Who Owns the Wealth and How they Spend It

In 2006 the world's richest two percent of adults owned more than half the global wealth, while half the world's population own only one percent. In 2007 the World Wealth Report estimated the total wealth of rich individuals at $37.2 trillion! While this wealth accumulates for a small minority, the vast majority of humanity is seeing its living standards plummet. In these figures we see another picture: the growing tensions between the classes that will lead to social upheaval and revolution on an unprecedented scale.

In 2006 a new report from the United Nations produced figures showing that the world's richest two percent of adults owned more than half the global wealth, while half the world's population own only one percent. Inequality has been increasing, particularly over the last decade, with the rich getting richer, the mega rich getting richer quicker than the rich, and the poor getting even poorer, with the number of people living on less than $2 a day increasing.

The actual wealth of capitalists around the globe is difficult to calculate, as much is hidden from view. This is often done by slick accounting, but also through secret bank accounts, with the bank fronting investments and deals. Switzerland is historically famous for this, but over the years has been joined by other countries, most recently Abu Dhabi, who last year set up a new bank precisely for the purpose of enabling the mega rich to invest and hide their wealth. Nonetheless, we can still get some indication of their wealth by looking at individual investments. In 2007 the World Wealth Report has estimated the total wealth of rich individuals at $37.2 trillion. This is a staggering amount, and difficult to get your head around. But think of it this way: the old Wembley Stadium football ground held 100,000 people; to reach just one trillion you would need 10 million stadiums!

At the other end of the scale the World Development Report has indicated that some 1.2 billion people (1/5 of humanity) are living in poverty. But increasingly inequality is not confined to those living with disease, malnutrition or imminent death from stark poverty; inequality is growing across the globe, in developed countries such as Sweden, Denmark, the UK and the United States, where there is a steadily increasing gap between the rich and the rest of us.

Inequality

This UN report lays out several causes that socialists would agree with, such as inequality resulting from "lower unionisation and dilution of the wage bargaining power of trade unions"; but we are unlikely to hear that analysis reported in the capitalist media.

So how do the wealthy use their ill gotten gains? Of the wealth we can find out about, there are two main areas in which it is spent: financial investment and private consumption. This investment can be divided into four areas: real estate (commercial and residential property), cash deposits (in bank accounts we can see), equities (stocks and shares), and what is called ‘alternatives' (things like hedge funds). In 2006, of the $37.2 trillion of private investment, 24% went on real estate, 14% was in cash deposits; equities were split between 21% in bonds giving a fixed income and 31% in shares; the remaining 10% went on alternatives.

The actual division between these four areas of investment might appear to mean little to us directly; but the power of these capitalists to move their money around does affect our lives enormously. Because capitalists are only interested in profit and not people, they move these trillions of dollars from one area to another and from one country to another, ever looking for the biggest profit. This movement of capital, or capital flows, devastates communities, ruins lives and subjects economies to the whim of the gambling table. The figure of 24% for real estate investment in 2006, had, for example, jumped from 16% in previous years. This was the rich moving money from other areas, thus fueling the rise in house prices during the 2004/06 period and creating shortages of investment in other areas.

Super luxury goods

The other use the wealthy put their money to is for their own private consumption. Over the past ten years the market for super luxury goods and services has been expanding at an exponential rate, reflecting the increasing amount of money flowing to the rich. Items such as a plasma TV, with a screen size of 142 inches and a price tag of $87,500, or the new Natalia SLS-2 motor car from DiMora, which retails at $2 million are just a few of their playthings.

Last year the Wall Street Journal undertook a survey of 198 people who were worth more than $10 million - this is small change compared to the really wealthy, but the report begins to give us an insight into their lifestyle. Yacht rentals topped the bill at an average of $384,000 per year, followed by villa rentals at $106,000, and at the very bottom of their shopping list was summer entertaining, which came in at a lowly $56,000. Yet these people are mere paupers compared to the richest 5% in the world!

Forbes provides us with a list of all the world's billionaire capitalists. The list is long, but not surprisingly, is headed by Bill Gates, whose current estimated personal wealth is around $56 billion. Someone made the calculation that from Microsoft's foundation in 1975 to 1998, presuming that Bill worked 14 hours a day every working day of those years, his wealth meant that he was earning a staggering million dollars per hour, or around $300 per second. Like the other mega rich individuals, his actual expenditure is often a closed secret. However, the Gates' principal residence, a large mansion, which occupies 50,000 square feet (with garage and outbuildings occupying an additional 16,000) and has a total assessed value of the property estimated at $125 million, with an annual property tax of $990,000, was widely publicised.

This personal expenditure of the wealthy is grotesque when we consider the stark poverty of billions of people across the world, and the continual demands of capitalists for workers to make sacrifices for the ‘good of the economy' by holding down wage increases below the rate of inflation. Nevertheless, compared to their total wealth, the mega rich's personal expenditure is only the surface appearance of their deeper impact and control on society. In addition to the devastation caused by capital flows, it is their purchase of political power that wealth buys which exposes the nature of the society we live in. In the UK we recently had the pantomime of the ‘cash for peerages' scandal; this is only the tip of the molehill, reflecting the influence of the wealthy on the two main political parties in Britain. This is illustrated by the funding of New Labour politicians by the wealthy. A well known case was the £7 million raised by Lord Levy from wealthy backers for Tony Blair's private office prior to the 1997 general election.

In the US the influence of the wealthy on elections is more obvious; it is often paraded as a virtue by the right wing capitalist media. The money that finances political campaigns in the United States has tremendous influence on who runs for office, how that person campaigns, and if elected, what policies that person supports. In a presidential campaign a single 30-second TV advertisement can cost $100,000. According to the Centre for Responsive Politics, the election of an average single seat of the House of Representatives costs $840,000.

Political power

Because of popular pressure at this obvious buying of political power, even Congress has been forced to pass a law designed to limit campaign contributions. Needless to say, wealthy contributors have always found convenient "loopholes" left in such laws, and thus, funding from the wealthy continues to influence campaigns. In the 2000 cycle of elections, the Democrats raised $219,343,172 in what is known as ‘soft money' (that is, outside the restrictions); while Republicans collected $243,780,583 in unregulated funds. The money for election campaigns continue to come primarily from donations from wealthy backers who demand that the candidates be pro-capitalist and that they support policies that further the interests of their patrons.

In 2006 George Bush and the Republicans supported the repeal of the US style of death duty, known as an estate tax. In reality this is a tax which only the very rich pay, while the remainder of Americans (about 99.7 percent of the population) are not rich enough to be affected by it. But the super-rich used the media and the Republican Party to present the continuation of estate tax as a threat to small businesses and farms. The story of people having to sell the family farm to pay the tax was peddled in the capitalist media. It was then revealed by a report from a watchdog body, the Public Citizen and United for a Fair Economy, that more than eighteen wealthy families, including the Walton family of Wal-Mart fame, had used their influence and spent millions of dollars to push for the repeal of the estate tax.

Accumulation

In the 19th century Karl Marx used his analysis of capitalism to illustrate that the development of capitalism would lead to ever greater accumulation by the rich, with the poor getting poorer. In countries like the UK, Europe or the United States most of us have a roof over our heads, but it can be a precarious existence. Unemployment, continual cuts in public services, and a relative decline in wage levels, mortgage or rent increases pose an ever present threat to working people. Often living standards are only maintained by working longer and longer hours. If we compare this situation to the actual total wealth in the world, we see that Marx was not far wrong. The statistics and figures looked at in this article speak for themselves. It is up to socialists in the labour and trade union movement to work to expose capitalism for what it is and fight for a better future.

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