Beyond grotesquely wealthy
Eight billionaires have as much wealth as half of the world’s population
THAT the world’s top eight billionaires own the same wealth between them as the poorest half of the population, an Oxfam survey reveals, is startling.
Not only does it indicate the immense concentration of wealth and power, but it may point to a long term potential decline in consumption among those with considerably less wealth.
The development charity said it was ‘beyond grotesque’ that a handful of rich men headed by Microsoft founder Bill Gates were worth US$426bil, equivalent to the wealth of 3.6 billion of the world population.
There is a need for a new economic model to reverse an inequality trend that purportedly helped to explain Brexit and Donald Trump’s victory in the US presidential election, said Bloomberg, quoting Oxfam.
“This clearly shows how capitalism widens the wealth gap between the rich and the poor, manifested in the form of wealth concentration and growing income inequality.
The complaint is that warnings of dire consequences have fallen on deaf ears.
“Such rising inequality, if it persists, will destabilize the social fabric of society as well as lead to greater polarization and division.
“This raises deep worries that the superrich plutocrats will wield power and influence by virtue of their massive wealth accumulation,’’ said Lee Heng Guie, executive director, Socio Economic Research Center.
Free market forces have come into question.
“Some have questioned if the ultra-free market and globalised capitalism has fully exploited the less developed countries and only benefited the developed and wealthier nations, which give them more power and influence as well as enhanced wealth,’’ said Lee.
This top billionaire group is headed by Gates, Amancio Ortega, founder of the Spanish fashion chain Zara, and Warren Buffett, renowned investor and chief executive of Berkshire Hathaway.
The others are Carlos Slim Helú, the Mexican telecoms tycoon and owner of conglomerate Grupo Carso; Jeff Bezos, founder of Amazon; Mark Zuckerberg, founder of Facebook; Larry Ellison, chief executive of
Oracle and Michael Bloomberg, a former mayor of New York and founder and owner of the Bloomberg news and financial information service, according to Bloomberg.
In contrast, Oxfam said last year the world’s 62 richest billionaires were as wealthy as half of the population.
However, Bloomberg said the number has dropped to eight in 2017 because new information shows that poverty in China and India is worse than previously thought, making the bottom 50% even worse off.
Poor distribution of wealth may have lasting effects on overall consumption.
“The kind of civil unrest like the Occupy Wall Street movement arose because of poor distribution of wealth.
“We also have certain segments and industries catering to a broader mass market that are suffering, for instance, Walmart is retrenching.
“I suspect consumption will overall slump for economies worldwide eventually if this spreads.
“There is a point made in economics that the propensity to consume out of income is higher for those who are poorer than the rich,’’ said Pong Teng Siew, head of research, Inter-Pacific Securities.
US stocks rose for the first time in 50 years when a new president was sworn in. Does this point to anything?
The Trump rally in stocks since the surprise US election outcome had stalled recently as investors awaited clarity on how Trump would boost the economy.
Meanwhile, the strength of the US dollar seems to have wavered slightly following comments from Trump that it was too strong, noted Hor Kwok Wai, chief operating officer, global markets, Hong Leong Bank.
With the recent string of improved economic data, the most likely outcome is higher short term US interest rates, said Hor, who added that while there is a lot to look out for, one has to wait for details before taking further views on the markets.
The buoyant mood on US stockmarket is based on expectation and is infectious.
“It is symptomatic of the great sense of anticipation and hope with which the US is looking to the Trump administration, and there is much hope that he will be the next Ronald Reagan.
“With interest rates at an all time low, unlike the 20% rates and much lower prevailing debt levels at the time Reagan stepped into office, such high hopes may very well end in disappointment.
“But Trump is ebullient and projects such confidence that the mood is infectious,’’ said Pong.
Reagan was US president from 1981-89; his Reaganomics focused on lowering taxes, government spending and regulation which resulted in an economic expansion that brought the country out of the worst recession since the Great Depression.
Reaganomics had brought about one of the longest economic expansions in US history although some argued it was interest rate cuts that had stimulated the economy; the Fed funds rate was lowered from 6% at the beginning of 2001 to 1% in June 2003.
Government spending was shifted from domestic programmes to defence, and Federal debt nearly tripled from US$997bil in 1981 to US$2.857 trillion in 1989.
Trump’s conviction is driving the current positive mood.
“His powerful inaugural speech underscores his strong conviction to deliver his election promises; Trumpnomics, reflation and the strong US dollar will define the year,’’ said Lee.