In Spite of A Global Meltdown, The Rich Are Now Richer!

posted Aug 2, 2013, 8:10 AM by Willie T. Butler   [ updated Aug 2, 2013, 8:21 AM ]
(Originally Published | March 16, 2011)

Well, the verdict is in.  In 2010, the world’s wealthiest people experienced significant growth in both personal worth and the number of new members joining their ranks.  According to the 25th Annual Forbes Report on the world’s Billionaires; there are now 1,204 billionaires worldwide including an increase of 214 new members—who combined have wealth exceeding $4.5 trillion.    

That’s right, now 1,204 individuals out of almost 4.5 billion global inhabitants have a combined financial worth that would place them second highest in Gross Domestic Product (GDP) behind the U.S.  Even China, who surpassed Japan in GDP during 2010, only generated $4 trillion while the U.S. generated $14 trillion.

More significantly, while the majority of the world’s population are still recovering from high unemployment, significant reductions in individual savings and investments, in their ability to obtain personal and small-business loans or lines of credit, and having to cope with reductions in public services provided by state and local governments, the world’s Billionaires managed to generate returns averaging from 120% to as much as 300% on their investments.   Did I mention there is still a recession?

Of equal note, while we usually identify the wealthiest Americans by their taxpayer status—which often fuels our growing political debate over whether the wealthy pay their fair share of income taxes and whether a lower income tax rate will spur or incent additional business investment, corollary evidence would suggest that there will not be any trickle-down benefits to the middle-class during this wealth cycle.

So, How about You and Me?

According to a March 5th Wall Street Journal article for their Real Time Economics Blog, “From mid-2009 through the end of 2010, output per hour at U.S. nonfarm businesses rose 5.2% as companies found ways to squeeze more from their existing workers.  But the lion’s share of that gain went to shareholders in the form of record profits rather than to workers in the form of raises.  Hourly wages, adjusted for inflation, rose only 0.3%, according to the Labor Department.  In other words, companies shared only 6% of productivity gains with their workers.  That compares to 58% since records began in 1947.”

While we may not resolve the debate over how wealth should be taxed or is distributed in the U.S. or abroad, it is important to note that 413 of the world’s richest people are American billionaires.  This means that out of 350 million Americans, a paltry 118 millionth of one-percent, shown as 0.00000118, represent our nation’s wealthiest citizens.  Add to this another 1.5 million who are real millionaires and the percentage of our nation’s wealthy rises to just 4.2 thousandth of a percent of our population.   Worst, this microcosm of our populace are considered by economic experts to own more than 53% of our nation’s stocks and other investment assets.  

Time for a Course Correction

America is creating an even greater divide between the haves and have not’s, however unintentional it may be.  We are reminded through Forbes’ research that wealthy individuals are increasing in financial worth by a margin—over low-to-middle income earners in the U.S—of about 15:1.   Based on calculating this out over a 10-year term using $100,000 earning a 5% annual return, those like me would earn approximately $17,103 while our billionaire cousin earns $404,556 or an average 15%.   Knowing this, which would you rather be?

More to the point, how can you get in on these higher earnings and play in the wealthy leaguer’s arena with the likes of Warren Buffet and Bill Gates?   Well, there are several ways to become a savvy investor, providing you are not placing all of your eggs in one basket, i.e., betting the store and not setting aside other financial responsibilities in the process.   For some, that is what I call the Las Vegas Syndrome, where the fever hits some with such intensity that they lose all sense of moderation and self-control.  All they want is the big win and they are willing to spend everything to get it.

On the other hand, perhaps it is time to consider that the pursuit of wealth is itself a syndrome that can rob a person of an important quality of life perspective.  Remember, that things you do not control will always control you.

In Phillip Greenspun’s blog on Money (dated 12/1/09), there is a very interesting passage which considers a healthier perspective:

“A young man asked an old rich man how he made his money. The old guy fingered his worsted wool vest and said, “Well, son, it was 1932…the depth of the Great Depression. I was down to my last nickel. I invested that nickel in an apple. I spent the entire day polishing the apple and, at the end of the day, I sold the apple for ten cents. The next morning, I invested those ten cents in two apples. I spent the entire day polishing them and sold them at 5 pm for 20 cents. I continued this system for a month, by the end of which I’d accumulated a fortune of $1.37. Then my wife’s father died and left us two million dollars.”

Other authors share similar thoughts which underscore this passage and offer sage advice:
  • "Keep your life free from the love of money, and be content with what you have." Heb 13:5 (RSV)
  • “Rest in the Lord and wait patiently for Him; Do not fret because of him who prospers in his way... Ps 37:7, 16 (NAS); and,
  • “Do not wear yourself out to get rich; have the wisdom to show restraint. Cast but a glance at riches, and they are gone, for they will surely sprout wings and fly off to the sky like an eagle.” Pr 23:4-5 (NIV)
The world’s youngest billionaire today is Dustin Moskovitz, age 26, and a co-founder of FaceBook which has been valued in 2010 to be worth around $54 Billion.   Good fortune based on a personal quest to be rich or the result of sheer hard work and circumstance?  You decide…

Famous inventor and Statesman Ben Franklin put it this way, He that is of the opinion money will do everything may well be suspected of doing everything for money.  

What’s Most Important To You?

Given man’s history with riches and wealth, I personally subscribe to the myriad counsel expressed by King Solomon, a man of great wealth and considered the wisest to ever live:

“Whoever loves money never has enough; whoever loves wealth is never satisfied with his income. This too is meaningless. As goods increase, so do those who consume them. And what benefit are they to the owner except to feast his eyes on them?   The sleep of a laborer is sweet, whether he eats little or much, but the abundance of a rich man permits him no sleep. I have seen a grievous evil under the sun: wealth hoarded to the harm of its owner, or wealth lost through some misfortune... Naked a man comes from his mother’s womb, and as he comes, so he departs.”   Pr 23:4-5 (NIV)

Let us hope that time and circumstance change the hearts and minds of the haves to think in terms of shared equity and beneficence on a much grander scale.  That way—and rather than wanting to be rich—we can all settle on fairness and the individual pursuit of what should really matter to us eternally.