At a time when rising wealth inequality is fuelling social conflict and political instability, and capitalism is increasingly under attack, the recent UBS/PwC Billionaires report, which celebrates this cohort as job creators, impact entrepreneurs and philanthropists, must have come as a breath of fresh air to the Bill Gates, Mark Zuckerbergs and Jeff Bezos of this world.
Analysis from the world’s largest wealth manager, which banks around 1,000 billionaires, shows that, over the 15 years to the end of 2018, billionaire-controlled companies listed on equity markets outperformed the broader market by almost 9 per cent, returning 17.8 per cent, almost twice the 9.1 per cent of the MSCI AC World Index.
This result is testament of “the value creation potential” of this cohort of individuals, in terms of job creation, job security and contribution to society, states Josef Stadler, head Ultra High Net Worth at UBS GWM. Their long-term vision, determination, smart risk taking and business focus are a “powerful cocktail”, he adds. Moreover, a growing number of the ultra-rich are channelling skills and wealth to achieving impact and addressing the world’s challenges.
“Wealth concentration has hit record levels, and this creates noise,” acknowledges Mr Stadler, but this is mainly due to ultra-loose monetary policy, which has driven money into risk assets, benefiting the rich who are heavily invested in the stockmarket. The middle class, relying on savings, suffers from ultra-low interest rates.
Tech billionaires saw their wealth increase more than any other sector last year, with 95 per cent of the value created by a technological breakthrough flowing back into society. Only 5 per cent remains with the founder. Billionaires’ input into society is real, but people and media tend to focus on emotions, and there is a need to reconcile these two aspects, insists Mr Stadler.
Yet, findings from other studies do little to inspire a liking for the wealthy elite. A report from development charity Oxfam, released at the World Economic Forum in Davos early this year, found that the 26 richest individuals own $1.4tn, as much as the 3.8bn people who make up the poorest half of the planet’s population. The number of billionaires has almost doubled since the financial crisis, to reach 2,200 globally, and their wealth increased by 12 per cent in 2018 - or $2.5bn a day - while the poorest half of humanity saw their wealth decline by 11 per cent.
For the first time in US history, last year, following President Trump’s tax cuts, the 400 wealthiest people paid a lower tax rate than any other group, according to the University of California, Berkeley.
It is no surprise that Elizabeth Warren, front-runner in the Democratic presidential nomination race, has made reining in the excesses of the wealthiest Americans, and largest US businesses, a centrepiece of her campaign. She is threatening a 2 per cent tax on fortunes of more than $50m, representing 0.01 per cent of the population in the country.
Such proposals have reignited hopes of French economist Thomas Piketty, whose 2013 book on inequality, “Capital in the 21st Century”, became a global bestseller and bible for tax-the-rich progressives. In an interview with French magazine L’OBS, Mr Piketty, who recently published his follow-up book, “Capital and Ideology”, explained that it is untrue that billionaires create jobs and boost growth. Billionaires have accumulated wealth thanks to collective goods, such as public knowledge, infrastructures or laboratories of research.
Under his tax plan, billionaires would be simply abolished.
Elisa Trovato is deputy editor of Professional Wealth Management. Follow her on Twitter @elisa_trovato
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