Economix Blog: Rajat Gupta, Merely Affluent

Spencer Platt/Getty ImagesRajat K. Gupta leaving court on Wednesday.

Rajat Gupta was rich by almost any standard. He just wasn’t rich compared with many of the people who surrounded him. He knew it, and he didn’t seem to like it.

More than a few of his friends and colleagues had tens or even hundreds of millions of dollars. They included his fellow board members at Goldman Sachs, the alumni of McKinsey Company — a firm that Mr. Gupta ran and that paid him a few millions of dollars a year — who then made fortunes on Wall Street and, perhaps most important, his friend Raj Rajaratnam, the hedge-fund manager sentenced to 11 years in prison for insider trading. Mr. Gupta, who was indicted Wednesday for passing along corporate secrets to Mr. Rajaratnam, has proclaimed his innocence.

DAVID LEONHARDT

Thoughts on the economic scene.

What seems beyond doubt, however, is that he was envious of the wealth that his peers were amassing. In that way, Mr. Gupta is a symbol of a different kind of income inequality from the one at the heart of the Occupy Wall Street protests, where demonstrators proclaim themselves part of the “other 99 percent” and criticize the top 1 percent of earners.

Mr. Gupta was surely part of the 1 percent. But seems to have felt as if he was part of the other 99 percent of that 1 percent.

You don’t have to sympathize with him to see how his envy could have affected the choices he made — orienting his post-McKinsey career around making money, handing over large chunks of his money to Mr. Rajaratnam and, at least according to prosecutors, going to great lengths to curry favor with Mr. Rajaratnam.

Such envy extends well beyond people accused of committing crimes. The inequality among the rich is a major force pushing many graduates of the country’s top colleges to Wall Street and drawing middle-aged professionals from other lines of work to finance.

Consider the numbers. Three decades ago, a taxpayer at the cutoff for the top 0.01 percent of earners — that is, in the top 1/10,000th — was making about 10 times as much as someone at the cutoff for the top 1 percent, according to research by the economists Emmanuel Saez and Thomas Piketty.

Since then, the top 1 percent has done very well, nearly doubling its income in inflation-adjusted terms, which is a far bigger raise than most households have received. Yet the very rich have done vastly better: someone at the cutoff for the top 0.01 percent now makes 30 times as much as someone at the top 1 percent, according to the latest numbers.

To someone making a few million dollars a year, these very rich — rather than the median-earning American — are often the relevant benchmark. “Most families are trying to keep up with the Joneses,” as Catherine Rampell wrote in a post here earlier this year. “And in dollar terms, the rich are falling far shorter of their respective Joneses than the middle-income and lower-income are.”

Article source: http://feeds.nytimes.com/click.phdo?i=b0296c9945680931d4e7f22e0811625b