SpaceX shares floated just last week and have since ‘slumped’ US$800 billion in value, which is equal to the GDP of Ireland or Belgium. Subsequently Musk’s so-called net worth fell $350 billion. Let me rub that in: it was just the sell-off, from initial market valuation of $2 trillion! And partly based on rather ambitious plans to colonise Mars!
Coincidentally, the erstwhile Fed’s godfather of financial markets Alan Greenspan died at the tidy age of 100. He would’ve been impressed to see his famous phrase ‘irrational exuberance’ to describe the original dotcom bubble, now taken to stratospheric heights in this new speculative mania. The mega fortunes of all the Big Tech bros are growing exponentially and rampant investment in AI has the US economy running hot.
French economist Thomas Piketty has shown that financial returns to capital historically exceed economic growth (and returns to labour). Mathematically the unequal distribution of wealth has thus proceeded apace in so-called late stage capitalism. In the USA, 1% of the population owns 32% of wealth (against 23% in 1989), with 10% holding 68%. Half the population have 2.5% of wealth (against 3.4% in 1989).
China is of course on board, and partly driving, the capitalist train big time, with comparable wealth distribution to the US: 1% hold 33% of wealth, the 10% have 62%, and half the population do slightly better with 6%. What would Deng Xiaoping make of this outcome of his ‘socialism with Chinese characteristics’ that propelled China in its modern era of ultra-rapid industrialisation? Not to mention the archaic CCP brand. Okay, the Chinese masses have been rapidly pulled out of poverty. And they now provide a huge domestic market for China’s prodigious, relentless industrial output, under its unique model of state-guided capitalism (and enrichment of elites).
Interestingly, India also has comparable wealth concentration to the US and China, with 10% of the population holding two-thirds of wealth. However, with reasonable democracy and 40% university graduates unemployed, the recently formed Cockroach Janta Party, a satirical take on the ruling CJP government, may offer some hope of change?
The Gini coefficient analysis of wealth distribution shows that Slovakia, Slovenia, Belgium, Ukraine, Japan and the Nordic countries are the most egalitarian countries in the world.
Australia has the 20th highest level of inequality amongst OECD countries, with 1% of the population holding 15% of wealth, 10% owning 50%, while the bottom 50% share 6% of wealth like China. The self-congratulating country of a ‘fair go’ could do much better.
With state-guided, oligarchic, corporate, entrepreneurial, welfare and other forms of capitalism covering the world’s economies, except Cuba, socialism let alone communism are long defunct. The only question is whether our governments can mediate capitalist forces for the common good, and dare I say more generous and fairer society. Piketty has suggestions to make about wealth taxes and other societal measures, which I won’t canvass here.
Finally, wealth is both accumulated and spent: incredibly just ten percent of the US population enjoys 50% of national consumption. Whether wealth creation should be an end in itself, and whether unbridled consumption is desirable, are higher order questions for another day. De Tocqueville said of their constitutional ‘pursuit of happiness’, that Americans are never satisfied. He probably hadn’t visited China.
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