Why are we so intrigued by enormous wealth? Year after year, organisations like the magazine Forbes and the news service Bloomberg publish lists of the richest people in the world, and we lap them up like puppies at the food bowl.
First published in the Daily Maverick 168 weekly newspaper.
Rich lists are now so popular they are updated in real time. Business Maverick published a story in mid-April 2021 on African global dollar billionaires, and it was one of the best-read stories of the week. Granted, this particular tally was unusually interesting because it coincided with the pandemic, and also because the increase in global billionaires exploded during 2020.
The already massively rich got enormously richer during the global pandemic. The numbers are eye-popping. The number of billionaires on Forbes’ 35th annual list of the world’s wealthiest (people with a net wealth of $1-billion or more) exploded to 2,755, roughly 660 more than a year ago. That means one person was being added to the list every 17 hours. Compare this with 1987, when there were only 140 dollar billionaires.
The total net worth of the group has also exploded. In a year, their wealth grew from $8-trillion to $13.1-trillion. The people at the top of the list are so wealthy it’s staggering. Amazon founder Jeff Bezos is the world’s richest for the fourth year running – he’s worth $177-billion. This is after his 2019 divorce from MacKenzie Scott, now the world’s third-richest woman, cost him $35-billion.
Prurience aside, do these lists actually tell us anything interesting? Funnily enough, the answer is “yes”. The most common way of measuring national wealth is through gross domestic product. But as any economist will tell you, GDP has all kinds of huge faults. Notionally, it is the market value of all the final goods and services in a country over a certain time period. Seems simple, but the actual calculation is mindboggling. Arguably, the biggest failing is that GDP tells you little about how wealth is distributed and is very dependent on the value of the dollar at any point in time. Increases and decreases in GDP move at a very incremental pace, even though we know, partly from rich lists, that wealth moves up and down dramatically.
The reason for the incrementalism is that the value of stock markets constitutes only a small portion of the total. Furthermore, increases in property values are not reflected very clearly. Both of these things have an enormous impact on the rich. Elon Musk was 31st on the Forbes list in 2019, worth about $24-billion. He rocketed to the second spot almost entirely because of the increase in the stock market value of his companies, mainly carmaker Tesla.
For the middle class all over the world, the crucial thing is property values. For ordinary people, getting lucky with your property is the most significant factor in your total net worth, which is why there is such a push to help poor people take advantage of this.
There is also an African problem with GDP: it largely measures flows to governments because private wealth is so sparse. African stock exchanges outside of the JSE are tiny. Even in a huge country like Nigeria, the total market capitalisation of the Nigerian Stock Exchange in $73-billion, compared with the JSE’s total market cap of just over $1-trillion. Property rights are massively difficult to secure, so the African housing market is small. What you are left with is government revenue, itself not enormous.
In a way, this is reflected in the number of African billionaires. There are 18 dollar billionaires on the Forbes list: SA has five billionaires, all the familiar names. A decade ago, there were 16 African billionaires, so the increase is modest. The fortunes of several of those have actually declined, at least according to Forbes’ estimation, and the increase of the others have been modest. Nicky Oppenheimer & Family were worth $6.8-billion in 2011 and are today worth around $8-billion. That is barely more than compound inflation.
What is really worrying is that private wealth in Africa is actually declining. A different report, the AfrAsia Bank Africa Wealth Report 2021, finds SA has performed particularly poorly – 4,200 dollar millionaires left the country over the past decade. With the JSE performing poorly, and property prices flat, total private wealth has declined 25% over the past decade. Partly because of SA’s poor performance, African net wealth has been flat for 10 years.
People are understandably envious of the very rich, and wealth disparities are grotesque, but the fortunes of the very rich – to some extent – are a bellwether of everyone’s wealth. DM168
This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.