In the City
Trough at the top
A
RISING stock market lifts all boats but raises highest those on yachts. The super-rich have more of their wealth linked to shares, so the post-Covid stock market boom has fuelled even greater inequality.
Growth may be missing from the UK economy, but stock markets hit record closing highs last month. The FTSE 100 index is up 11 percent this year and 26 percent over the past three years; the Dow Jones index is 7 percent ahead this year and 45 percent since September 2022. This year chip-maker Nvidia became the first listed company to be valued at more than $4tn, powered by AI fever.
The share of US wealth held by the 19 richest US households (Musk, Bezos, Zuckerberg, Gates, Buffett and friends) soared by an estimated $1tn last year to $2.6tn, the biggest rise on record, according to an analysis by French economist Gabriel Zucman (pictured), an expert on wealth and inequality, reported by the Wall Street Journal. This followed the best consecutive years on Wall Street for a quarter of a century. The richest 1 percent own 31 percent of America’s wealth, the bottom 50 percent just 3 percent, according to the US Federal Reserve.
In the UK, the Office for National Statistics estimated earlier this year that in 2020-22 the 1 percent richest held 10 percent of all our household wealth – the same slice as the combined least wealthy 50 percent. However, this is probably a significant underestimate. A 2021 article by Professor Arun Advani of Warwick University and Resolution Foundation co-authors suggested official statistics undervalued the richest’s share of the wealth pie by nearly £800bn. The 1 percent share for the period 2016-18 (the latest available) had thus been not 18 percent but 23 percent. That share is likely to have since increased, given subsequent and current higher share prices.
That Journal of Applied Public Economics article highlighted that the super-rich were taking a bigger slice due to their “rising financial wealth” and “passive capital gains”. A “major driver of rising inequality is that wealthy families’ financial portfolios contain a greater share of high-yielding assets”. Almost a third of the richest 10 percent’s wealth was in financial or business assets, making the richest even richer. Interest on interest. Higher property values. Inflation. Private pension pots boosted by the FTSE 100 rising 585 percent and the Dow 3,300 percent since 1985.