United States Economy

Listen to This ArticleAudio Recording by AudmTo hear more audio stories from publications like The New York Times, download Audm for iPhone or Android.In 1981, Malcolm Forbes, the eccentric and fabulously wealthy magazine publisher, came to his editors with a request: Could they pull together a special issue about the 400 richest Americans? The idea was inspired by Caroline Schermerhorn Astor, the doyenne of Gilded Age New York, who regularly hosted the city’s high society in her Fifth Avenue ballroom, which was said to fit about 400 people. It’s quite possible Forbes saw something of himself in Astor. This was a different era of magazine publishing; Forbes — who wound up making the cut on his own list — lived like a sultan. He entertained celebrities and politicians on a 126-foot yacht called the Highlander. By the end of his run he owned a chateau in Normandy, 12 Fabergé eggs and a collection of hot-air balloons in fantastical designs — one shaped like the Sphinx, one like a bust of Beethoven, one like a Fabergé egg, one like the chateau in Normandy and, of course, one in the image of a sultan, about as tall as his yacht was long.According to a brief history of the magazine written by Malcolm Forbes Jr., better known as Steve, the editorial staff was not pleased with his father’s idea. They conducted a feasibility study and told him it wouldn’t be possible to figure out who these 400 people were. The elder Forbes replied if they wouldn’t do it, he’d find some other journalists who could. “Edit capitulated,” writes his son. The resulting reporting project took a year, dozens of flights and thousands of interviews. At the top of the very first Forbes 400 list was Daniel K. Ludwig, a shipping magnate, estimated by the magazine to be worth more than $2 billion.If you simply adjusted for inflation, that’s now at least $5.8 billion, a fortune that would land Ludwig in a seven-way tie for the 182nd spot on the last Forbes 400 list, alongside Fred Smith, the founder of FedEx; Gary Rollins, chief executive of Rollins, Inc., which owns several pest-control companies; and who could forget Peter Gassner, the head of a cloud-software company called Veeva. Fortunes at this tier hardly seem to merit media coverage anymore. One of Gassner’s most in-depth profiles was published on the blog of the Hacienda Business Park in Pleasanton, Calif., where Veeva keeps its offices. He does not own any hot-air balloons.Since 1987, Forbes has published another list, which started smaller but has grown to be much larger: the World’s Billionaires List. The magazine just published this year’s edition, with a staggering 2,668 names. The task of gathering information for both lists is overseen by Kerry Dolan, an editor at Forbes, in a highly collaborative effort that involves at least 92 different reporters from all over the organization, including from the company’s many internationally licensed editions — Russia, Poland, India and more, each a testament to the triumph of globalized capitalism. Dolan has worked at Forbes for nearly three decades, starting in 1994 covering Latin America, which involved helping out on the billionaires list too. Compiling it was far more laborious back then: “I couldn’t just go online and look at the São Paulo stock exchange and figure out who owned what,” Dolan says. But a financial magazine down in Brazil used to put out a book about all the biggest companies in the country, and she would have a contact in Brazil ship it to her in the States. That would reveal financial information on these companies, and she could go from there.The process has become easier in one sense, because our access to information is so much better; and harder, because there are so many more billionaires. The 2022 World’s Billionaires list, for example, grew by 573 names compared with the last prepandemic list, in 2020. That year, the world was minting new billionaires at a rate, Forbes noted, of about one every 17 hours. At the top of the new list is Elon Musk, with an estimated net worth of $219 billion; behind him is Jeff Bezos, with $171 billion. From there, it goes like this: Bernard Arnault and family ($158 billion), Bill Gates ($129 billion), Warren Buffett ($118 billion), Larry Page ($111 billion), Sergey Brin ($107 billion), Larry Ellison ($106 billion), Steve Ballmer ($91.4 billion) and Mukesh Ambani ($90.7 billion), the richest man in Asia and, I confess, the highest-ranked person on the list I’d never heard of.If you continue down, keeping your eyes on the Americans, most are familiar, names you know from the vast fortunes cast off by Silicon Valley, or Walmart (the wealthiest Walton heirs have around $65 billion each), or Nike ($47.3 billion), or divorcing Jeff Bezos ($43.6 billion), or living longer than Sheldon Adelson ($27.5 billion). But eventually, you start to encounter less-familiar names: Thomas Peterffy, who immigrated from communist Hungary and pioneered computerized stock trading (No. 80, $20.1 billion); Robert Pera, who founded something called Ubiquiti Networks and — this was fun to learn — went to the same state college that I did (No. 127, $14.6 billion); speaking of college, there’s Dustin Moskovitz, who was roommates at Harvard with another guy who had a cool idea for a social network (No. 167, $11.5 billion). Before long, you’re down with the Peter Gassners