Mega-wealthy survivors

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: Matthew Lynn

You might be forgiven for thinking this was a rotten moment in history for the mega-rich. Crooked hedge-fund managers such as Bernard Madoff are waltzing off with your fortune. Taxes are being raised around the world, and are likely to rise further. Every politician running for election is taking potshots at the excesses of bankers and oligarchs. Even the offshore financial centres, usually the one place you could count on to welcome you with open arms and a waiting limo, are contemplating handing over the details of all your accounts to tax authorities back home.

Don’t be downhearted. There has never been a better time to be mega-wealthy. The plutocracy is entering a gilded era. The reasons are simple: All the things you need to maintain your lifestyle are getting cheaper. And there are a lot fewer of you around. The main point about being rich is not how much you have, but whether you have more than everyone else. Anyone who tracks the price of luxury items knows that while life is harder for ordinary people, it is getting cheaper for the seriously wealthy.

Wealth-management firm Stonehage calculates the cost of living for what it calls “ultra high net worth families.” Its index includes everyday essentials such as Beluga caviar, dinner at the Ivy, a day’s grouse shooting, and a grand tier box at the Royal Opera House. None of them are cheap. They are, however, a bit cheaper than they used to be. Stonehage says the price index dropped about 4% in the 12 months through April 2009, as luxury-property rents and discount-travel deals fell. By contrast, inflation rate for the rest of the UK population, measured by the consumer price index, was more than 2%.

The World Wealth Report produced by Capgemini SA and Merrill Lynch found the number of US-dollar millionaires in the world dropped 15% last year to 8.6 million people, wiping out the increase in their ranks during the previous two years. Overall value of assets held by millionaires dropped 20% to $32.8 trillion in 2008. That is unfortunate for those who have dropped out of the club and have to reacquaint themselves with coach class. Still, there is no cloud without a slither of silver in it somewhere. The thinning of the ranks of the world’s wealthy is good news for those who remain.