Hard Times Hardly Hurt the Superrich

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the Philadelphia Inquirer

Hard Times Hardly Hurt the Superrich

Forget the recession - there has never been a better time to be a member of that most exclusive of clubs: the ultrarich.

Yes, America's top 1 percent were hit hard by the economic crisis, accounting for half of income loss. Their share of U.S. income plunged from 23.5 percent to 18.1 percent. But in the sluggish recovery, top incomes have rebounded much more strongly. Economist Emmanuel Saez finds that in 2010, the top 1 percent captured 93 percent of income gains.

Two factors explain the vastly different recoveries of the rich and the rest. First, mass unemployment has devastated millions who rely on wages, but it has not directly affected the minority who live off their investments. Most of the wealth of the superrich takes the form of stocks, bonds, and other financial assets.

Second, the average American's most important asset is the home. And though the stock market has rebounded, 31 percent of U.S. homeowners were still "underwater" as of June. The burst housing bubble is the chief reason the median net worth of American families plummeted almost 40 percent from 2007 to 2010.

While the Federal Reserve and other agencies have stabilized and revived the financial sector and the stock market, political gridlock has blocked progress in writing off or restructuring the huge housing debt. The result? The wealth of average American families remains below its prerecession high.

What about the rest of the world? Data on the global rich are hard to come by. The information that is available, however, suggests a similar pattern worldwide.

In 2009, at the beginning of the recovery, the overall wealth of the world's 10 million millionaires and billionaires grew 18.9 percent, according to a report by Merrill Lynch and the Paris-based consultancy Capgemini. The wealth of this group had already approached its 2007 peak by the end of 2010. The world's top 1 percent held 44 percent of global wealth in 2010, according to Credit Suisse. That was up slightly from 2000, when the top 1 percent owned 40 percent of global assets, according to a the World Institute for Development Economics Research.

Meanwhile, the poorest half of the world's population - some 3.5 billion people - hold just under 1 percent of global wealth, and many are now staggering under the weight of rising food prices.

So perhaps it's no surprise that, even during a period of mass unemployment and despair in much of the industrialized world and slowing growth in China and other emerging economies, the world's wealthy are feeling great. Less than a quarter of the world's wealthy are pessimistic about their future prospects, according to the Knight Frank consultancy and Citi Private Bank. This year, respondents to Fidelity Investments' Millionaire Outlook were more optimistic about the future than in the previous five years.

Note, however, that a quarter of the millionaires consulted by Fidelity said they do not feel rich, but would if they only had $5 million more.

The rich really are different from the rest of us.

Michael Lind

Michael Lind is Policy Director of the Economic Growth Program at the New America Foundation and is the author of "The Next American Nation: The New Nationalism and the Fourth American Revolution."

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