At the beginning of each year, the world’s corporate and political elite gather in the Swiss ski resort of Davos to pat each other on the back, attend seminars on “the fourth Industrial Revolution” – whatever that might be – and generally mull over the state of the world. Rarely is so much wealth to be found in so few conference rooms. And each year, Oxfam, the global development charity, takes the opportunity to run the numbers on the state of global inequality. Oxfam’s findings are often eye-catching, but this year especially so.
The wealth of the five richest people in the world, they found, has more than doubled, from $405bn (£320bn) in 2020 to $869bn in late 2023. That’s an increase of about $14m an hour, which is not bad going by anyone’s reckoning. Perhaps more strikingly, Oxfam calculates that on current trends the world is due to welcome its first dollar trillionaire within a decade. Elon Musk, the richest person at the time of writing, is worth about a fifth of that, at $210bn.
It may of course take longer than Oxfam predicts, but the global trends are reasonably clear. Go back a decade or so, and the world’s then richest man, Carlos Slim – a Mexican telecoms magnate – was worth about $70bn, or one-third of Musk’s current estimated value. It does seem likely that, without a radical change, we’ll have our first trillionaire by the 2040s.
Even in macroeconomics, where huge numbers are commonplace, a trillion dollars is a big deal. For context, the entire annual economic output of the United Kingdom comes in at about $2.9tn. To grasp how unprecedented it will be, it’s helpful to think historically. The oil magnate John D Rockefeller was announced by newspapers as the world’s first dollar billionaire back in 1916. US GDP was around $50bn then, so Rockefeller was worth about 2% of national income. Now it’s closer to $27tn and expected to grow to $40tn by the mid-2030s, so a contemporary trillionaire would be worth between 2.5% and 3.5% of the output of the world’s richest country – a larger chunk than the wealthiest person in modern economic history.
Indeed, there have never been as many super-rich people as there are today – with numbers rocketing since the financial crisis of 2008. Back then, there were 1,000 dollar billionaires – now there are more than 2,000. One conspicuous indicator of this can be seen each summer in the marinas of well-to-do resorts. At the turn of the millennium there were fewer than 2,000 superyachts, compared with more than 5,000 today, with about 150 new launches each year.
Does any of this matter? Aren’t billionaires, even the odd trillionaire, the mark of a prosperous economy? To answer this, we need to look at how we got here in the first place. Three economic trends are key: first, asset prices have risen quickly and much faster than wages. A decade of low interest rates saw the price of everything from shares to houses and art soar in value. These are the kinds of things wealthy people already have, so it’s a classic case of the rich getting richer. And if you thought interest rate rises might put paid to that, the S&P 500, the US’s principal share index, reached a record high in February 2024.
Second, there’s the increase in corporate profits. Many of the world’s billionaires have made their money running firms, often in industries marked by low competition. Corporations with large market shares are able to raise prices without it hitting their bottom line, as customers have few other places to go. As Oxfam notes, the average global mark-up, the difference between the price of production and the sale price, rose from 7% in 1980 to 59% by 2020.
Third, taxation regimes have generally become less progressive. In 1979 the top marginal rate of income tax was 83% in the UK. In the US it was 70%. Nowadays, the rates are 45% and 37%, respectively. In summary, not only have the super-rich benefited from rising asset prices and higher profits, they are taxed at half the level they were two generations ago.
It’s true that a certain amount of inequality is built into capitalism – some will work harder than others or be more prepared to take risks. But it turns out that such extreme disparities are unnatural, politically dangerous and actually threaten economic stability. There is evidence that unequal societies are more vulnerable to shocks, and more likely to suffer political instability. Research by the International Monetary Fund, not known for its leftie sympathies, identified inequality and the loss of worker bargaining power as leading factors in the 2008 crash. Some economists and philosophers, such as Ingrid Robeyns, argue that a hard upper limit on individual wealth is not only morally and socially right, but economically desirable.
So, yes, we should worry about the emergence of the world’s first trillionaire. But preventing it would require some radical changes. It would mean politicians recognising that there is more to taxation than simply raising revenue – preventing extreme inequality is a good in and of itself. It would require a new focus on rigorous competition policy to break up and prevent monopolies. It would need corporate governance to change, so that shareholders aren’t the only priority, and the needs of employees, suppliers and customers have to be taken into account, too.
Look back to Rockefeller, though, and there may be grounds for hope. The fact that he was part of a cohort of businessmen known as the “robber barons” tells you something about the popular view of their immense wealth. That political discontent culminated in the progressive era, during which competition policy got tough, marginal tax rates headed north, and the rights and power of workers increased. Of course, it took a stock market crash and a depression for the landscape to decisively shift, but today we have the advantage of economic hindsight. The fact that G20 leaders are mulling a global minimum tax on billionaires is a good sign, but it will not be enough. The prospect of the world’s first trillionaire should be a spur to act before it’s too late.
Further reading
Limitarianism: The Case Against Extreme Wealth by Ingrid Robeyns (Allen Lane, £25)
End Times: Elites, Counter-Elites and the Path of Political Disintegration by Peter Turchin (Penguin, £10.99)
Vulture Capitalism: Corporate Crimes, Backdoor Bailouts and the Death of Freedom by Grace Blakeley (Bloomsbury £20)
