James Henry: US still leads as many new billionaires emerging in China and Russia; corporate profits at record levels – as austerity hits and unemployment remains high
JESSICA DESVARIEUX, TRNN: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.
As we all know, the world’s largest economies are in a recession. But what you might not know is that Forbes just released their “Rich List”, and there are 210 new members in their billionaire club.
Here to discuss all this is James Henry. James Henry is a leading economist, attorney, and investigative journalist who has written extensively about global issues. James served as chief economist at the international consultancy firm McKinsey & Co. And as an investigative journalist his work has appeared in numerous publications, like Forbes, The Nation, and The New York Times.
Thank you for joining us, James.
JAMES S. HENRY, ECONOMIST, LAWYER, AND INVESTIGATIVE JOURNALIST: You’re very welcome.
DESVARIEUX: So, James, it looks like for the first time in 13 years Warren Buffett hasn’t made Forbes‘s top three. Who are these 210 new members in the billionaire club, and what does this say about wealth inequality around the world?
HENRY: Yeah. We have about 1,426 billionaires in the world, according to Forbes. I think that’s an undercount. You know, a recent study in China showed that there were at least 100 billionaires. That’s the number that Forbes shows. But the person who did the work back in July was saying that he thought he may have missed another 100.
So, many of the new billionaires are in some of these emerging markets, oddly enough, the former Soviet Union, for example. The Ukraine has ten. Russia itself has about 165. You know. So if you–looking around for new wealth that was created by–in a relatively short period of time, a lot of it had to do with the games that are being played in places like Russia and China with the distribution of state assets.
And if you look, for example, at the folks from China on the list, out of the 100 billionaires that they report from mainland China, 23 made their fortunes in real estate, and their median age is just 50. So this means they made a lot of money in a short period of time, basically, in places like Hong Kong and Shanghai and Beijing, where real estate prices are among the highest in the world, and where the state banks had been lending to people who have the connections to develop these highrises we all see in pictures there.
So in the United States we’ve had–you know, if you look at the people on the U.S. list, there’s the usual suspects. Bill Gates is still number two.
But he’s dropped below Carlos Slim, who’s one of the most important businesspeople in Mexico. He owns the Telmex, which is still a telephone monopoly in Mexico. And Warren has slipped down the list quite a bit. The Walton family, which inherited all their money, accounts for another three of the top ten people on the list.
So the interesting thing for the rest of us, who are experiencing things like, you know, sequestration and still very low growth rate for the overall economy–unemployment, if anything, is likely to rise here because of layoffs in the government sector–you know, we’re wondering why the stock market is rising–these folks own a lot of the stock market–and, you know, how this extraordinary wealth at the top of the system squares with the experience that most folks are having in the United States, as well as in Europe, of very poor economic performance for ordinary people.
DESVARIEUX: So, as you mentioned, the stock market is doing exceptionally well and corporate profits are at an all-time high, the Dow Jones hitting a milestone, according to The New York Times just a couple of days ago. Do you feel like more Americans are becoming aware of this wealth inequality?
HENRY: Well, the stock market is certainly an indicator that most Americans are not profiting from. Most stocks and bonds are owned by, you know, the top 1 percent.
But the stock market’s rise is interesting. In real terms, it’s not quite matched the level that it reached in 2007, but, you know, it’s approaching that. And I think we have to look at a mystery here, which is: we know that the regular economy is growing at a pretty modest rate, and, you know, so–and real median incomes are flat or declining still. We still have relatively high unemployment in the labor market.
And so what’s going on? Basically, in the fourth quarter of 2012, we saw corporate profits reach an all-time high as a share of GDP, about nearly 11 percent. And at the same time, the wages share in GDP has national income has declined.
So what you’re really seeing here is that I think, you know, some of the largest companies on the planet are basically making money hand over fist, their owners are doing relatively well, and the rest of us are kind of left in the dust. You know.
I mean, I think if this continues we’ll see some wealth effects on the rest of the economy. We’ll see the housing market begin to pick up. It already has in many areas. And that would cause more wealth to be distributed more broadly.
But for the time being, we really have a two-tier story here in the economy [incompr.] very wealthy and people like the Forbes list that are profiting from this situation already and doing quite well. The aggregate wealth for that group increased by $800 billion in just one year from $4.6 trillion to $5.4 trillion this year. And so, you know, that’s pretty hard to square with the experience the rest of us are having.
DESVARIEUX: Okay. Thank you so much for joining us, James.
HENRY: Okay. Quite welcome.
DESVARIEUX: And thank you for joining us on The Real News Network.
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