of the world, and there are a lot of them — America has some 735 billionaires now according to Forbes, collectively worth more than $4.7 trillion. A decade ago, Forbes counted only (“only”) 424. A decade before that, 243. They keep multiplying, and their collective wealth grows, even, or especially, as the rest of us fall behind.Illustration by Andrew RaeSo where are they all coming from? Depends who you ask. An optimist might tell you that an economy producing so many billionaires is an economy that’s growing, which is certainly true of ours. Nothing wrong with that. In the 1950s, the economist Simon Kuznets popularized the idea that inequality was an unfortunate but self-regulating side effect of economic growth; whenever it got too high, Kuznets reasoned, the political process would rein it in. This was known as the Kuznets curve, a parabola that showed inequality soaring before being slowly brought back to Earth through redistribution. Kuznets believed that the richest societies would eventually be the most equal.But in the last 12 years, the American political system has delivered Citizens United, a top marginal tax rate of 37 percent (down from a high of 94 percent in Kuznets’s day) and a billionaire president openly hostile to the democratic process — along with 332 new billionaires. The Kuznets curve has fallen out of favor, too, replaced by something called the Kuznets wave, which shows successive peaks and valleys of inequality. Branko Milanovic, the economist who put forward this revised model, thinks it might take at least a generation to tamp down the current peak.In his book “Ages of American Capitalism,” the University of Chicago historian Jonathan Levy describes the era of capitalism we live in as the Age of Chaos: a time in which capital has become more footloose, liquid and volatile, constantly flowing into and out of booms and busts, in contrast to the staid order — and widely shared prosperity — that characterized the industrial postwar economy. Levy begins the story in 1981, the same year Forbes thought of his list. That was the year the Federal Reserve, under its chairman, Paul Volcker, raised interest rates to 20 percent with the goal of ending inflation. Volcker’s Fed succeeded at that, but the decision, Levy notes, had far-reaching consequences besides, accelerating America’s transition away from the production of goods to a form of capitalism never seen before. The dollar skyrocketed in value, making American exports even less attractive and imports even cheaper; many factories that remained profitable were closed, because compared with the incredible returns money could earn in such a high-rate environment, they simply weren’t profitable enough. When the Fed began to loosen its grip, the widely available credit unleashed a speculative bonanza, which benefited a newly empowered corporate class that felt little obligation to the work force and profound obligations to shareholders.The Great ReadMore fascinating tales you can’t help but read all the way to the end.Brash and funny, Emily Nunn uses her popular Substack newsletter, The Department of Salad, to hold forth about ageism, politics and, oh yes, leafy greens.For years, a virus hunter worried about animal markets causing a pandemic. Now he’s at the center of the debate over Covid’s origins.A few years ago, Nicola Coughlan was working in an optician’s office in Ireland. Now, with “Bridgerton” and “Derry Girls,” she’s starring in two of the most beloved shows on Netflix.Typically the economy expands when investments are made in productivity, but this expansion was different: It was, Levy writes, “the only one on record, before or since, in which fixed investment as a share of G.D.P. declined.” In other words, our industrialists were investing less in productive stuff — ships, factories, trucks — while making more money doing so. In fact, they were often tearing that stuff up and shipping it abroad; this was the age of the corporate raiders, who would book enormous profits while putting Americans out of work. You can see this, in crude terms, as the birth of the Wall Street-Main Street divide: a severing of the finance industry from the “real” economy.This shift to a highly financialized, postindustrial economy was helped along by the Reagan administration, which deregulated banking, cut the top income tax rate to 28 percent from 70 percent and took aim at organized labor — a political scapegoat for the sluggish, inflationary economy of the ’70s. Computer technology and the rise of the developing world would amplify and accelerate all these trends, turning the United States into a sort of frontal cortex for the globalizing economy. Just as important, the tech revolution created new ways for entrepreneurs to amass enormous fortunes: Software is by no means cheap to develop, but it requires fewer workers and less fixed investment, and can be reproduced and shipped around the world instantaneously and at practically no cost. Consider that the powerhouse of 20th-century capitalism, Ford Motors, now employs about 183,000 people and has a market capitalization close to $68 billion; Google employs about 156,000 people and has a market cap of around $1.8 trillion. This new economy would be run by, and for, knowledge workers, who would reap most of the gains, and therefore have more money to spend on services — a sector that would come to sort of, but never fully, replace the manufacturing this transformation did away with.