World's witnessing a new Gilded Age as billionaires’ wealth swells to $6tn

Dollars

The world’s super-rich hold the greatest concentration of wealth since the US Gilded Age at the turn of the 20th century, when families like the Carnegies, Rockefellers and Vanderbilts controlled vast fortunes.

Billionaires increased their combined global wealth by almost a fifth last year to a record $6tn (£4.5tn) – more than twice the GDP of the UK. There are now 1,542 dollar billionaires across the world, after 145 multi-millionaires saw their wealth tick over into nine-zero fortunes last year, according to the UBS / PwC Billionaires report.

Josef Stadler, lead author of the report and UBS’s head of global ultra high net worth, said his billionaire clients are concerned that growing inequality between rich and poor could lead to a “strike back”.

“We’re at an inflection point,” Stadler said. “Wealth concentration is as high as in 1905, this is something billionaires are concerned about.

“The problem is the power of interest on interest – that makes big money bigger and, the question is to what extent is that sustainable and at what point will society intervene and strike back?”

Stadler added: “We are now two years into the peak of the second Gilded Age.”

He said the “$1bn question” is how society will react to the concentration of so much money in the hands of so few.

Anger at so-called robber barron families who built up vast fortunes from monopolies in US railroads, oil, steel and banking in the late 19th century, an era of rapid industrialisation and growing inequality in America that became known as the Gilded Age, led to President Roosevelt breaking up companies and trusts and increasing taxes on the wealthy in the early 1900s.

“Will there be similarities in the way society reacts to this gilded age?,” Stadler said. “Will the second age end or will it proceed?”

The International Monetary Fund (IMF) recently said Western governments should force the top 1% of earners to pay more more tax to try and reduce dangerous levels of inequality.

Stadler said media coverage of inequality and the super-rich suggested there would be an “inflection point”, but he said “the perception that billionaires make money for themselves at the expense of the wider population” was incorrect.

He added that 98% of billionaires’ wealth found its way back into wider society and said the world’s super-rich employ 27.7 million people – not far behind the number of people in the UK workforce.

Billionaires’ fortunes increased by 17% on average last year due to the strong performance of their companies and investments, particularly in technology and commodities. The billionaires’ average return was double that achieved by the world’s stock markets and far more than the average interest rates of just 0.35% offered by UK instant-access high street bank accounts.

Stadler said that the super-rich’s concerns over public perceptions that they are getting wealthier at the expense of the wider population had led them to make greater philanthropic gifts and spend their money on public art galleries and sports teams.

“You could say it is about ego and wanting to show off and sit in the front row,” he said. “But it is also about giving back.”

The report said billionaires now account for 72 of the world’s 200 top art collectors, up from 28 in 1995. “While not a fresh phenomenon, private museums are growing in number, especially in Asia,” the annual UBS report said. “Motivated by their passion for art, and often encouraged by favourable tax treatment, art collectors are setting up private museums all around the world to share their collections with the public.”

Recent gallery openings include The Broad in Los Angeles, funded by Eli Broad – the world’s 65th richest person with a $7.4bn fortune. Japanese billionaire Soichiro Fukutake is building a series of galleries to house his art collection on islands in Japan’s Seto Inland Sea.

“The billionaire population is concerned about [inequality] and that may be why we are seeing this acceleration of publicly displaying art collections or partnering with public institutions so more of the public can enjoy what they have,” John Matthews, UBS’s head of private wealth management. “I think it’s a big part of investment in sports franchises - it’s a way for them to say ‘I made all this money and I did it in Cleveland, Ohio, I’ve got to give back to my community and one way I’m going to do that is to make sure the stadium is great’.”

The report found that 140 of the world’s top sports teams are owned by just 109 billionaires, with two-thirds of the US National Basketball Association (NBA) and National Football League (NFL) teams owned by billionaires. In the UK, nine of the 20 Premier League teams have billionaire owners, including Chelsea owned by Roman Abramovich and Manchester City which is part of Sheikh Mansour’s global sports empire.

“There is an acceleration of these transactions as we speak, with major buyers coming from China,” Stadler said.

One of the billionaires told the UBS researchers he had bought sports teams because it opened doors to “stars, Sheikhs, famous businessmen and regular guys from around the world, all in the same room, all talking only about the ball”.

Powered by Guardian.co.ukThis article was written by Rupert Neate, Wealth correspondent, for theguardian.com on Thursday 26th October 2017 16.48 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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