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How Income Inequality Has Erased Your Chance to Drink the Great Wines

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Among the many ways the rich are different from you and me: Only they can afford grand cru Burgundy.

That wasn’t always the case. In the 1990s, middle-class wine lovers could still afford to experience that rite of passage — drinking a truly great wine, not simply to enjoy it, but to understand what qualities made it exceptional in the eyes of history.

It might have been a splurge, perhaps requiring a few sacrifices. But it was feasible, just as it was possible to buy first-growth Bordeaux, or the top wines of Barolo, Brunello di Montalcino or Napa Valley cabernet sauvignon, to name a few other standard-bearers.

For example, back in 1994, a bottle of Comte Georges de Vogüé Musigny 1991, a grand cru, retailed for $80 (the equivalent of $141 in 2020, accounting for inflation). Today, that bottle costs about $800.

In a more extreme case, Domaine de la Romanée-Conti La Tâche 1990, another grand cru and one of the world’s great wines, cost $285 in 1993 ($513 in 2020, accounting for inflation). That’s no small sum then or now, but profoundly curious people might have found a way.

Today, a bottle of the 2017 La Tâche goes for about $5,000, well out of reach for dedicated students of wine, except for the most wealthy.

Plenty of other options exist: Village Burgundy rather than grand cru, or any of the many other great wines now being produced around the world. But these bottles, as good as they may be, have not been part of a conversation that has endured for centuries.

For wine lovers, drinking such renowned bottles would be the equivalent of a college course in Shakespeare, Beethoven or Charlie Parker. In any field, it’s necessary to comprehend the reference points, the benchmarks that connote greatness, to join that conversation even if ultimately you choose to argue the point.

These days, it is impossible for most people to pay for these wines.

You could argue that prices have risen on all sorts of consumer goods since then. Why should wine be different? You would not be wrong.

But the issue is not simply that prices in general have gone up. The prices of top wines have risen at a far steeper rate than the prices of many other luxury goods. La Tâche 2017 is almost 18 times as expensive as the 1990, while a basic Hermès Birkin 30 bag, the grand cru of handbags, has gone from about $3,000 in 1990 to $11,000 in 2020, not quite four times as much.

Bordeaux operates on a slightly different scale than Burgundy. Far more wine is produced. But it, too, has its benchmark wines, and like Burgundy, their prices have skyrocketed.

Orley Ashenfelter, an economics professor at Princeton University, has closely tracked the Bordeaux market for years. In 1980, the price of a first-growth Bordeaux was roughly four times the price of a fifth-growth Bordeaux, he said in a phone interview, referring to an 1855 classification that ranked top Médoc producers in five tiers, or growths. Nowadays, he said, as prices have risen for all these top wines, the ratio between first- and fifth-growth price is more like 10 to 1.

What accounts for these disparities?

Partly it’s the good old law of supply and demand. Great wine is tied to finite pieces of land and to the rhythms of agriculture. With a limited quantity of grapes and only one opportunity to make wine each year, production cannot be increased to meet rising demand.

With the exception of certain top Champagnes like Dom Pérignon, which are not linked to particular vineyards, the best wines are not luxury goods like watches or handbags in which production can grow to meet demand. Nor can production be kept artificially low, for that matter, to create demand.

Yet even for a trophy wine like Dom Pérignon, the relative price has gone up. A study published in 2017 in The Journal of Wine Economics analyzed Champagne prices in New York City from 1948 to 2013 by determining how many hours people in various income groups would have to work to pay for an entry-level Champagne, a midrange bottle and a flagship or luxury cuvée like Dom Pérignon.

The study found that the entry-level bottles across income groups required fewer work hours in 2013 than in 1948, but the hours necessary to buy luxury bottles had increased. What’s more, the study found that the work hours required for a top Champagne increased at a much higher rate for the lower income groups relative to the highest, meaning that their access had diminished.

Thirst for top wines continues to increase exponentially. The audience for these wines was once restricted largely to connoisseurs in Europe, North America and a few other scattered places. It expanded gradually after World War II, encompassing countries like Japan and Australia, and really took off with the fall of the Iron Curtain and the economic opening of China, spurred on by the globalizing effects of the internet.

Today, wine lovers from around the world clamor for roughly the same pool of great Burgundies that was available in 1990.

In another example from Bordeaux, Professor Ashenfelter, along with two researchers from the University of Bordeaux, presented a paper in 2018 showing that as income inequality has increased since 1980, the price of first-growth Bordeaux has paralleled the rise in top incomes.

Though the problem matters to wine lovers, the rising inaccessibility of fancy wines is just a microscopic example of how income inequality and the concentration of wealth in fewer hands have affected daily life.

I live in Manhattan, where, until the pandemic at least, the price of Manhattan real estate has soared for decades as more people and companies competed for a fixed amount of space. Predictably, Manhattan became harder to afford for small businesses, struggling artists and writers, not to mention civil servants, police officers or firefighters.

Yet billionaires continue to vie for space. A hedge fund billionaire paid $238 million for a new apartment in 2019, in a building constructed only after dozens of middle-class tenants were evicted from their apartments. When billionaires decide that they want something, whether an apartment or a bottle of wine, it drives up prices for everybody else.

I am admittedly simplifying a complex issue. But thriving mixed neighborhoods have been transformed into luxury ghost towns, as the lifeblood of many communities gave way to grandiose condominiums with absentee owners and chain businesses.

“In order for income differentials to drive price increases, supply can’t increase,” Professor Ashenfelter said. “That’s the secret of real estate and wine.”

I don’t want to paint too dire a picture for wine lovers, though. Just as artists and musicians left Manhattan for other parts of New York City, so have many wine lovers had to turn elsewhere for formative experiences.

Fortunately, great wines are being produced all over the world nowadays. Those who are fascinated by how wine can express in intricate detail the characteristics of a place and culture can turn to German rieslings, the chenin blancs of Savennières, Chianti Classicos and Priorats.

They also have many other less-expensive options, in places like Burgundy and Bordeaux, wines that are highly pleasurable and offer a taste of what the fuss is about, even if they don’t tell the full story.

The wine areas themselves, or the culture that made the wines what they are, are also vulnerable. Bordeaux is already dominated by corporate ownership, but Burgundy has until recently largely been a region of small farmers. Only in the second half of the 20th century, when more grape-growers began to bottle their own wines instead of selling to large merchants, did some measure of prosperity begin to flow toward the farmers.

Today, the price of Burgundy has sent land values soaring, threatening the continuity of many small family estates as succession of ownership is confronted with steep inheritance taxes and the natural inclination of some in the next generation to cash in rather than grow grapes.

This has not occurred on a wide scale yet, but in 2017, in one recent example, Bonneau du Martray, which makes exquisite Corton-Charlemagne, a grand cru white Burgundy, was sold to Stan Kroenke, an American billionaire, after 200 years of ownership by one family. Mr. Kroenke may turn out to be a fine steward of the property, but the community and culture lose out.

I’ve spoken to Burgundy producers who grumble about their wines’ going solely into the hands of wealthy collectors, or of investors who will never open them but seek to profit from them as their value rises. These bottles are made to be opened and shared, they will say.

The producers have little recourse. If they were to sell their wines at lower prices, investors would leap in to buy them and then resell the wines at the market price. The investors, rather than the producers, would pocket the profits, without having to wait years for the bottles to appreciate.

Diminishing access to great wines is certainly not a catastrophe, or much of a problem for anybody not enamored of wine. But it is a shame.

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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