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How the other half lives - Richard Branson sprays a bottle of champagne across the nose of a new private jet
Last updated October 2015

How the Other Half Lives

Dominic Fox joins the dots between the recession, oil prices, and the psychological suffering of the very rich.

Imagine a country with almost no taxation, no VAT, a lot of subsidies throughout the economic system, and a very heavy and generous public-sector payroll. A utopia that provides for all one's needs you might think. Well think again. The full extent of the impact of slumping crude prices on Saudi Arabia's public finances has been highlighted by the International Monetary Fund in a new report telling oil exporters to be braced for a prolonged period of disruption to their budgets. It's enough to give Scottish nationalists nightmares.

The IMF's half-yearly fiscal monitor report shows that in the past three years a hefty budget surplus in Saudi Arabia has been turned into a deficit of more than 20% of GDP, double the shortfalls seen in the UK and the US during the worst of the global slump of 2008-09. Other leading oil exporters such as Russia and Iraq, neither immune from economic and political chaos, have also suffered marked deteriorations in their public finances as a result of the fall in crude, from a peak of almost $130 a barrel in 2012 to just under $53 currently. It's a sign of the times that Standard Oil has been replaced by Islamic State as the major oil producer in Syria.

Where once people in the western developed world felt immune to these destabilising effects, recent events have shown how vulnerable we are. One minute the wars in Syria, Sudan and Afghanistan are background on our televisions. The next, huge numbers of refugees are streaming across Europe's borders from all points south and east. Germany is currently trying to cope with hundreds of thousands of new arrivals, almost none of whom speak German and all of whom need accommodation, food, schooling, and medical care. Suddenly it has become a first world problem and there is every indication there are more to come.

Churches, charities and civil society organisations are mobilising across Europe to help these desperate and disenfranchised people. It is surely incumbent on us all to help if we can. A continued public commitment to charitable endeavour with donations of money and time are more important than ever.

Andy Haldane, a policy maker at the Bank of England, has warned us to anticipate that we may be locked into what he calls a "three-part crisis trilogy", with part I, the Anglo-Saxon crisis of 2008-09, and part II, the Euro crisis, about to be followed by part III, the emerging market crisis of 2015 onwards. The risk of a new global financial crash has increased because of a slowdown in China and decline in world trade that is undermining the stability of highly indebted emerging economies, according to the IMF. Increasing job losses among European steelmakers, suddenly hopelessly uncompetitive as cheap steel floods the market, are one of the more immediate effects. Some commentators consider that trade has become more like economic warfare.

Credit Swisse, which has recently announced its own programme of job losses, has issued a remarkable report that shows a person needs only $3,210 (£2,100) to be in the wealthiest 50% of world citizens. About $68,800 secures a place in the top 10%, while the top 1% have more than $759,900. The report defines wealth as the value of assets including property and stock market investments, but excludes debt.

About 3.4 bn people, just over 70% of the global adult population, have wealth of less than $10,000. A further 1bn, a fifth of the world's population, are in the $10,000-$100,000 range. Each of the remaining 383m adults, 8% of the population has wealth of more than $100,000. This number includes about 34m US dollar millionaires. About 123,800 individuals out of these have more than $50m, and nearly 45,000 have more than $100m. The UK has the third-highest number of these "ultra-high net worth" individuals.

The UK was one of only three countries, along with the US and China, to record a rise in household wealth in 2014. It also leapfrogged Germany in the number of people with more than $50m, with 400 more than 2014 and a total of 5,400. This put the UK in third place, behind the US with 61,300 of the worlds wealthiest and China with 9,600.

But help is at hand. Jana Kasperkevic, writing in the Guardian, describes a handy new service in New York, "wealth therapy", that appears entirely unaware of the notion of irony. Clay Cockrell, a former Wall Street worker turned therapist says, "There is guilt over being rich in the first place. There is the feeling that they have to hide the fact that they are rich". And then there is the isolation. Being in the 1%, it turns out, can be lonely.

"It's an -ism," says Jamie Traeger-Muney, a wealth psychologist and founder of the Wealth Legacy Group. "I am not necessarily comparing it to what people of color have to go through, but ... it really is making value judgment about a particular group of people as a whole."

"People say: 'Oh, poor you.' There is not a lot of sympathy there," one respondent to recent research confessed. "[Wealth] is still one of our last taboos. Often, I use an analogy with my clients that coming out to people about their wealth is similar to coming out of the closet as gay. There's a feeling of being exposed and dealing with judgment."

It's been a long hard road but the wealthy have finally joined the groups of the oppressed. Just don't give them money. It won't help.

 

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