During an unprecedented pandemic that is ravaging the global economy, the richest man in the world – Jeff Bezos, Founder and CEO of Amazon, added a mammoth US$74 billion to his personal wealth during the same time. His total net worth is now an estimated US$190 billion! For a lay person its easily missed how much money such figures actually amount to. The rich get richer, even during a pandemic – or especially during a pandemic?
To give you an understanding, here are some quick and truly insane comparisons:
- Jeff Bezos’s personal wealth is greater than the National Incomes of some entire countries– such as Qatar, Ukraine and Hungary.
- He is on track to surpass the National Incomes of Greece and New Zealand, which are the 51st and 52nd biggest economies of the world, as per the World Bank!
- He is worth more than AstraZeneca, United Kingdom’s largest company, a pharmaceutical giant worth £121 billion.
- Bezos could even hypothetically buy Britain’s four biggest banks – HSBC, Lloyd, Barclays, RBS and still have a sizeable fortune left over.
- In just a day in July 2020, he made US$13 billion. This single-day increase in his wealth is 30 times more than the entire fortune of the Queen of England!
So to reinstate, Bezos’s personal wealth is greater than some entire countries’ economic activity in one year. He is richer than some of the biggest corporations. He is even richer than the monarch of United Kingdom. This one individual’s obscene wealth gain must be juxtaposed to the great suffering unfolding around the world in the midst of a pandemic.
As we entered 2020, most countries around the world went into an enforced lockdown of their societies and economies, to control the spread of the virus. According to a UN study from April this year, the workplace of 81% of the world’s work population was either fully or partly closed due to the outbreak. According to Angel Gurría, OECD Secretary General, the initial economic shock of the pandemic was greater than that of the 2008 financial crisis as a whole!
The pandemic has led to great devastation of the global and local economies. Millions around the world have lost their jobs, and countless small and medium sized businesses are being forced to shut down. An economic crisis is brewing, say experts, one that could be worse than the Great Depression of the 1930s. If you haven’t heard of the Great Depression, it was the greatest economic crisis faced by the modern world, and we are expecting to surpass that with the current pandemic.
We are in dire straits, yet the rich are increasing their share of wealth while suffering and hardship is common place, and getting worse. How do we understand such trends? What are the factors that are driving it? How are some ultra-rich able to gain ever more wealth, while millions of individuals and businesses around the world are struggling to stay afloat? Why should we in essence care? The clue lies in the economic system we all subscribe to.
How are some profiting off a global pandemic?
Back in March 2020, the World Health Organisation declared that the Covid-19 epidemic had graduated into a global health crisis, calling it a ‘pandemic’. The news of the fast spreading coronavirus and its economic impacts sent shockwaves through the global financial markets. In the United States, stock markets declared an end to a eleven year bullish cycle, with stock prices falling fast. Trouble was brewing. If the financial markets would collapse, it would spell an even greater disaster for the ‘real economy’ where goods and services are exchanged and people generate their livelihoods. This is because if stock markets were to collapse or crash, significant savings and wealth would be wiped out in the economy, making an economic recovery harder with less capital going around.
Seeing these trends, in March itself, the United States Federal Reserve (their central bank) vowed to pump a record US$1.5 trillion into the stock markets. To be clear, this money is spent as a form of loans to cash-strapped financial institutions on Wall Street so that they can meet their trading requirements for the day; essentially giving bankers and investors a safety net when the market is reacting with volatility. The Fed Reserve also cut interest rates to almost zero to stimulate the stock market. This action by the U.S. Fed Reserve, catapulted by the pandemic, is declared as historic and rare! Since this declaration, the U.S. stock markets have seen a sharp bounce back since March. Stocks are seeing a fresh demand from investors as the U.S. Fed Reserve continues to provide emergency support to the stock markets.
Along with this, another trend in business has been unfolding. As the world switched from office work to work-from-home, the landscape of how business is done has been changing radically. Technology companies (especially Big Tech) and industries that have become essential services during the pandemic (such as e-retailing, pharma and health care) have witnessed the biggest boost in stock prices after an initial slump in March.
This rise in stock prices is definitely bolstered by the US Federal Reserve’s historic stock market interventions, making certain stocks appear safe investments to rich and wealthy investors, despite grim economic outlooks world over. And indeed rich investors have benefitted greatly from it, even when governments are struggling to raise the money needed to respond to the needs of the working class and poor people.
Let’s recap Jeff Bezos’s wealth gains, it highlights this phenomenon perfectly. In 2020 due to the pandemic, Amazon has been steadily gaining ever greater market share (and profits), ramping up its e-commerce services, when small brick and mortar retailers have had to shut down. A combination of Amazon’s success during the pandemic, along with US Federal Reserve’s extraordinary efforts at stabilising the stock markets, Amazon stock prices have gained 70% in value during this year alone. As Bezos owns 11% of Amazon shares, the events of the pandemic has made Jeff Bezos grossly richer than he already was. And he was already the richest man in the world! And Jeff Bezos is not alone in the list of ‘pandemic profiteers’. According to Irit Tamir of Oxfam:
“The Covid-19 pandemic has exposed deep inequalities and massive failures in our economic system, leaving tens of millions of people in the US without jobs, devastating public services and bankrupting countless small businesses… Yet at the same time, thanks to a combination of government assistance and pure luck, a handful of companies are raking it in and making already rich shareholders even richer.”
