The definition — and perception — of wealth in Washington has changed over the last four decades, says Washington Post columnist Steven Pearlstein.
While Washington does have the lowest poverty rate of any metropolitan city in the country — about 8.5 percent — it also has the highest rate of people who are considered to be "the poorest of the poor." That is, people who live at least 50% below the federal poverty level.
And not only that, but through the years, the way Washington has looked at wealth, and thought about wealth, has changed. And that’s something that’s long fascinated Steven Pearlstein, a columnist and writer for The Washington Post since 1988.
Pearlstein lived in D.C. in the mid-1970s, before returning to his native New England. He came back in 1988 to be the Post’s deputy business editor. At that point, he and his wife pooled their funds from their respective home sales in Boston, and together purchased a home in Wesley Heights, an upscale neighborhood in Northwest D.C.
A few months later, Pearlstein was sitting in his office when who should walk in but Bob Kaiser, who would eventually become the Post’s managing editor. The way Pearlstein tells the story, Kaiser discreetly closed the door, strode up to Pearlstein’s desk, “and threw down a copy of the paper, of the section that had these real estate listings, and one of the transactions was circled. And that was mine!”
So right there, in black and white, you could see, how much Pearlstein and his wife had paid for the house: approximately $830,000.
And that, Pearlstein was told, simply was not cool.
“Bob, perhaps a little disturbed, but also wanting to help me out since I was new to town and new to the Post, wanted me to know that this really wasn’t the sort of thing that mid-level editors at the Washington Post did,” Pearlstein recalls, “which was to visibly spend so much money on a house.”
Because, the way Kaiser put it at the time, “it didn’t reflect my proper station at the paper and in the community and it called too much attention to myself. It was too glitzy, and I shouldn’t have done it.”
Kaiser was a Washington native, and his Washington viewed wealth in a very particular way, since, after World War II, the town was more of a “middle-class paradise.”
“It was a small, sleepy southern town focused totally on the government,” Pearlstein explains. “And there were people who had brought some money to Washington or inherited some money. There really wasn’t a lot of money being made in Washington.”
The ethic, Pearlstein says, was you were in Washington to do public service.
“And this ethic was not only shared by people who worked for the government. It was shared by people who worked in trade associations, law firms, journalism. And you weren’t supposed to think about what you were doing as part of a career to make money. It was a career to gain influence, to gain stature, to gain respect; those were sort of the right ambitions. The wrong ambition was to have a big fancy house in Wesley Heights.”
Pearlstein says this attitude started changing in the 1980s and 1990s. In terms of the law business, as it became more nationalized, and as other law firms from other cities started to open up Washington offices, there was a great deal of competition for the talent that was here.
“Bidding wars started up,” Pearlstein explains. “And so all of a sudden, in order to lure a partner away from Covington or Shaw-Pittman, you had to pay more. So we got into a little bit of an arms race with the law business.”
Another business that drastically changed was government contracting.
“In the early days there were government contractors, but they were nowhere near as many or as big as they are today,” Pearlstein says. “What developed in the 1980s under the Reagan administration was this anti-government attitude that the private sector could do it better. And outsourcing of what were more mundane and routine government functions started to begin.”
Pearlstein points out that there was an early group of technology companies in the region, started by people who had been in government “and could see the possibility of work being better done on the outside.”
“And they hoped maybe to make some money, but that wasn’t really the primary purpose,” Pearlstein explains.
But in the 1980s, outsourcing gained popularity “because it would allow politicians to say they were shrinking the government even though they weren’t,” Pearlstein says. “But they were shrinking the number of government employees.”
As a result, people realized these companies “could be real honey pots,” Pearlstein says. “You could issue public shares to public shareholders and you could make big money doing that because they were growing so fast.
And all of a sudden, the companies went from seeking to be long-term contractors for certain agencies, to being entities people could buy and sell.
“So Wall Street came in as part of this system and people could and did make big money, and still do,” Pearlstein says.
A third area that saw major change is real estate.
“As Washington and the government got bigger and more complex, they needed more people in Washington,” Pearlstein says. “And so what had been a sleepy southern town with plenty of land, well, all of a sudden land became worth more, because there were more people that needed to live and work here. And so real estate development, which had always been the source of some local wealth, became a much bigger business.”
As a result, a great deal institutional money came from the outside to be invested in Washington real estate, Pearlstein says. And everyone who lived here and owned a house “got to ride the real estate wave.”
“Bob Kaiser, the managing editor who came to complain to me, bought a house around Dupont Circle in the mid-1970s for less than $60,000, which he would have considered an appropriate amount,” Pearlstein says. But now that he has “retired after 50 years at the Washington Post, he’s moving with his wife to New York. And he sold his house for something in excess of $2 million.”
An interesting offshoot of this changing attitude toward wealth in Washington, Pearlstein says, is the growth of philanthropy in the region.
“By the 1970s there was the Cafritz Foundation and there was the Eugene Meyer Foundation. Those were really the only big foundations. Washington was not a philanthropic town,” Pearlstein explains. “The reason was (a) there wasn’t a lot of big money here, and (b) people were giving all everyday at the office. They thought they were in public service.
“To the degree that Washington became much more commercial, much more like everyplace else, to the degree that the public service ethic receded, and to the degree that there was then serious money in Washington, Washington began to develop a very strong philanthropic tradition here and now there are many, many people making a lot of money and giving it away,” Pearlstein says.
Pearlstein makes sure to point out that D.C.’s changing attitudes about wealth were not necessarily a conscious thing.
“There was no meeting of a cabal at the Metropolitan Club in which they decided, ‘Hey, you know, we can really cash in here, guys,’” Pearlstein says. “The mores, ethics and incentives of the rest of the country got to Washington eventually.”
That’s why the law business changed, he says, and the financialization of American business; it was happening everywhere, and it happened here as well.
So, this “different ethic toward wealth and whether you should show it or not [did play] itself out in Washington,” says Pearlstein, “but it’s not so much that Washington changed, as the country changed, and Washington then changed with it.”
[Music: "Big Spender" by London Promenade Orchestra from 101 Great Melodies from Great Musicals]