“During the Reagan years,” Levy writes, “something new and distinctive emerged that has persisted down to this day: a capitalism dominated by asset price appreciation.” That is, an economy in which the rising price of assets — stocks, bonds, real estate — would be, somewhat counterintuitively, a fuel for economic growth. It has been a good time, in other words, to own a lot of assets. And owning assets is mostly what billionaires do.In his book “Capital in the Twenty-First Century,” the French economist Thomas Piketty notes that the new economic order has made it difficult for the superrich not to get richer: “Past a certain threshold,” he writes, “all large fortunes, whether inherited or entrepreneurial in origin, grow at extremely high rates, regardless of whether the owner of the fortune works or not.” He uses the examples of Bill Gates and Liliane Bettencourt, the heiress to the L’Oréal fortune. Bettencourt “never worked a day in her life,” Piketty writes, but her fortune and Gates’s each grew by an annual rate of about 13 percent from 1990 to 2010. “Once a fortune is established, the capital grows according to a dynamic of its own,” Piketty notes, adding that bigger fortunes tend to grow faster — no matter how extravagant, their owners’ living expenses are still such a small proportion of the returns that even more is left over for reinvestment.Piketty was writing in 2013, while the economy was still recovering from the financial crisis of 2008. That recovery was buoyed by several years of near-zero interest rates, kept there by the Fed on the theory that, with credit widely available, the economy would regain its health. But low interest rates do two things: They push investors into riskier territory seeking better returns (and ideally creating jobs in the process); and they inflate the value of assets. Private equity and venture capital benefited greatly from this low-rate environment, helping both Silicon Valley and the financial engineers of Wall Street clean up once more. Even in less-dynamic sectors of the economy, the cheap money enabled an explosion in stock buybacks, some $6.3 trillion worth during the 2010s, or about 4 percent of our G.D.P. over the same period — more than we currently spend on defense. This, too, made asset owners richer.The Trump years supercharged another bull market that would be supercharged again, paradoxically, by the Covid pandemic. When the Fed and Congress stepped in to prop up markets and assist the economy, they fueled yet another boom in asset prices — this time with more everyday Americans trying to get a piece of it, investing in everything from Tesla options to JPEGs of apes. The retail investors have seen winners and losers among them, while the billionaire class as a whole has absolutely flourished. Over the last five years, Jeff Bezos’ fortune has more than doubled; Elon Musk’s, fueled in part by retail investor exuberance, has grown by a factor of 20.Illustration by Andrew RaeNothing special happens when you become a billionaire. There isn’t a little red light that flips on at I.R.S. headquarters. At the low end, it’s not even a stable status; market fluctuations push people in and out of billionairedom every day. What’s incredible is how little information we have a right to know about them, these 735 Americans who have amassed, at minimum, the G.D.P. of a small island nation. We can know only what they share — or can’t hide — from journalists. And certainly some are better at hiding than others.I asked Dolan what her profile is of a billionaire whom she’d never find. She told me it’s someone who quietly sold a stake in a business for, say, $250 million in the ’90s, then invested it well. Today, a guy like that could use his wealth to do whatever he wanted: buy truckloads of Nazi memorabilia, try to persuade your mayor to privatize the city’s sewers or maybe both, and you’d be none the wiser. And in fact, he wouldn’t even have had to be all that smart with his money. If he parked $250 million in an S.&P. tracking index fund in 1992 and left it alone, he’d be worth more than $4 billion today. (Dolan cautioned that no one would be quite crazy enough to put all his money in the market; nevertheless.) He would have slipped through the billion-dollar barrier like an Olympic diver. And now he’s just a guy with an insane Schwab account, some interesting ideas about sewage treatment and the world’s largest collection of authentic Totenkopf rings.The easiest sort of billionaire for Dolan to handle is one whose wealth derives from his ownership stake in a publicly traded company, probably one he founded, though possibly one he inherited. Anyone who owns more than 5 percent of a company’s shares must disclose that fact, along with the exact number of shares they hold. But once you’re past what’s discoverable in the public markets, these figures are pretty much just a combination of reporting and educated guesses. Many billionaires, for example, have equity in companies that have not yet and may never make an I.P.O., at least not at their current valuations; if they do, they may make even more. Many own stakes in regular old privately held companies that are worth billions, selling shoes (New Balance), or hardware (Menards), or candy (Mars) — all