Thirty-five years ago at a residential real estate awards event in Sedona, Ariz., the man declared the city’s Realtor of the Year took the podium, shared all the requisite thanks and expressions of humility, and then spoke to his financial success thusly: “It’s true that money can’t buy happiness, but it sure makes misery more tolerable.”
The audience guffawed.
Who can argue that misery not only loves company, it loves financial compensation, and the more the better.
Fortunately, if there is anything financial systems around the developed world are good at, it is making the rich richer and, increasingly, making far more people rich. One of the organizations that assists in confirming the theorem is Credit Suisse Research Institute, which produces an annual global wealth report, the most recent of which reveals that during the 12 months ended June 2017, global wealth rose by 6.4 percent, the fastest tempo of wealth aggregation since 2012. That expansion of financial might includes 2.3 million new millionaires.
Meanwhile, the Bloomberg Billionaires Index reports the richest people on earth became $1 trillion richer during 2017, more than four times the gain they realized in 2016. Nobody was more lavishly enriched during the past year than Amazon founder Jeff Bezos, who added $34.2 billion to his net worth, pushing his total net worth past $100 billion and making him the world’s richest person. Bezos wrested that title from Microsoft co-founder Bill Gates ($91.3 billion net worth), who held the title of world’s richest since May 2013.
Forty-three percent of millionaires are minted in the United States, making the U.S. the global leader in that category. Emerging economies are making their presence felt, now accounting for 8.4 percent of the world’s millionaires, up from just 2.7 percent in 2000.
What our financial systems have not been so good at, at least in recent years, is a broad-based enrichment of the masses. Astonishingly, the top 1 percent of richest individuals own more than 50 percent of the world’s total wealth. If the sum total of the planet’s assets were peanut-buttered across all households, each would have a net worth of $56,540 — a relative fortune, depending where in the world you live. The reality is that median wealth per household is only $3,582. If your household wealth is higher than that figure, you are among the richest 50 percent of the world’s population.
That would include virtually all U.S. millennials (those born between 1982 and 2004), though they are estimated to have amassed almost 50 percent less wealth, on average, in 2017 than the equivalent age group did in 2007. Among the culprits holding them back are student debt and the difficulty they are having cracking the housing market and building equity through homeownership.
No practically-minded person advocates equal distribution of all wealth, though it has become clear to any observer of world events the current chasm between society’s richest and poorest cannot withstand further gaping of that chasm. The gap between rich and poor among advanced economies is widest in the United States.
Interestingly, the wealth gaps among individuals appear reflected in the nation’s companies as well. The Economist recently reported, based on U.S. government data, market concentration has occurred in more than three-quarters of U.S. industries since the late 1990s, muting competition but creating higher profits, creating an environment of fewer and more profitable companies. The concern: If few companies dominate U.S. industries, our country’s reputation as a vigorous business environment for entrepreneurship and startup companies will diminish.
The current situation has also compounded the rich-versus-poor gap among individuals because, while corporate profits have escalated, real wages among U.S. workers have been sluggish, though they have been picking up during the past couple of years. U.S. anti-trust laws were created long ago to prevent reduced competition caused by industry consolidation, though enforcement of anti-trust statutes has been lax at times, perhaps because a series of companies that were considered poised to take over the world failed to do so. Instead, they were toppled by new enterprises. Think about how U.S. automakers were taken down by superior Japanese products, or IBM getting sacked by Microsoft, and Microsoft in turn eclipsed by the likes of Amazon, Apple and Google. Now, more than any company, Amazon seems to be moving into a position of extreme dominance, threatening to bring about the demise of perhaps hundreds of name-brand retailers. It is also the No. 1 cloud computing company, with Amazon Web Services and its 40 percent market share significantly outdistancing competitors such as Google, IBM and Microsoft, who have a combined market share of 23 percent.
Despite it all, an economy left unfettered by overregulation and laws that protect the strongest companies’ dominant market position against incursions from startup companies, moderates itself over time and job growth and, perhaps more important, income growth escalates.
Let’s hope so, because money is indeed a worthy anodyne for misery.
Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.