The Billionaire Society
by Niko Karvounis
This year Forbes magazine listed 1,125 billionaires in the world, compared to 946 in 2007--and a measly 140 billionaires in 1986, the first year of the publication's ranking. Clearly, the ranks of the billionaire class have swelled.
This week, The Century Foundation hosted a three-day conference on "Billionaires and Their Impact" as a session of the 2008 New York Times Journalism Institute, which seeks to inform and enlighten prominent journalists on important--and under-reported--issues.
You might think that the identities and exploits of America's billionaires are anything but underreported--and you'd probably be right. We hear a lot about Bill Gates, Warren Buffet, Rupert Murdoch, and all the rest; but what we don't hear all that often is what's going on around them. How does the rise of billionaires tie into inequality? To globalization? What is their influence on society and politics? In short, what does it mean to live in the 'Billionaire Society'?
According to Tom Hertz, a professor of economics at American University and a presenter at the event, one thing it doesn't mean is that America has some special claim to being the land of opportunity--at least in the way we usually think of it.
Looking at the Forbes list of billionaires between 2003 and 2007, Hertz found that, across most continents, a similar proportion of billionaires is classified as self-made:
Note that the odds of becoming a billionaire are slightly better in the U.S. than in most other places (i.e. the ratio of billionaires to general population is highest here), but that, save for the Middle East and Africa, which, Hertz notes, tend to have very precarious economies hampered by the effects of monarchy, the odds of a billionaire being a self-made man or woman are about the same everywhere. Our moguls aren't that different from those in other nations.
This may come as a surprise. As Americans, we tend to think that the U.S. is a world leader in socio-economic mobility--and that, by extension, a greater share of people reach the pinnacle of wealth by their own efforts. But this doesn't seem to be the case. Nor is it true that America is the most mobile of nations, even for those of us outside the ranks of the billionaires club.
Julia Isaacs, a fellow at the Brookings Institution, showed some compelling data at the conference, noting that the class structure of the U.S. is a lot more rigid than you might think. While the proportion of people in the top quintile of income earners who stay rich is about the same in the U.S. , Sweden, Denmark, Finland, Norway, and the U.K. (somewhere around 35 percent), a greater share of Americans in the lowest quintile of earners stays poor (42 percent) than in these other nations.
Taken together, the numbers from Isaacs and Hertz make for a compelling one-two punch: the richest folks in America are no more self-made than their international peers, and our poorest citizens have less of a chance of moving up than their global counterparts. Now that doesn't sound like socioeconomic mobility, does it?
But don't fret, if worse comes to worse, you can always try to rake in the billions via hedge fund. Professor Steven Kaplan from the University of Chicago Business School spoke a little about the rise of mega-money on Wall Street, and offered the following graph of hedge fund profits over time:
Yep, that's right: hedge funds raked in almost $80 billion in fees in 2007. Talk about bringing in the bucks! Here's a good question to ponder: how many of those making a mint off hedge funds--billionaires or no--do you think come from the lower income quintiles of America? My guess is not too many.
The concept of the Billionaire Society where individuals make obscene amounts of money is very sexy, but for those who value the principles of the American dream--entrepreneurial spirit, upward mobility, and societally productive means of wealth creation--it's not all it's cracked up to be.
Look for more posts coming out of this conference--including video highlights of the proceedings--in the near future.