New millionaires

Credit Suisse has just issued its Global Wealth Report, which showed that 5.2 million people became dollar millionaires in 2020, despite the economic damage caused by responses to the pandemic. In 2020, more than 1% of adults worldwide became millionaires for the first time, taking the world total to 56.1 million people. Total global wealth, which took a hit at the start of the pandemic, had recovered by the end of the year to record an increase of 7.4%. Nannette Hechler-Fayd'herbe, chief investment officer at Credit Suisse, said:

"There is no denying that actions taken by governments and central banks to organize massive income transfer programmes to support the individuals and businesses most adversely affected by the pandemic, and by lowering interest rates, have successfully averted a full scale global crisis."

Since the year 2000, the worldwide number of people with fairly modest assets of between $10,000 and $100,000 has more than tripled from 507 million to 1.7 billion.

It should be noted that the Credit Suisse estimates include non-investable assets such as the value of owner-occupied homes, and are therefore higher than comparable surveys that do not. Undoubtedly a large part of the increase in global wealth has come from low interest rates. Government and banks have pumped out money, and the ultra-low interest rates have pushed people out along the risk curve into assets such as stocks and property as they seek to make some worthwhile returns.

Will it last? The answer is that probably a proportion of it will. When interest rates rise and make bonds more attractive, the pressure will ease on asset prices, and they may dip in response. But some of the gains will stick.

Is it a good thing? It undoubtedly is. When people have more assets behind them, they have funds to back new business start-ups, and the collateral to borrow for new ventures. These are the major source of future wealth-creation and future jobs. And a wealthier world is one better able to survive external shocks than a poorer one.

Is there a limit to it? The optimists, who include myself, say that there is not. A large part of humanity now lives at many times the living standard of their predecessors of 250 years ago. We used to set the international poverty line at a dollar a day minimum. Currently we set it at $1.90 a day, and there is no reason why it should not continue to rise. Future generations could easily live at many times the living standards of current ones.

To be a dollar millionaire is no longer to be in the top 1% of the world’s richest. And as economies make up the slack of the pandemic downturn, the number of them will increase further.

Can the world support such wealth? Yes, it can. There will be pressure on resources, so we’ll invent new ones. And we can make the environment cleaner using ingenuity rather than reverting to poverty. These are problems, and solving problems is something people are rather good at.

So, let us welcome the new millionaires and hope to welcome many more of them in the future.