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The plutocracy is no meritocracy

Posted by Graeme in Economics,Politics at 6:52 am on Tuesday, 25 January 2011

Many of the spate of recent articles on the super-rich, such as the influential one in The Atlantic have accepted the idea that the plutocracy is meritocratic: the wealth is earned. I have my doubts, and had a look at how and where the richest of the super-rich made their money.

Going through the twenty richest people (some together with immediate family) in the world:

See below for more details.

This means that three quarters of these billionaires either simply inherited their money, or had the advantage of very privileged backgrounds.

Looking further down the list (I took random looks,including near the bottom) around half obviously inherited their money. As you move down the people become less public figures so it was not practical to find out what the backgrounds of the rest really were, so we can safely assume that substantially more than half were from wealthy of influential families. We are still looking at about only a quarter coming from ordinary middle class or less affluent backgrounds, with most of the remaining three quarters coming from backgrounds rich enough to put the in the top fraction of a percent even in a rich country (and a tiny fraction of the world population).

It could be argued that a quarter or so of the super-rich coming from ordinary backgrounds is sufficient to justify The Atlantic’s contention that they are more meritocratic than their predecessors. Firstly there have always been people who made a fortune from nothing: this is not new.

More fundamentally, just a quarter coming from ordinary backgrounds still means that those whose parents are very rich are (at least) hundreds of times more likely to be in the elite themselves than someone from an ordinary family. Some meritocracy!

I used the Forbes rankings of the world’s twenty richest billionaires.

Details

  1. Carlos Slim’s father was a successful businessman. Not super-rich, but apparently rich by most people’s standards, owning a business and several properties in Mexico city.
  2. Bill Gates. There is some variation in the accounts on the web of how rich his family was. At the very least they were well off and had extremely useful contacts, especially at IBM, the company from which Microsoft got the contract that was the root of its success. More detail from Philip Greenspun.
  3. Warren Buffet’s father owner a stock brokerage and was a US congressman. Not an ordinary family at any rate.
  4. Mukseh Ambani inherited a half share of a massive conglomerate.
  5. Lakshmi Mittal’s family owned a successful steel business.
  6. Larry Ellison seems to be from a fairly ordinary family.
  7. Bernard Arnault’s family owned a construction business and his original business was funded by family money.
  8. Eike Batista’s father was the head of a mining company.
  9. Amancio Ortega’s father was a railway worker.
  10. Karl Albrecht (with his brother) built Aldi apparent starting from a fairly small family business.
  11. Ingvar Kamprad appears to be from a fairly ordinary farming background.
  12. Christy Walton inherited wealth (Walmart)
  13. Stefan Persson inherited Hennes and Mauritz
  14. Li Ka-Shing appears to have started his business with very little.
  15. Jim Walton is another Walmart heir.
  16. Alice Walton: you might have started recognising the surname by now.
  17. Liliane Bettencourt inherited L’Oreal
  18. S. Robson Walton’s surname says it all: Walmart again.
  19. Prince Alwaleed Bin Talal Alsaud: is the nephew of the King of Saudi Arabia. Not exactly a humble beginning.
  20. David Thomson inherited a large chunk of Thomson, which later merged with Reuters to form Thomson Reuters.

Comments (3)

Comments(3)

Comment by Mark Carter at 10:56 am on 4 February 2011 at

Put it this way: even if I had come from the same background as Bill Gates or Warren Buffett, I am certain I would never have attained a fraction of what they achieved. So you’ve got to give them /some/ kudos.

Comment by Graeme at 11:16 am on 4 February 2011 at

I do give some of them a lot of credit for their achievements – Warrren Buffet in particular.

On the other hand, there are LOTS of people in the world with their potential who did not have the luck to be born into the right family.

Comment by Peter Wright at 5:09 pm on 6 July 2012 at

I don’t blame them for being too wealth, meaning others must literally starve because of it. But for people to use Banks to defraud society. Is a systemic flaw,because we allwould do the same in their position, they are only human. It is the lack of regulation that allows this to happen, those regulators are to blame.