Billionaires 2017

Forbes recently released their list of billionaires for this year, and the amount of wealth on the list is staggering: $7.67 trillion USD, roughly 10% of global GDP¹ and 18% higher than last year.  This data didn’t really tell me much, though, and in order to understand it I investigated three questions:

1. are the individual billionaires richer, or are there just more billionaires;
2. has their wealth increased in real terms, or can this be explained away by inflation;
3. did they become richer because the world became richer, or because of wealth concentrating?

The first question is the easiest to answer, with the numbers on the list: the wealth of the world’s billionaires increased from $6.5 trillion USD in 2016 to $7.67 trillion USD in 2017 — an increase of 18%— while the number of billionaires grew from 1 810 to 2 043 — a total of 13% — meaning a total per-billionaire growth of 4.5%².

In order to determine whether this growth is real, in that it represents an actual increase in spending power, we must compare the growth to inflation, which is the measure of how much wealth has devalued; a pound sterling in 1700 was worth considerably more than a pound now. Global inflation from 2016-2017 was 3.28%³, which means their wealth grew 1.22% over inflation, indicating a real gain in wealth of 1.2%. From this we can conclude that, on average, the world’s billionaires have gained wealth in real terms.

Does this increase in wealth indicate they own a bigger share of the pie or, as many in favour of trickle-down economics argue, that they’re growing the pie for everyone and just taking their fair share for themselves? According to the International Monetary Fund, IMF, the global economy grew by 3.4% from 2016-2017⁴, meaning that the billionaires’ wealth is increasing faster than the total wealth of the planet by about 1%.

But the story doesn’t end there: because we’re comparing the wealth on a per billionaire basis, we should compare the global economic growth on a per capita basis, meaning we need to take into account global population growth. In the past year, the world population has increased by 1.11%⁵, meaning that the average person saw 2.3% more wealth, slightly more than half the rate of billionaires.

We’ve now answered our original three questions:

1. billionaires have gotten wealthier faster than the number of billionaires has grown;
2. the wealth growth has been real, rather than a product of inflation;
3. while some of this growth is due to a global increase in wealth, half is attributable to wealth concentrating; the pie is growing twice as fast for the billionaires as it is for everyone else.