The New Gilded Age
by Roger Lyons
Switched on the TV one night during BC week for The News Hour in time to catch the last segment of the Nightly Business Report, which was an upbeat piece on the bright outlook for luxury retail sales–$20,000 handbags, $85,000 watches, and the like. One Madison Avenue retailer explained that they’d made a mistake last year when they advertised on-sale prices. It had the unexpected consequence of cheapening those items. It turns out that the top priority when buying luxury items is to spend as lavishly as possible.
Obviously, the luxury retailers hadn’t read their Thorstein Veblen. Neither had the business press, otherwise they wouldn’t have been so upbeat. I thought I’d entered a time warp into the 1890s, which Mark Twain called “the gilded age.”
Even if Veblen had written his Theory of the Leisure Class in 1999 instead of a century before, he would still have put those $85,000 watches down to “conspicuous consumption,” but he would have to revise what he said about buying racehorses. Back then, owning a racehorse was a mark of social rank, which, as Theodore Dreiser shows in his novels of the time, was the prime fetish of the gilded age. What owning a racehorse has become would have to fall under Veblen’s less-known Theory of Business Enterprise, published in 1904. How far thoroughbred breeding and racing have been drawn into the business-industrial vortex is a particularly discrete measure of historical change, but it will do.
To commercial breeders–the primary producers–money spent on racing and breeding stock at the sales in Lexington recently goes down on the balance sheets as something like effective demand. That’s what those sales feel like when commercial breeders pay their bills. But, in fact, that investment only masquerades as effective demand. As I’ve previously pointed out, it’s actually a secondary supply function, which is why it’s called investment.
To find the racehorse production and investment industry’s demand side, you must cast your gaze across America’s widening socio-economic divide.
On BC Friday I made the one-hour drive down to Newkirk, Ok, where there’s a Kaw Nation casino with OTB, to buy three BC superfectas. It’s an incentive program for my company’s employees–that is to say, Jackie and me. I couldn’t do it locally because, although I love Kansas, I have to admit Thomas Frank is right about what’s wrong with it. The South Wind Casino in Newkirk was filled almost to capacity with retirees, people who have time on their hands and enough retirement income to enjoy some simple pleasures.
To me, that scene was the spitting image of racing’s tenuous relation to its effective demand. By contrast with American retirees, unemployed Americans of working age are no longer relevant to the thoroughbred industry because they have no purchasing power. People with work are working more than ever before–and for lower wages–just to make ends meet. They’re becoming increasingly irrelevant to the thoroughbred industry because they don’t have the time.
The first segment on The News Hour turned out to be a report on the conclusions of the President’s national deficit-reduction commission. It’s clear the deals that are about to be made will have the predictable effect of deepening the demand slump we’re now stuck in–oh, except for those $85,000 watches.
What does this have to do with the thoroughbred industry? Everything, because now we know for sure that the health of racing is not about Wall Street, conspicuous consumption, or the supply side. It’s about broadly shared economic prosperity. The thoroughbred production and investment industry is losing its effective demand as more and more ordinary people fall victim to our country’s pernicious supply-side economic policies.
Jackie and I did our part for the demand side on BC weekend, but it was supposed to be a lesson in how to deal with failure after investing the time and effort required to pick the best three supers out of a two-day BC card. That plan backfired when we hit both the Juvenile Fillies and the Classic. The good side is that I think Jackie is hooked, and racing needs all the new players it can find.