of these have created billionaires. To arrive at a value for these firms, Forbes compares them to similar companies that are publicly traded. All alleged billionaires are given an opportunity to comment on the magazine’s claims. Some share more detailed information; most don’t.In 2012, Bloomberg started a billionaires index of its own by hiring reporters from Forbes. It now covers the top 500 in the world, and updates every day. Forbes, too, has a live ranking of billionaires that updates with the markets, and just a quick glance at the top 10 shows considerable differences in the estimates. Bloomberg agrees that Musk is now the wealthiest man on the planet, for example, but estimates his net worth to be about $15 billion lower than Forbes does. By the No. 7 spot, the rankings diverge, and Bloomberg places Sergey Brin ($119 billion) where Forbes has Larry Ellison ($115.7 billion).Some differences between the Forbes and Bloomberg lists are simply products of different reporting and differing methodologies. Bloomberg’s methodology is considerably more transparent than Forbes’s, but its published list is one-fifth the size of the Forbes list (for now) and its newsroom much bigger. For each of the 500 billionaires, Bloomberg offers a one-to-five-star ranking based on its confidence in the estimate, with those who cooperate with the reporting process and whose assets are held mostly in publicly traded companies getting five stars (only a handful have the honor), and those whose assets are hidden or illiquid scoring lower. And yet, for all its precision, Bloomberg’s list has one intentional flaw: It does not contain Michael Bloomberg, the founder and majority owner of Bloomberg L.P., a distinction that has made him a billionaire many times over. Some 82 times, to be exact, at least according to the latest numbers from Forbes.Today, Bloomberg’s Wealth desk is run by an Englishman named Pierre Paulden, who oversees more than 25 reporters and editors, though the team often taps into the organization’s broader newsroom of 2,700. Paulden, like Dolan, has noticed over the years that fewer and fewer billionaires want to be discovered. In fact, when unknowns do announce themselves to the press as billionaires, Paulden and his team regard their claims with great caution: “Most of the time now, the type of fortune that we’re trying to find, they don’t really want you there,” he says.Paulden’s desk has turned up some enormous hidden fortunes in recent years. They dug into Leo KoGuan, a Singaporean businessman, after he went on Twitter one day and claimed that he was the third-biggest shareholder in Tesla. “And then he went dark,” Paulden says. He eventually resurfaced, and they were able to confirm his holdings, in what Paulden calls a “global effort,” both by looking at his financial records and by talking to his business associates. Similarly, Bloomberg broke the news that Changpeng Zhao, the chief executive of the crypto exchange Binance, was much richer than anyone knew: He was the 11th-richest person on the planet. When they published the story, they estimated his fortune to be $96 billion, noting that it was most likely higher: They didn’t even include any of his personal crypto holdings in the figure.Both Bloomberg and Forbes consider themselves conservative in their estimates of billionaire wealth. And in fact, there exists yet another billionaire census, done by a research company called Wealth-X, that is considerably less so. In 2021, it counted 927 billionaires in the United States — some 203 more than Forbes did. It doesn’t name any of them. Perhaps they’re right about these 203 unnamed billionaires. Perhaps not. It’s frustrating to not know — to know you can never know for sure — but even more frustrating to know that knowing wouldn’t change a thing about it.Illustration by Andrew RaeLast summer I was wandering around the neighborhood where I grew up in San Francisco, one substantially changed over the last decade, like every corner of that city, by the enormous fortunes generated in Silicon Valley. San Francisco is now home to 81 billionaires, at least according to Wealth-X. That’s almost two per square mile, or about one for every 10,000 residents — the highest concentration in the world. As I was walking, I came across a homemade sign hung in the window of an old Edwardian. It read: NO BILLIONAIRES! $999,999,999.99 IS ENOUGH ALREADY! The sentiment was comically San Franciscan: stridently in line with contemporary liberal values, and at the same time openly tolerant of extreme inequality. Why would it be OK for someone to have $999 million and not a billion? What really happens when that last penny pushes them over the line?It can feel as if we live in an era defined by rage at billionaires, but most Americans actually don’t have much appetite to eat the rich. We did, quite recently, elect a billionaire to the presidency. In January 2020 and then again in July of last year, Pew surveyed Americans to see if they thought billionaires were good for the country, bad for the country or neither. In 2020, 58 percent of respondents said they were neither. A year and a half into the pandemic, the number had barely budged (it dropped to 55 percent, within the margin of error). Some 29 percent think they’re bad; 15 percent think they’re good. It’s not exactly October 1917 out there.Still, one cohort