Who are the profiteers?
To give you a bird’s eye view, a Washington based think-tank Institute of Policy Studies (IPS) published a study in April of this year where it analysed wealth gains made by the ultra-rich. According to IPS, in a period of merely 23 days at the start of the pandemic, billionaires as a group of individuals gained US$ 282 billion in wealth. If we consider a two month period from mid-March to mid-May, American billionaires gained US$434 billion in wealth during the lockdown. In the last three months alone, 29 new billionaires were added to the Forbes Top Billionaires list!
Some of the biggest gainers of 2020 are listed below (Big Tech tops the list):
- Since March of this year, Facebook stocks have grown by 30%. Facebook Founder Mark Zuckerberg gained US$30 billion, making him worth an estimated US$100 billion. He is only the third person in the world to have reach a US$100 billion in wealth, making him the third richest man in the world.
- Microsoft CEO Steve Ballmer, and Google co-founders Larry Page and Sergey Brin – each made a minimum of US$15 billion since the start of the pandemic (riding on gains in stock prices)
- Apple CEO Tim Cook became the first non-founder CEO of a company to become a billionaire, with him reaching US$ 1 billion in net worth this year. Apple itself made history recently- it took Apple 42 years to reach US$1 trillion in market valuation, whereas it doubled its valuation to US$2 trillion in just 21 weeks during the pandemic!
- When I started writing this article, Elon Musk was the 20th richest person on the planet, having gained $19.3 billion as Tesla stock prices rose by 73% since the pandemic. But by the time I finished writing this article, Musk has become the 4th richest person on the planet, with his net worth reaching US$90 billion. This itself tells you the pace at which the rich have gotten richer.
- Zoom, the video chat app that’s become so popular during the pandemic, it’s stocks exploded in 2020 due to its widespread use, and as a result Zoom co-founder Eric Yuan made some big gains and is now worth an estimated US$ 13 billion, he is the 115th richest person in the world.
- Ten billionaires, including Bezos and Musk made US$53 billion in gains in just the week of Aug 17th – 21st 2020. While most of these gainers were US billionaires, other members of this club include Richard Liu (dubbed as Jeff Bezos of China), and Lei Jun (Chairman of smart phone maker, Xiaomi)
In China, billionaires are being minted sheerly due to stock market mechanism:
- Back in 2017, China was ‘creating’ two billionaires each week. This happened as company owners raised enormous funds during their company’s Initial Public Offerings (IPO), giving them the title of ‘IPO billionaires’.
- In 2018, Chinese billionaires became the second largest group of billionaires in the world after the U.S.
- In 2020, China is still creating IPO billionaires, even while an economic crisis seems to be looming. As per Bloomberg, “Buoyed by an army of retail investors looking for quick returns, the stock-market euphoria has been more apparent in the Asian nation than anyplace else… The latest 2020 batch of Chinese IPO billionaires had a combined wealth of $70 billion as of mid-July”.
Closer to home, Indian Billionaires have made some huge gains as well:
- The wealth of Cyrus Poonawalla grew the fastest among Indian billionaires. Poonawalla is the head of Serum Institute of India, the world’s largest manufacturer of vaccines. His company gained an invaluable contract of manufacturing 1 billion doses of a Covid-19 vaccine, which is being developed by Oxford University in partnership with AstraZeneca Poonawalla’s net worth grew by 25% during the pandemic. In the top billionaires list, he was bumped up by 57 places to the 86th richest person in the world.
- Mukesh Ambani, chief of Reliance Industries Limited who was already Asia’s richest man, is now in the top 10 richest individuals in the world, as his conglomerate’s shares rose by 145% since March. Before March, Ambani lost a big chunk of his wealth as stock markets went tanking. After March stock prices rose again, helping Ambani make all his wealth back. Ambani’s large wealth gain was a result of substantial investments being raised from the likes of Facebook, BP Plc, General Atlantic and more. Ambani’s wealth has grown by US$22 billion since recoveries in stock prices were made.
- Indian rich were already insulated from the economic downturn that has been gripping India before the crisis hit. But as stock markets surged despite the pandemic, India has been creating three billionaires each month, as per the Hurun Global Rich List 2020 released earlier this year.
These are dizzying figures for the most of us. Especially when we are in the middle of a global pandemic. It must be noted that an estimated 51% of billionaires lost some of their wealth during the pandemic, but I must press, they are still billionaires, when both an economic and a humanitarian crisis is unfolding in front of us at a global scale. Additionally new billionaires are being created, how do we make sense?
