Thursday, September 11, 2014

Meet the World's Richest Man, and Rethink Wealth

Global wealth rests in the hands of a few individuals. What could this wealth accomplish?
 by Grant Andrews

It's likely you don't know much about the world's richest man. It's not Microsoft billionaire Bill Gates, who lost the spot a few months ago after holding it sporadically over the past two decades, nor is it Warren Buffet, who hasn't held the top spot since 2008. Instead, it's Mexican business magnate and investor Carlos Slim Helú, widely known simply as Carlos Slim, who has been ranked the world's richest person for five of the past eight years. In fact, his fortune has been growing at a staggering rate, from $53.1 billion in 2007 to an estimated $83.8 billion today, a growth of 30.7 billion dollars, or almost 58% growth in only 7 years.

Slim's father Julián was a wealthy businessman in Mexico City, having started a dry goods store and purchasing real estate to amass his fortune. Slim began as a trader in Mexico after college and eventually formed his own brokerage firm. This was the beginning of his growing fortune, and he would go on to run the conglomerate Grupo Carso, with interests in communication, real estate, media, technology, retailing and finance.

Slim is one an elite group of ultra-rich people worldwide. The high-net-worth individuals (HNWI) of the world, or those who have more than $1 million in wealth outside of their primary residence, number 13 million worldwide, or about 0,186% of the world's population. The US is the country with the highest number of these individuals, with around 4 million HNWI, or about 1,3% of the US population having accumulated $1 million in wealth. The the top 1% of US earners make around $220,000 a year after tax. Being among the wealthy is much rarer than many people think.

Another important tier of wealth is reserved for the ultra-high-net-worth individuals (Ultra-HNWI). These are individuals who own $30 million or more in wealth. There are only about 199,235 of these worldwide, but their total wealth is $27,77 trillion. If they were a country, they would have the highest GDP in the world by far, surpassing the US by about $10 trillion. These individuals, constituting only 0.002% of the world's population, control about 11% of the world's wealth.

The American Dream holds that anyone can achieve great wealth if they simply work hard, but these figures seem to suggest otherwise. While Forbes claims that 70% of the Forbes 400 top billionaires were self-made, only 35% really built their wealth from middle-class or lower-middle-class backgrounds, and most of these billionaires were already born into relative wealth. Only a handful really started from poverty.

So it is clear that the American dream, for most of the world and especially for the poor, is simply a dream, and that even though all of us are complicit in maintaining the current systems of wealth inequality, and we all hope to end up in that elite group, chances are that we won't make it there regardless of how hard we work. Hard work is not directly correlated with wealth, and in fact the work hours and work intensity of the poor and middle-class are increasing while their income decreases.

The age-old cliche holds true, as the rich are truly becoming astronomically richer while the poor (and even the shrinking middle-class) are becoming much poorer, even in the US.

Is this the way things are supposed to be? Should we accept the system the way it is because one in a million of us make it out of poverty and even fewer become wealthy?

As a step towards an answer, let's see what the wealth of the richest individuals could do.

If the 199, 235 ultra-HNWI remained ultra-wealthy, and held on to an average of $30 million each while using the rest to improve the lives of others off whose labour they accumulate their wealth, there would be a surplus of around $21,8 trillion dollars.

To build 20 000 state-of-the-art schools in every country in Africa, maintain them for 10 years, train 30 teachers for each of those schools in a four year college degree and pay these teachers the average salary for 10 years, it would cost just over $10 trillion. So for about half of the total wealth we have to work with, money which was in excess of making a few people Ultra-HNWIs, we could take a great step towards solving education in Africa for the next decade.

Of course, we don't simply need to focus on education, and these figures are oversimplified, but this is just one example of how money can make a difference. And money in foreign aid does make a difference, despite the myths surrounding this:

Each year, less than $200 billion is given in aid to developing nations, much less than is needed to make any significant difference. While it is true that a lot of this money is lost to corruption and mismanagement, a small portion of it could be spent on hiring many managers who could ensure that it is properly spent. The wealthy clearly have the means to make a significant difference to our world. No one expects handouts of cash, but since we live in an unequal world, the responsibility to manage its social problems has to rest mostly with those who have the most power, or those who benefit the most from wealth inequality, namely the rich.

There are some rich individuals who are already part of the solution. Many billionaires, including Oprah Winfrey, Bill Gates, Warren Buffet and others, have pledged to donate 99% of their wealth to charitable foundations. Many of the world's wealthy are already involved in improving the state of the poor through aid, creating jobs and building infrastructure. But most of the world's rich are not doing enough.

It is important to dispel the myths around wealth in order to approach the world's problems with clarity. Very few of us are really benefiting from wealth inequality, but all of us are part of maintaining it, and the myth of the American dream is one of the many factors that keep us in limbo.