The coronavirus pandemic will usher in unprecedented wealth inequalities. Amazon founder Jeff Bezos is already a leading example.
As tens of millions of Americans file for unemployment benefits, Jeff Bezos added $33 billion to his wealth. | Image: REUTERS/Michele Tantussi
The coronavirus crisis has left millions of ordinary Americans without jobs and livelihoods. Jeff Bezos, on the other hand, just got richer.
From March 16, the Amazon founder added $33 billion to his net worth.
In mid-March, the world’s richest person was worth $105 billion. His net worth now stands at $138 billion after Amazon (NASDAQ:AMZN) hit an all-time high on Tuesday.
The global financial crisis was blamed for the wide wealth gaps we have today. The coronavirus pandemic will make a bad situation worse as asset prices rise.
Wealth gaps and asset prices are positively correlated. The rich tend to own more stock while the middle has a higher share of their wealth in housing.
According to Goldman Sachs, the richest 1% of American households owned 56% of U.S. equities at the end of Q3 2019. At the time, their holdings were estimated to be worth $21.4 trillion.
During the same period, the bottom 90% owned just 12% of U.S. equities, worth $4.6 trillion.
As asset prices rise, the rich get richer. This comes despite the massive headwinds facing the U.S. economy, such as surging unemployment and collapsing GDP.
While Bezos was solidifying his lead as the world’s richest man, 16 million Americans lost their jobs.
But with near-zero interest rates and lack of better investments, the U.S. stock market has made an astonishing recovery. As the newly unemployed file for jobless claims, the rich are recording capital gains. This reflects the sad reality of an economy that values capital more than labor.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act will make a bad situation worse. Just looking at the amounts allocated to ordinary Americans versus corporations and business owners tells you it’s heavily tilted toward the rich.
Corporations and business owners will get a vastly bigger share than the 13% allocated to direct payments to individuals.
There’s even talk that hedge funds, that vehicle of the rich to make even more money, are claiming bailouts as small businesses. The audacity!
For some of the corporations being bailed out, the major beneficiaries will be pampered shareholders, even as they furlough and lay off workers.
Take the major U.S. airlines, for instance. Over the past decade, they have largely been profitable. But what did they do? Spent their profits on dividends and stock buybacks, which enriched shareholders even as debt levels rose.
The lesson of the global financial crisis was never learned. It’s Wall Street over Main Street, and capital over labor all over again. The coronavirus pandemic is being fought with social distancing rules. It’s also ushering in a greater distance between the 1% and the middle class.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.
Last modified: September 23, 2020 1:49 PM
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