a bailout or will the Fed simply continue to pump enormous liquidity into the system, once again postponing a needed correction? We know the government protects the rich and if the average American were to become insolvent or significantly impaired spending-wise, the economy would tank, greatly harming the fortunes that depend on steady commerce.
Look for politicians to come to the aid of their wealthy donors and agree to bailout the debt-ridden, wannabe-rich types, with the final bill ultimately handed to the taxpayers.