Millions join the ranks of super-rich amid the pandemic.
A report by Credit Suisse revealed that some 5.2 million people globally became millionaires during the Covid-19 outbreak. There are now more than 56 million millionaires in the world. Most of this wealth comes from North America, but thanks to China’s impressive economic boom, one in 200 Chinese nationals are now millionaires.
The same report shows that America is home to the largest number of ultra-high net worth individuals with personal fortunes exceeding $50 million (R709 million), accounting for 84 percent of the world’s highest income earners.
But what is behind this staggering increase in wealth?
The main driver appears to be government and central bank intervention, which involves rising equity and residential property prices. These interventions increased aggregate household net worth to around $418.3 trillion (R5.9 quadrillion). At the same time, more than half of the world’s population had less than $10,000 (R141,000) in net assets.
The lowering of interest rates by central banks has probably had the most significant impact.
Credit Suisse said: “There’s no denying actions taken by governments and central banks to organise massive income transfer programmes to support the individuals and businesses most adversely affected by the pandemic, and by lowering interest rates, have successfully averted a full-scale global crisis.”
Credit availability is another major factor influencing household debt levels. It is of special significance given the actions taken by central banks to relax the credit constraints facing both individuals and businesses.
But these interventions could have long-term adverse effects. “A final big unknown is how governments will deal with increased public debt in the years to come,” the report stated. It is unclear if governments will recover monies through increased taxes in the future, including possible new taxes on wealth.
Credit Suisse’s notes that while it is still too early to quantify the global losses brought on by Covid-19, some pieces of the puzzle tell an interesting story.
The US is the only country in which overall wealth inequality appears to have declined. “Global inequality also depends on differences across countries, where assessment awaits the arrival of more data,” stated the report.
But it’s easier to gauge the impact in particular groups. The biggest losers in this pandemic are the low-skilled, women, minorities, the young, and small businesses. In contrast, those working in the tech industries and other “new economy” sectors in global lockdown fared better.
“Female workers have suffered disproportionately, partly because of their high representation in businesses and industries such as restaurants, hotels, personal service and retail that have been badly affected by the pandemic.” Lockdown may have also caused women greater stress than men due to increased home and childcare duties as schools and restaurants closed, and family incomes fell. “Single mothers suddenly faced with round-the-clock childcare duties and possible job loss provide one illustration of the kind of challenges faced,” the report noted.
Millennials are also among the hardest hit. “The disadvantage associated with millennials is partly attributable to the consequences of the 2007/8 crisis, which left many unemployed. The COVID-19 pandemic may not only mean a “double whammy” for the millennial generation but also a repeat experience for the next post-Covid-19 generation as economic activity is reduced, globalisation goes into reverse, and travel is discouraged.”
The report also noted that US minorities were severely affected as opposed to their white counterparts. Infections, hospitalisation and job losses among Hispanics and African Americans were significantly higher.