The Rest of Us
A lot will be analysed and written over the coming years about how the pandemic is devastating the lives of regular hard working people. There is an undeniable trend though that is already quite visible. That is, job losses during the pandemic are extreme and disproportionate. Meaning that those most vulnerable to economic shocks, such as individuals with low paying jobs and low job security are the most affected. Women, people of colour, minorities, and young workers are amongst them. Below here I will attempt to give you a brief window in to the scale of damage.
In the United States:
- Gross Domestic Product (GDP) or their economic output shrunk by 10.6% in the first half of this year.
- In June, reportedly a total of 43 million Americans had applied for unemployment insurance. And further, an estimated 28.5 million jobs were actually lost.
- US unemployment rate is estimated to have climbed to 20% by June 2020, highest since the 1930s Great Depression.
- According to a survey conducted by U.S. Federal Reserve, 40% of individuals whose family income was less than US$ 40,000 (i.e. poorer households), reported that they had already lost their jobs at the start of the pandemic, in March itself.
- U.S. government had sanctioned a US$ 650 billion Paycheck Protection Program (PPP) in March for small businesses, giving them grants or loans to ensure that they can stay afloat. But there are several reports that these grants instead of going to small businesses, went to companies belonging to wealthy individuals, or to companies that serve them. All of this even while American ultra-rich are the biggest group of pandemic profiteers globally.
- The European Union’s collective GDP is predicted to shrink by 7.5%, as per the European Commission.
- For the first time since 1992, China’s GDP shrank in the first quarter of 2020.
- The UK is already officially in a deep recession, worst amongst major economies, as its economic output shrank by 22.1%!
- In India, job losses are estimated to reach 130 million. With India’s economic output predicted to grow by only 1-1.5%.
- 31 million women working in sectors vulnerable to the pandemic may be facing job cuts. If all of these women were to lose their jobs, US$ 1 trillion will be wiped off the global Gross Domestic Product.
- Overall, the pandemic is pushing an additional half a billion people into extreme poverty, as per Rebecca Gowland, who is Oxfam’s Head of Inequality Campaign.
The list could truly go on…
Rising Inequality pre-existed: Pandemic worsens trend
Many premier international economic organisations like the Organisation for Economic Cooperation and Development (OECD), the World Bank, and the International Monetary Fund (IMF), have been stating for years that wealth inequality has been steadily on the rise world over. Simply put, wealth inequality means that the rich gain greater share of the economic pie, while less is left for the rest of us to share. These organisations and many activists for a long time now have been sounding alarm on the potential dangers that growing wealth inequality poses, wherein it hampers economic growth and stability, and even peace in societies.
Even some billionaires themselves have been arguing that they should be taxed more so as to arrest this trend. And many have been donating money in the millions towards Covid-19 relief efforts as well. But what we MUST PAY ATTENTION TO is that during the pandemic, this trend of widening wealth inequality is sharpening at a rate we never expected to see in such a short period of time, making things a lot more worse. Even when the U.S. Federal Reserve took swift action to support the stock markets under the assumption that they will be saving the ‘real economy’ where goods and services are actually exchanged, the ‘real economy’ is actually not really being saved here, it’s the rich who are benefitting the most.
The events of the pandemic are really a testimony to what is going wrong with our global economic system of unfettered and unchecked capitalism. And really, this economic system is proving to be grossly incapable of handling such crises.
Billionaires and wealthy enterprises and individuals are stepping up donating money in the scores. But the need is turning out to be so much greater. Money is not flowing through the mechanisms of the global economy as it was pre-pandemic; businesses are temporarily closing or shutting down completely, and unemployment rates are surpassing historic records. The level of goods and services exchange that leads to economic growth has been hampered severely by the pandemic. The inequalities that existed before the pandemic have sharpened. Those who worked pay check to pay check and had little to no savings, whether in the U.S. or India, suddenly find themselves with limited sources of income, or worse none. But the wealthy who were already amassing wealth, continue to gain an even greater share of the economic pie at a dizzying pace.
In essence, the burden of the pandemic is being borne by those that were already the most vulnerable. It is not a surprise that the vulnerable are now facing the major brunt of an unprecedented global health and economic crisis. They were already vulnerable to it in our global economic system. This system is rewarding the rich for being rich, and penalising the poor for being poor. If left unchecked, unfettered capitalism will continue to make the rich richer and poor poorer, risking the very stability of our society, and the well-being of humanity and the planet.
The pandemic brings us lessons. Lessons that social security nets, which meet basic need of all, such as affordable health care, education, housing, unemployment support, income transfers from the richest to the poorest through taxes – all balance the scales. Times of crisis do arrive in a cyclical fashion; economists actually expect it in the capitalist system. But if vulnerable people and the working class are supported through basic safety nets that give them opportunities to improve their lives, our society will surely be more resilient to such an economic crisis. But we must be willing to acknowledge these realities.
I hope that there is growing understanding, especially with the hard lessons of the pandemic, that profit cannot always take precedence. That we must care for people too.