Millions Of People Became Millionaires During The COVID-19 Pandemic: Here's How
More than five million people became millionaires across the world in 2020 despite economic slump from the COVID-19 pandemic.
While many poor people became poorer, the number of millionaires increased by 5.2 million to 56.1 million globally, investment bank Credit Suisse research found.?In 2020 more than 1% of adults worldwide were millionaires for the first time.
But the real question is: How? How were they able to accumulate the wealth during a pandemic?
How?
Recovering stock markets and soaring house prices helped boost their wealth.Wealth creation appeared to be "completely detached" from the economic woes of the pandemic, the researchers said.
Anthony Shorrocks, economist and author of the Global Wealth Report, said the pandemic had an "acute short term impact on global markets", but added this was "largely reversed by the end of June 2020".
"Global wealth not only held steady in the face of such turmoil but in fact rapidly increased in the second half of the year," he said.
However, wealth differences between adults widened in 2020, and Shorrocks said if asset price increases, such as house price rises, were removed from the analysis, "then global household wealth may well have fallen".
Nannette Hechler-Fayd'herbe, chief investment officer at Credit Suisse, said: "There is no denying actions taken by governments and central banks to organise 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."
She added: "The lowering of interest rates by central banks has probably had the greatest impact. It is a major reason why share prices and house prices have flourished, and these translate directly into our valuations of household wealth."
But she added that these interventions "have come at a great cost".
"Generous payments from the public sector to households have meant that disposable household income has been relatively stable and has even risen in some countries," she said.?
Hechler-Fayd'herbe said a "major reason" why share prices and house prices had "flourished" was due to the lowering of interest rates by banks, which, she added, translated "directly into our valuations of household wealth".
Where the numbers at
The global wealth report by Credit Suisse revealed wealth per adult rose 6 per cent last year to hit another high of $79,952 (?57,598).
Total household global wealth grew by 7.4 per cent, or $28.7 trillion (?20.7 trillion) to $418.3 trillion (?301.3 trillion) at the end of 2020, although some of this was helped by exchange rates.
The boost to household wealth meant there were 56.1 million millionaires worldwide last year, up 5.2 million on the previous year.
The study estimated $17.5 trillion (?12.6 trillion) ¨C or 4.4 per cent ¨C was lost from total global household wealth between January and March 2020 at the start of the crisis.
Shorrocks also noted that setting aside asset price increases might actually reveal a drop in global wealth, given that less-wealthy sectors with fewer financial assets saw stalled growth. At the same time, the richest 500 people in the world¡¯s added $1.8 trillion to their collective net worth in 2020, Bloomberg reported.
Who got the richest
Some of that increase was fueled by emerging economies¡¯ growing prosperity in countries such as China, Credit Suisse said, as well as the middle class¡¯ expansion in the developing world.
The bulk of new wealth, though, was in the U.S. and Europe, rising by $12.4 trillion and $9.2 trillion in those regions, respectively. China¡¯s increase added another $4.2 trillion, with the Asia-Pacific region outside of China and India another $4.7 trillion, Credit Suisse said.
¡°The rise in wealth inequality was likely not caused by the pandemic itself, nor its direct economic impacts, but was instead a consequence of actions undertaken to mitigate its impact, primarily lower interest rates,¡± the report noted.
The increase in asset prices, then, did not reflect the pandemic¡¯s economic challenges, Shorrocks said.¡°There¡¯s a sort of disconnect between what¡¯s been happening to the wider economies ¨C which have been in serious trouble and required a lot of government intervention ¨C and what¡¯s happened to household wealth, which seems to have just continued as if nothing has been happening,¡± he told The Guardian.
