In 2013 It Was Very Good to Be the Billionaire: Up from $3.2 to $3.7 Trillion: Monday Focus

A couple of weeks ago Matthew Miller and Peter Newcomb gave Bloomberg News’s take about how, in 2013, it was very good to be the billionaire. Insanely good. Crazy good:

Matthew G. Miller and Peter Newcomb: Billionaires Worth $3.7 Trillion Surge as Gates Wins 2013: “The richest people on the planet got even richer in 2013, adding $524 billion to their collective net worth, according to the Bloomberg Billionaires Index, a daily ranking of the world’s 300 wealthiest individuals… aggregate net worth… stood at $3.7 trillion at the market close on Dec. 31, according to the ranking…. Bill Gates… was the year’s biggest gainer… fortune increased by $15.8 billion to $78.5 billion… as… Microsoft… rose 40 percent… recaptured the title of world’s richest person… from… Carlos Slim….

Global stocks soared in 2013 for the best annual gain since 2009, with the MSCI World Index advancing 24 percent during the year to close at 1,661.07 on Dec. 31. The Standard and Poor’s 500 Index rose 30 percent to close at 1,848.36, its best yearly gain since 1997. The Stoxx Europe 600 gained 17 percent to close at 328.26. Companies in the S&P 500 are worth $3.7 trillion more today than they were 12 months ago….

Sheldon Adelson… of Las Vegas Sands Corp…. was the second-biggest gainer… adding $14.4 billion…. Slim lost $1.4 billion…. Nobody lost more of their fortune than Eike Batista, whose net worth declined more than $12 billion during the year. OGX Petroleo & Gas Participacoes SA, the oil company that transformed him into Brazil’s richest man, filed for bankruptcy protection in October. Batista was the world’s eighth-richest person in March 2012, and now has a negative net worth….

Bloomberg News uncovered 109 billionaires in 2013 who have never appeared on an international wealth ranking, including Lynsi Torres, the youngest female billionaire in the U.S…. heiress to In-N-Out Burger…

The 300 billionaires appear to own roughly 3% of global economic assets–and to control roughly 10% of global economic assets. Since they make up 0.000017% of households, that gives each of them the relative wealth of something like 175,000 times the global average, and the relative economic power of something like 600,000 times the global average. If we think–as we should–of the global market economy as a collective social resource allocation mechanism in which we collectively decide what to produce and how to use it and in which each person’s preferences are roughly weighted by their wealth, these equal-to-600,000-average-households for each one and 10%-of-the-total for all 300 are the right numbers to keep in the back of your head as you think about wealth- and control-based global power imbalances.

This becomes a real source of trouble to the extent that their preferences deviate from those of the rest of us. They are–obviously–much more interested in their own standard of living than we are. But it is not clear that this runs all one way: Bill Gates is much more interested in, say, curing river blindness and alleviating African poverty than your average American voter who is likely to applaud cuts in U.S. foreign aid. On the other hand, Sheldon Adelson’s preferences are definitely not mine. And I have no idea how Lynsi Torres views the world at all–other than a generalized fear that heirs and heiresses are by virtue of their upbringing dangerous people to give a large voice in social decisions to, and even upwardly-mobile entrepreneurial plutocrats are likely to have a very overoptimistic view of how our current institutions function in the large.

And I do not believe any of us should be terribly happy with the large upward leap seen in 2013. It is not as though the 300 did much to redistribute wealth from the rest of us to them. Rather, it is mostly that the rest of us–or at least those of the rest of us who trade on the stock market–finally marked their beliefs to market and recognized:

• that, no, idle capacity is not going to leap upward in the near future–and, Europe aside, idle capacity is unlikely to even creep upward any time soon.
• that, no, loose monetary policy is not going to generate inflation and economic disruption any time soon.
• that, no, rising wages are not going to put substantial downward pressure on interest rates any time soon.
• that, no, central banks are not going to raise interest rates substantially any time soon, and thus that you should not be speculatively in short-term cash rather than in long-term assets that carry claims to real incomes.

These factors, collectively, account for nearly all of the $500 billion increase in billionaire wealth in the past year, and in the rough doubling of billionaire wealth since the Days of Fear in March 2009.

But reflect on the fact that the U.S. stock market is not yet back to its inflation-adjusted peak during the dot-com boom. Since 1999 we have had fifteen years of pouring 3% back into equity valuations via retained earnings that should have boosted the inflation-adjusted S&P by more than 50%. Investors as a whole are thus 1/3 more pessimistic than they were back in 1999. Yet our global billionaires are between 1.5 and 2 times as weighty in a relative sense in our world economy today as they were back in 1999. Part of this is because the past fifteen years have been relatively bad years for the U.S.: only Europe and Japan of the world’s regions have done worse. But part of this is because the trend toward greater wealth concentration at the very, very top that started toward the end of the 1970s has proceeded at least as rapidly since 1999 as it did in the 1990s, and more rapidly than it did in the 1980s.