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An interesting phenomenon in recent years has been the growth of expert billionaire observers – consulting firms that scrutinize the Ultra-High-Net-Worth population, much like naturalists observing wildebeest migration. They haven’t yet gotten to the point of affixing satellite trackers to billionaires so they can track them down to the second, but the attention to detail is still pretty wild (all in the service of helping their clients selling more stuff to the kind of people who can literally afford anything).
My favorite among these consulting firms is Wealth-X (for no particular reason except that its reports are readily available), and this time of year is always fun because that’s when we get a new census of billionaires. And what news from the wealth creation front?
- “2020 has seen the strongest absolute growth in billionaires since the start of our records. For the first time, the number of billionaires in the world has exceeded 3,000 (to 3,204), an increase of 13.4%. Their combined wealth reached $ 10 trillion, an increase of 5.7%. This is a striking development given the upheaval of the coronavirus pandemic and the deepest contraction in global economic output in a generation, ”is the report’s opening paragraph.
To sum up: heads they win; pile they also win; if the coin fell sideways in a weird accident, they would win that way too.
I admit that I have been a lifelong fan of Russia, but I’m still particularly interested in breaking up billionaires from Russia in particular. It’s no big surprise that the top three countries in terms of billionaire populations are America, China, and Germany (these are three of the world’s four largest economies after all), but the Russia’s position is abnormal. It’s not even in the top 10 economies, but it has the world’s fourth-largest number of billionaires: 120 people with a combined wealth of $ 397 billion.
Interestingly, however, as Credit Suisse (who are also skilled wildebeest watchers) makes clear in its own Wealth Report, Russia has relatively few dollar millionaires. According to his data, by simply walking down the street, you would be 25 times more likely to run into a millionaire in Ireland than in Russia, and 50 times more likely to do so in Australia. Almost 60 percent of all the wealth in the country belongs to the richest 1 percent, which is a higher proportion than in any large economy. Russia is a country of billionaires, but not millionaires (just look at tables four and five in this report).
- “It is interesting to note that while the share of the top 1% is much higher in Russia than in China, the share of the top 10% is similar in both countries (67% in China and 71% in Russia in 2015) , which suggests that Russia’s transition strategy favored its wealthier citizens more than those of China.
The other striking statistic of Russia recently has been the appalling contraction of its population over the past year. The Russian population crisis has been a problem for decades (I’ve written a whole book about it, in fact) but it was masked for a while by a mini-baby boom, brought on by a relatively large cohort of mothers. ; and secondly by the fact that the self-declared population of Russia has increased significantly thanks to the flight from Crimea and Sevastopol to Ukraine. Today, thanks to Covid-19, the downward trajectory has been reaffirmed.
- “Russia’s natural population has suffered its largest peacetime decline in recorded history over the past 12 months,” The Moscow Times reported last month, based on an analysis by a demographer published here.
These numbers carried the country through to the end of September, when the recent horrors of its current wave of Covid-19 were just beginning. The death toll in September was 45% higher than the year before, and Russia had the third highest excess death toll in the world relative to its population, behind only Peru and Bulgaria. It has only gotten worse since then. The death toll per day is now consistently over 1,000 and – with the vaccination rate still very low – there is no end in sight.
The United Nations in 2019 already predicted that Russia’s population would be barely larger than Tanzania’s by mid-century, and a little larger than Mozambique’s by 2100, and the picture has only grown. darken since then.
The question is: are these extreme statistics – Russia’s inequality on the one hand, and its demographic catastrophe linked? The population problems predate the end of communism and are largely due to epidemic levels of alcoholism, but it’s hard to imagine that there is no connection between their persistence and the country’s astonishing inequalities. . When the country’s most influential people have their own hospitals, their own rules, and – thanks to the oil and gas – don’t even rely on serf labor for their wealth like the old aristocrats did, then it’s easy to see that they would be quite indifferent to what happens to their compatriots.
So if you want a reason to hope that COP-26 achieves a breakthrough on weaning the world from fossil fuels, here it is. If we can force Russian billionaires to work for a living, rather than extracting their wealth from oil wells, they might start to care about everyone else’s welfare.
One question I’ve been thinking about a lot lately is why, if the world is spending so much time and effort trying to stop money laundering, so much money is being laundered. Estimates of the size of the illicit economy – two to five percent of the global economy – have remained unchanged for decades, while the compliance burden on financial transactions has increased dramatically. Of course, one option is that it would be a lot worse without all the compliance, and we were running to stand still, which I heard from a contact last week. Another option is that compliance is just heavy work and comes nowhere, which I have heard from many others.
The Financial Action Task Force coordinates international efforts and has just added three new countries to its “watch list”: Turkey, Mali and Jordan, where they join Syria, Myanmar, Nicaragua, South Sudan , Yemen, Haiti and many others. places that are not major financial centers, but which are apparently deemed worthy of closer examination than the City of London, Wall Street, Hong Kong or Singapore.
The FATF denies taking a ‘one size fits all’ approach, but one complaint I hear over and over is that under FATF rules all countries are treated equally. Sounds good, but in reality it means that the risk of money laundering via the US or UK is no greater than that via Yemen or Haiti. Since Western countries have so much more money to spend to appear to comply with FATF principles, they get rave reviews, while the amount of dirty money moved barely changes.
Here is a survey of people active in the capital markets released last month, which presents clearly alarming statistics that two-thirds of those polled believed that “significant” funds were laundered and not detected.
- “Money laundering in this industry is likely to be relatively low in volume compared to the retail industry, but when it does occur, its value is very high,” he said.
These capital markets are not found in Haiti, Yemen or South Sudan, but in the major Western capitals. If we are to address the concerns of market participants, we need to spend less time worrying about nominal compliance in poor countries, and more time enforcing actual compliance in rich countries.
While on the topic of “they win tails, they win tails too”, here is more news from Elon Musk, who appears in this newsletter a little more often than I expected. Last week I announced breathlessly that he was the first person to be worth $ 250 billion, thanks to Hertz saying he would buy 100,000 cars from Tesla. Well the deal has apparently not agreed at all.
And what was the market response to this turnaround? Well, it’s now worth $ 300 billion, roughly equivalent to the annual economic output of Pakistan, which is home to 220 million people. The Hertz deal was done, and it did well; the deal was not done, and he did better. Does that make sense? Probably someone, but not me.
WHAT I’M READING
I went to see Dune with my kids at Imax in London last week, so I spent more time than I should have re-read Frank Herbert’s sci-fi masterpiece. I’ll be interested to see, when they shoot the second part of the story, if they stick to the book’s approach of only describing all the exciting things incidentally, or if they’ll actually show us battles. Still, it was fun, and I would recommend the movie.
I’m reading the book I intended to read last week: Put your life on it, Authorized Biography of Victor Chandler, by Jamie Reid. Chandler is a fascinating man in his own right, an old school bookmaker, which interests me particularly because he pioneered offshore gambling, and thus helped inspire the explosion in the volume of money wagered all over the world. . I’m halfway there and it’s an epic read, although I think I would get more out of it if I had heard of any of the horses before.