The Rich Really Are Different - And You'd Better Believe It

If you were rich, you could buy this apartment on 5th Avenue in New York.

or you could gaze out on Central Park from the balcony of this apartment below which used to belong to Madoff - before he was caught, of course.

So let's talk about being rich and what it means in the year 2011.

London is still the 24 hour centre of the global financial world. It is big in stocks and shares, but it's the intangible, the international that it specialises in. And it's the international bit that we're concentrating on in this post.
1.7 trillion dollars of currency passes through London's trading Rooms every day,
2/5th of the global market
70% of eurobond business is done in London
The City contributes 10% GDP to the UK economy.
In the City, good old London still rocks!


Alan Greenspan was, from 1987 - 2006, the legendary chairman of the United States Federal Reserve, in other words he was head of the central banking system of the United States of America, one of the most influential men in the world, and the high priest of free market capitalism.

Discussing our present economic situation, Greenspan says, "Our problem basically is that we have a very distorted economy, in the sense that there has been a significant recovery in our limited area of the economy amongst high-income individuals...
"Large banks, are doing much better and large corporations are in excellent shape. But the rest of the economy, small business, small banks, and a very significant amount of the labour force, which is in tragic unemployment, long-term unemployment - are pulling the economy apart. They are fundamentally two separate types of economies."

And he is right.

Two huge trends have developed over the past 30 years that have seriously reshaped the world's economy.

One is a surge in the size and connectedness of international markets, which has created a burst of global prosperity that has lifted hundreds of millions out of absolute poverty and into the middle class, particularly in the rising Asian power-houses of China and India.

But the second trend, even as the global economy has grown overall, is that within countries the gap between rich and poor has increased. For example: In the US, between 2002 and 2007, 65% of all income growth went to the top 1% of the population. And the divide has not only opened up in the US and European countries, the gap has developed in the booming emerging markets, too. The gap between rich and poor in Communist China is as big as that of the USA.

On one side you have the super-rich.
On the other side? Everybody else.

This dramatic split has been named 'the plutonomy' - it describes a society where the majority of wealth is controlled and consumed by an ever-shrinking minority of the very very rich.

So obviously, the economic growth of that society becomes dependent on the fortunes of that very very rich group.

And that rich group are different to the rich of previous years.
For the most part, today's rich are not a leisured, landed gentry of inherited wealth.
Emmanuel Saez, an award winning economist who is one of the premier students of the super-elite, has found that in 1916, the richest 1% of Americans received only one-fifth of their income from paid work. In 2004, that figure had tripled, to 60%.

Many of today's plutocrats are the beneficiaries of globalisation. And even those who made their money at home have figured out that to make more they need to embrace the global economy.

As a result, there is a growing trans-global community of peers who have more in common with one another than with their countrymen back home.
They belong to no country. They acknowledge no borders.
Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today's super-rich are increasingly a nation unto themselves. They have, in fact, created their own virtual country.

 If you lived in the country of the rich you, too, could watch TV in your deliciously modern  (and rather) macho dream of a pent house in Moscow, in the wonderful Triumph building, designed by Geometrix, complete with Russian bear bearing down on you from the ceiling.  And you could sip your vodka in the early evening while viewing Moscow from your balcony.  (courtesy of Adelto)

One of the places where that virtual country meets up is in Davos, Switzerland, at the annual meeting of the World Economic Forum (WEF), the premier convener of the global super-elite. But there even the very very rich are getting worried that income inequality has grown to extremes.

The Forum's Global Risks report for this year's conference reports that "Economic disparity and global governance failures both influence the evolution of many other global risks and inhibit our capacity to respond effectively to them"

So the global risk context in 2011 is defined by a 21 Century paradox: as the world grows together, it is also growing apart.

And here we have the dilemma.

In today's hyper competitive global economy we need our super rich and the innovative companies they create more than ever. But they need us too - as consumers, as employees, as fellow citizens.

But here is the lesson of history. In the long run super elites can only survive in one of two ways - by suppressing dissent, or by sharing the wealth.

Seems it pays sometimes to be generous and share a little of your billions.

(many thanks to Paul Mason and Chrystra Freeland).