The deepening divide

February 2003

’Are the rich the new driving force for economic growth?' The important French daily Le Monde asked this rather provocative question recently, then went on to answer it with a number of concrete examples. To cite a few… The Rodriguez Group, a specialist in yachts over 20 feet in length, enjoyed an increase in sales of more than 46% in 2002. Charles Dehelly, the Managing Director of Thomson, observed, “what works well in the United States are large-screen televisions, those costing more than 15,000 or 20,000 euros, while the sales of entry-level and mid-range products cannot get off the ground.” Even more provocative, or frankly even cynical (which does not mean unrealistic), are the words of Serge Weinberg, President of PPR (owner of Gucci, Yves Saint-Laurent and Boucheron, among others). He seemingly had no hesitations in declaring, “The growing inequity is a key factor in support of the luxury goods industry.” Weinberg drove the nail in further by affirming that “the concentration of wealth is increasing, which offers luxury groups the potential for more rapid growth than in the past.”

All these statements, which we might criticize for their icy immorality, are in fact observations of fact, observations that are rather disconcerting. Is the world heading slowly but surely towards a 'Argentinization', like this country, so rich, where the entire middle class has been decimated to the point of disappearing, leaving in its wake the tragic deep divide sep-arating the 'super-rich' on one side and the 'super-poor' on the other?

Severin Wunderman, the owner of Corum, said it his own way in one of our columns (see in this issue). He explained that, in order to achieve the same numbers as last year, he has been forced to move up-market as the only way to deal with the situation. Along similar lines, analysts at Morgan Stanley stated, 'The increase in clientele for sales of the most accessible products has made luxury industrialists more sensitive to the ups and downs of the economy or to the state of mind of the households.' According to their analysis, the luxury brands would do well to quickly re-concentrate their efforts on the most inaccessible products…

The observation in our columns describing the good health of the 'mid-range' brands does not really contradict these analyses. In fact, we notice that this 'good health' is also dependent upon a 'move up-market', as in the case of Raymond Weil or Tissot.

One thing is certain. Inequality is growing, whether it is between countries themselves or internally between the social classes. The divide is deepening. The world is increasingly moving at two speeds.

While the same Greenwich time is imposed on all of us, the manner in which it is read is becoming more and more unequal. This is neither comforting nor reassuring.