stood out: 18-to-29 year olds. Fully 50 percent of them believe billionaires are bad for the country. And is it any surprise? This is a generation that has grown up paddling in the chop of the economy that produced all this disordered wealth: working (or failing to find work) in industries that have been financially engineered into ruin by the fleece-vest guys of Midtown or upended by software that made some nerd so rich his grandchildren’s grandchildren will live like princelings, and either way paying obscene rents to millionaire landlords who were smart enough to be born 20 years before them. Billionaires are, from this perspective, the purest distillation of the brutality and stupidity of arranging a society this way.As the ultrawealthy have multiplied, some Americans have drifted toward a sort of billionaire Gnosticism, a sense that we live in a fallen world run by a demonic group of plutocrats. On the right, you have the whole unseemly George Soros thing, in which one man is imagined to be the devious puppet master behind everything from Central American migrant caravans to the George Floyd protests. Though not personally a billionaire, Klaus Schwab, the head of the World Economic Forum at Davos, has been reimagined as a sort of Bond villain serving their interests, plotting to make you live on cricket meat as part of something called the Great Reset. On the left, the disturbing revelations about Jeffrey Epstein, and his connections to several billionaires, have led to fevered speculation about the sources of his wealth and the circumstances surrounding his pretrial suicide.But you don’t need to think of any individual billionaire as evil to find the sheer concentration of power they have disturbing. On the contrary, one of the scariest things about our billionaires is that they’re really just people, with all the frailty that entails. Think about Musk’s desperate outing as an “S.N.L.” host. Or Gates’s lame efforts at dating in middle age. Bezos’ corny sexting. Zuckerberg’s uncanny approximations of normal behavior. Tom Steyer’s and Bloomberg’s doomed presidential campaigns, both in the same cycle, both to unseat another billionaire who lost anyway. There really are some things money can’t buy, and our billionaires demonstrate this just as often as they prove the converse.Of course, there is also a lot that money can buy. Not just yachts and Picassos but also lawyers, politicians, silence. You can finance a lawsuit against a website you don’t like, and make it disappear. You can commission a yacht so big that it can’t get to sea unless you disassemble a bridge; you can offer to cover the costs of bridge disassembly. You can fund a libertarian uprising against the sitting president and derail his agenda. You can launch a car into space. There’s a very good reason the genie forbids wishing for unlimited wishes.I witnessed the dizzying effects of this caprice firsthand about a decade ago. I was working at a sceney restaurant in Manhattan when an ultrawealthy customer came in twice in the span of about a month. I was told at the time that he was a billionaire, though I can’t say for sure whether he really was. He certainly seemed like it. On the first occasion, he spent something like $10,000 on wine, tipping 20 percent on top of that, adding some $2,000 to the tip pool. Each waiter made $600 that night. It nearly covered my rent for the month.Then, not long after, he sat down in one of my banquettes. This caused a small flurry of action: The maître d’ let me know who he was, and the sommelier urged me to send him over as soon as he expressed any curiosity about wine. I went over and told him and his companion about the night’s specials and took their order. I’ll never forget what he asked for: the burger. Anything to drink? I asked, still anticipating victory. Yes, he said. A glass of the cabernet.I think he spent about $100 that night, as was his right. Because in addition to being insanely wealthy, he was also just some guy. And sometimes all a guy wants is a cheeseburger and a drink.The issue with billionaires is not that they’re sociopaths, though certainly some are. It’s that their power comes with no accountability. They dwell — or don’t dwell, as is often the case — above the clouds in supertall skyscrapers. They fly to private islands on private jets and do God-knows-what there. Their yachts remind us that, no matter what the paperwork says, they’re citizens of no nation; that if we try to fix them in place, they can just go elsewhere. They become enamored of certain ideas — fixing African agriculture, resurrecting von Mises and Hayek, terraforming Mars, being the president — and can spend nearly unlimited sums in the pursuit of making them a reality.Even if they fail at any or all of it, they will remain billionaires, and there’s not much you can do about it. They’re not elected to the role, so you can’t vote them out of it. They didn’t become billionaires by cashing paychecks, so there’s no one you can harass into firing them. They didn’t break the law to make a billion dollars — at least usually not — so you can’t drop a dime on them. They have more money than God, as the saying goes, so even he is of no use.And until something changes, we will live in a nation that is substantially warped by the gravity of their fortunes.Willy Staley is a story editor for the magazine. More