The COVID-19 pandemic may have pushed the world economy into a tailspin, with 2020 projected to be worse than any of the years since the global financial crisis. But billionaires, at least a select group of them across countries, have seen their wealth soar during the past three months, which have been financially painful for most people across the world.
In the US, billionaires have become richer to the tune of $565 billion since March 18, according to a report published earlier this month by the Washington DC-based think tank Institute for Policy Studies and Clearwater, Florida-based advocacy group Americans For Fair Taxation. The total wealth for billionaires stood at $3.5 trillion, up 19 per cent from the low point near the beginning of the pandemic, the report said. Amazon chief Jeff Bezos alone is worth $36.2 billion more than he was on March 18. This during a phase when nearly 43 million Americans filed for initial unemployment benefits.
What explains the trend?
The surge in wealth of the richest Americans is being driven by the sharp bounceback of the stock market in US, primarily driven by the unprecedented action from the US Federal Reserve.
Despite the surge in US Covid-19 cases and the record 43 million Americans filing for unemployment benefits, the Nasdaq has been hovering at close to record highs. The US Fed’s emergency response to the crisis, including cutting interest rates to zero and undertaking to buy unlimited amounts of bond has translated into assets such as stocks, despite being risky investments, seeing fresh demand. Investors have been buying equities, with Big Tech companies and those linked to healthcare — Big Pharma and hospital stocks — among the major beneficiaries.
During the crisis, Amazon shares have surged nearly 50 per cent from their mid-March lows while Facebook too has recovered from the troughs that it hit in March to record highs. Like Bezos, Facebook founder Mark Zuckerberg’s new worth has surged over $30 billion since March 18, the IPS report found.
The study calculated billionaire wealth using data provided by the Forbes Global Billionaires List, a real-time assessment of net worth. March 18 is used as the starting date as that is the date tied to the 2020 Forbes Global Billionaire survey and also roughly corresponds with the time period when US Government began imposing lockdown restrictions.
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Other tech players who have seen their wealth surge over the past three months include Tesla’s Elon Musk, Google founders Sergey Brin and Larry Page, and former Microsoft CEO Steve Ballmer, who have each seen their wealth surge by $15 billion or more since March 18, the report found. Eric Yuan, the founder and CEO of Zoom too has seen a sharp increase in wealth during the pandemic, and is reported to be worth about $2.58 billion. The Walton family, major stakeholders in retail major Walmart, are also big gainers. Jim, Alice and Rob Walton each made about $3 billion during the three months to May 19.
This is even as the US’ pandemic job-loss figures have surged to 28.5 million — three times the number of jobs lost during the 2008 financial crisis. The unemployment rate is expected to climb to nearly 20 per cent, higher than it’s been since the Great Depression.
While the billionaires have clearly benefited, those invested in stocks in the US have also benefited from the V-shaped recovery in the stock market, with the bounceback in the markets improving the valuations of investment portfolios, pension and retirement funds. An investment in a regular fund that tracks the S&P 500 would have given investors a tidy return of nearly 40 per cent since the March 23 lows, according to a CNN estimate that used Bloomberg numbers for underlying calculations.
What’s been the trend around the world?
In the three months since the pandemic spread across countries, the resultant coronavirus-led bloodbath in global stock markets had also impacted a number of global billionaires negatively, at least initially. A record 1,062 billionaires saw their wealth decline, while 267 of them dropped out of the billionaires list. The total combined net worth of billionaires in 2020 stood at $8 trillion, falling from $8.7 trillion in 2019, according to Forbes data. “The richest people on Earth are not immune to the coronavirus. As the pandemic tightened its grip on Europe and America, global equity markets imploded, tanking many fortunes… Of the billionaires who remain, 51 percent are poorer than they were last year,” it stated in a report released earlier this month.
Those who’ve benefited include promoters of online retail companies and technology firms that have some benefits from the pandemic and the lockdown. Colin Huang Zheng of Chinese low-end social shopping giant Pinduoduo is among the gainers in the past two months. Inditex co-founder Amancio Ortega, who owns Spanish retail brand Zara, has seen some recovery in his wealth after the initial slide.
The biggest losers during the four-month-period include Berkshire Hathaway’s Warren Buffett, Frenchman Bernard Arnault, chairman and chief executive of LVMH, the world’s largest luxury-goods company and Mexican telecoms billionaire Carlos Slim Helu.
What about Indian billionaires? Helped by a fund-raising spree, Reliance Industries Ltd (RIL) chief Mukesh Ambani has emerged as the eighth richest man in the world, a position he shares with Google co-founder Sergey Brin, according to a Hurun Research report. The Chairman and Managing Director of RIL, who is already Asia’s richest man, has moved one rank up from the earlier position he held before the Covid-19 outbreak, as on January 31, 2020. Since April 22, Jio Platforms — a wholly-owned subsidiary of RIL — has raised funds from a string of global investors including Facebook, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG and L Catterton.
Vaccine major Serum Institute’s Cyrus Poonawalla’s wealth too grew the fastest among Indian billionaires and fifth fastest in the world during the COVID-19 pandemic because of the strong business potential of his company, Serum Institute of India, according to the Hurun Research special report, ‘Wealth Impact 4mths After Covid-19 Outbreak’.
Poonawalla has climbed 57 places to be the 86th richest person in the world as of May 31 on the back of a 25 per cent rise in his networth during the four months of the pandemic, the report said. The Pune-based entrepreneur’s unlisted company, already among largest vaccine manufacturers in the world, has struck an agreement with AstraZeneca to manufacture 1 billion doses of coronavirus vaccine being developed by Oxford University.
What are the implications of these trends?
The rising divide between haves and have-nots is already listed as a contributor to the unrest being fuelled across the United States. Wealth inequality is likely to get even worse because of this crisis, experts say. “The surge in billionaire wealth during a global pandemic underscores the grotesque nature of unequal sacrifice,” said Chuck Collins, one of the co-authors of the Americans for Tax Fairness and the Institute for Policy Studies study.
In India, even before the crisis hit, it needs to be noted that the rich list was largely insulated from the broader downturn that has gripped India’s economy. India minted three billionaires every month as the nation’s stock markets surged to new highs, despite a slowing economy ahead of this crisis, according to Hurun Global Rich List 2020. “Indian billionaires are defying gravity as the structural slowdown in the economy doesn’t seem to hamper the growth of Indians in the list,” said Anas Rahman Junaid, managing director and chief researcher, Hurun Report India released earlier this year.
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