Business

Davos billionaires keep getting richer — as world's have-nots just keep getting poorer

Bloomberg, AP

The global elite descending on Davos are richer than ever.

A decade after the financial crisis poured flat champagne on the World Economic Forum, gold-collar executives set to gather there this week have bounced back, and then some.

David Rubenstein has doubled his fortune since 2009. Jamie Dimon has more than tripled his net worth. And Stephen Schwarzman has increased his wealth six-fold.

It’s a remarkable showing given the economic and political tumult of the past decade, from Lehman Brothers to Brexit to Donald Trump. The fortunes of a dozen 2009 Davos attendees have soared by a combined $175 billion, even as median U.S. household wealth has stagnated, a Bloomberg analysis found.

The data illustrate the ever-widening gap between the true haves—those in the 0.1 percent—and the have-nots of a global economy. Data from UBS and PwC Billionaires Insights reports show that global billionaire wealth has grown from $3.4 trillion in 2009 to $8.9 trillion in 2017.

Central bank actions to fight the financial crisis—record low interest rates and bond-buying programs—have underpinned this ballooning wealth by driving up the prices of stocks and other assets.

“Ten years ago, ironically at the lows of the market, what you wanted to own was capital and if you did own capital you did incredibly well,” said Michael Hartnett, Bank of America Corp.’s chief investment strategist.

It means the Davos Man—the conference remains overwhelmingly male—exerts more authority and visibility than ever.

Dimon is returning to the WEF with JPMorgan Chase & Co. larger and more profitable than ever. Schwarzman—recognizable in his tan winter coat over suit—has built Blackstone Group LP into the world’s largest alternative asset manager with $457 billion of assets as of last Sept. 30, up from $95 billion at the end of 2008.

And Davos remains as popular as ever. The forum—titled Globalization 4.0—is expected to host 3,000 people.

This year, George Soros is hosting a dinner at which he will speak and Dimon’s JPMorgan is throwing a cocktail party. Bill Gates will be present again, as will billionaire Carlyle Group co-founder Rubenstein, who hosts a show on Bloomberg Television and whose fortune has doubled over the past decade.

Billionaire success was difficult to envisage a decade ago, when the gathering was marked by fear, anger and bitterness.

“Everyone I spoke to says it’s the grimmest Davos they’ve ever been to,” academic Kenneth Rogoff said at the 2009 meeting. “The mood has been very depressed.”

The intervening years have given attendees plenty of reasons for cheer. Business owners and financiers have benefited from the longest bull market in history while the benefits from an era of cheap money and recent U.S. tax cuts have largely flowed to the wealthy.

Wealth inequality around the world is “out of control” and doing particular harm to women, anti-poverty campaigner Oxfam warned Monday.

Oxfam, which has for years been trying to bring attention to the issue ahead of the World Economic Forum, said in a report that billionaire fortunes increased by 12 percent last year — the equivalent of $2.5 billion a day — while the 3.8 billion people who make up the world’s poorest half saw their wealth decline by 11 percent.

“This is not inevitable, this is unacceptable,” Winnie Byanyima, Oxfam International’s executive director, said in an interview.

In the report, which is based on figures from Credit Suisse’ Wealth Databook and Forbes’ annual list of billionaires, Oxfam said the number of billionaires has almost doubled since the financial crisis a decade ago yet tax rates on the wealthy and corporations have fallen to their lowest levels in decades.

Oxfam said making taxes fairer will help address many of the world’s ills. It said getting the world’s richest 1 percent to pay just 0.5 percent extra tax on their wealth could raise more money than it would cost to educate the 262 million children out of school, and provide lifesaving health care for 3.3 million people. It also suggested governments look again at taxes on wealth such as inheritance or property, which have been reduced or eliminated in much of the developed world and barely implemented in the developing world.

Even as the meeting’s reports and agendas have repeatedly flagged inequality as one of the chief risks to a stable society, the global economy’s bifurcation has only quickened.

“The financial crisis was the kind of event that shakes things out, but it didn’t happen 10 years ago,” said Anand Giridharadas, author of “Winner Takes All: The Elite Charade of Changing the World.” “The same rigging that caused the crisis ensured the losses were socialized.”

For those with minimal or no assets, it’s been a more challenging decade.

Wages have stagnated and while equity markets have risen, fewer U.S. adults are invested in the stock market than in 2009. Compensation for chief executive officers in America’s largest firms is now 312 times the annual average pay of the typical worker, compared with about 200 times in 2009, 58 times in 1989 and 20 times in 1965, according to a 2018 report by the Economic Policy Institute.

The recent turmoil in the stock markets means some attendees may have discomfiting flashbacks to 2009. U.S. stocks in 2018 had their worst year since the financial crisis while oil ended the year mired in its steepest quarterly slump since 2014. And plenty of risks loom this year, from the U.K.’s impending exit from the European Union to U.S.-China trade talks and the continuing showdown between President Donald Trump and Congress over the budget.

It’s possible this means the Davos pow-wow has peaked. Bank of America’s Hartnett detects a transition in which “Joe Six Pack” will benefit relatively more as central banks withdraw easy money, populist politicians win at the ballot box and nationalism tops globalization.

“Wall Street has done worse lately while Main Street has done better,” he said. “You’re going to be in that world for the foreseeable future and I can only see that world accelerating.”

If the last decade is any guide, don’t bet on it.