Wealthy enjoy ‘benefits’ of the Covid-19 pandemic
The Covid-19 pandemic has benefited the well-heeled like no other crisis, netting $28.7 trillion (CHF26.4 trillion) in added wealth last year for those with property and financial investments, while increasing the gap between the rich and the poor.
“Wealth creation in 2020 was largely immune to the challenges facing the world,” states the annual Global Wealth Report 2021External link from Switzerland’s second-largest bank Credit Suisse.
“Surprisingly, in the second half of 2020 share prices continued on an upward path, reaching record levels by the end of the year. Housing markets also benefitted from the prevailing optimism as house prices rose at rates not seen for many years.”
More than five million people around the world were newly minted as millionaires last year.
In Switzerland, total wealth grew 12.5% to $41.7 trillion by the end of last year, but this figure is inflated by a near 10% appreciation of the Swiss franc against the US dollar. Total global wealth grew by 7.4% as the pandemic took hold last year, reaching $418.3 trillion.
The picture for wealth looked a lot worse when the pandemic took hold in the first three months of 2020, causing a dip in stock markets worldwide. This wiped out $17.5 trillion of wealth between January and March. But intervention by governments and central banks provided the stability for markets to bounce back with vigour in the second half of the year.
Wealth vs the ‘real’ economy
Pure wealth endured the pandemic better than the “real” economy, which encompasses retail, manufacturing, tourism and their associated jobs. The Swiss economy endured its worst economic slump in 45 years in 2020 and has only just begun to swing back toward positive momentum.
In its report, released on Tuesday, Credit Suisse sounded a warning about the unrelenting concentration of wealth among the richest, high-net-worth people in the world – the top 1%. “High-net-worth adults are increasingly dominant in terms of total wealth ownership and their share of global wealth,” it says.
The share of global wealth enjoyed by this group of the wealthiest individuals has risen from 35% to 46% since the turn of the Millennium.
Last year marked the first time that people needed at least $1 million in assets to join the ranks of the top 1% of wealthiest people on the plant.
Unequal distribution
Pandemic-induced inequality has not been evenly spread throughout the world, with the least wealthy nations having suffered the worst effects.
“In many high-income countries the loss of labour or business income was softened by emergency benefits and employment policies,” says the Global Wealth Report. “In countries with an absence of income support, vulnerable groups like women, minorities and young people were particularly affected.”
Even in Switzerland, one of the richest countries in the world with among the highest proportion of millionaires per head of population (15%), the issue of growing inequality has raised concerns. The pandemic has led to public debate over the divide between rich and poor and whether the tax system should be adjusted to rebalance society.
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