Because a million isn't what it used to be
'Millionaire' needs an inflation adjustment to its definition.
How many words in the language cry out for some sort of inflation adjustment to their definition?
Millionaire, surely? After all, the value of money erodes over time. Someone with a million dollars today is relatively less wealthy than someone who had a million a century ago. But a century ago, we called someone who had a million dollars a millionaire. And we use the same term today.
This has been on my mind of late for a number of reasons. There have been the ups and downs of Wall Street this summer. There has been the turmoil in the subprime mortgage market, for instance, where the million-dollar dream house has begun to collide with the million-dollar starter home.
The process by which a fixed amount of money loses value over time is called inflation. Economists have ways of talking about this phenomenon. They speak, for instance, of "nominal prices" – the numbers written on the price tag hanging from the suit in the store – versus "real prices," adjusted for inflation.
But they haven't really adjusted millionaires for inflation.
Millionaire came into English from French in the 1820s. The Oxford English Dictionary defines millionaire rather airily as "a person possessed of a 'million of money' – pounds, dollars, francs, etc.; a person of great wealth."
Now, for a start, which would you rather have – a million pounds, a million dollars, or a million francs? Then there's the time value of money. A million pounds in 1826, when Benjamin D'Israeli used the term millionaire in his first novel (he was a novelist before he was Britain's prime minister), would be worth more than £2.5 billion today, by some measures.
One might wonder what was going on in people's minds that made the early decades of the 19th century the moment when it seemed relevant to think in terms of a million.
What if, on the other hand, a bunch of cave dwellers at the dawn of human language had come up with a word for someone who has accumulated, oh, let's say, a dozen useful rock tools? "My mother wants me to marry a twelve-rocker when I grow up," one little girl might now say to another as they play video games.
But no, we've stuck with "millionaire," even as inflating prices have made the term applicable to more and more people.
In 1995, there were 3.77 million millionaires in America, according to Wall Street Journal reporter Robert Frank's new book "Richistan." Nine years later there were 9 million. That's more millionaires than Austria, for instance, has people. And they control a collective net worth of some $30 trillion – more than the total value of all the goods and services produced in Europe, China, Japan, Brazil and Russia combined.
The New York Times ran a report last month on the "working-class millionaires" in the Silicon Valley, those whose net worth is "only" a few million and who feel driven to keep up with those higher on the food chain. These working-class types are part of the economic geography Frank describes as "Lower Richistan." In Frank's taxonomy, it takes $6 million to be really rich, and $10 million to be comfortably rich. Serious money seems to start somewhere beyond $100 million.
One interesting point: As part of its effort to regulate hedge funds, the Securities and Exchange Commission is proposing to raise the net worth bar for someone to qualify as an "accredited investor" – one rich enough to invest in private investment pools without needing protection from government regulators. It used to be $1 million in net worth, but the proposed new standard is $2.5 million in investable assets. The "mere" millionaires are crying foul and charging discrimination.
Millionaire still means what it has always meant, all right. It's just that being a millionaire doesn't mean what it used to be.