‘Turkey Plunges Down in Ultra-Rich Ranks Amid Growing Global Wealth’
The headline introduced an article I came across in the English version of our local newspaper Hürriyet:
‘With the number of millionaire households in Turkey remaining at around 22,000, showing no significant change from the previous year, Turkey dropped three places in the global rank to 42nd, according to the BCG study, “Riding a Wave of Growth: Global Wealth 2014.”
‘Turkey is also left out of the top 10 countries with the highest number of ultra-net-high-worth households, (households that have private financial wealth of more than $100 million), retreating from 9th to 12th place.
‘While there were 357 people worth more than $100 million in 2012, this number fell to 288 in 2013, according to the study.’
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Well, sympathetic as I am trying to feel for those 69 citizens whose worth dipped below $100 million last year, I have to tell you, I’m not convinced that they (or the other 288 who are still in the club) are actually doing the country’s economy a whole lot of good. Another news item I chanced on the other day announced that German luxury car manufacturer Mercedes Benz was awarding Turkey the prize for being ‘Europe’s Most Successful Market’ in 2013. The Lamborghini people reportedly expect to sell seventy of their ludicrously over-powered and over-priced boyztoyz to Turkish boy-racers this year. Prices in the USA range from $200-550 thousand – double that for Turkish Liras and add another fifty percent to find the local price. Then there are the Ferrari buyers who will pay €550,000 (around 1.5 million TL) for a ride that’ll do 350 km/h and 0-100 km/h in 3 seconds flat. Tell me where you can actually do either of those things.
Getting back to that Hürriyet article, how do you read the tone? It seems to me that words like ‘no significant change’, ‘dropped’, ‘left out’, 'retreating' and ‘fell’ suggest that the writer implies there is something Turkey should feel ashamed of here. Interestingly, the article goes on to note: ‘the report also draws attention to the substantial overall wealth boost that Turkish households have recorded over five years. The total assets of individuals in Turkey amounted to around 840 billion Turkish Liras in 2013, up from around 500 billion liras in 2008.’
What should we make of that? The ranks of the super-rich in Turkey have declined by nearly twenty percent since 2012 while average household wealth has increased nearly seventy percent in the five years since the 2008 global financial crisis. And these figures are not doctored stats released by the Turkish Government – they are published in a report presented by an outfit styling themselves the Boston Consulting Group (BCG). Check them out. If you thought the Trickle-down Theory of wealth redistribution was dead and buried, there’s a gang of corporate whizz kids who will put you straight.
I wasn’t able to read the full report on their website because you have to be a member of the club to do that. However, I did check out a couple of other items. One that particularly interested me was entitled: ‘For Mining Companies, Productivity is the Key to Value Creation’. It grabbed my attention, of course, because of the tragedy in Soma, Turkey last month where 301 coal-miners died in a dreadful accident.
Read the BCG article, however, and you may come to feel that 'accident’ is the wrong word to use. In addition to BCG, I have now learned another useful acronym: TSR (Total Shareholder Return). The guys at BCG apparently analysed mining companies' profits over the previous decade, and found that they averaged sixteen percent per annum with the top ten companies averaging 35 percent. I’ll say that again in case you missed it – those mining companies made 35 percent profit on shareholder investment in a single year! Nevertheless, the Bostonian Consultants insist that there is a ‘profitability pinch’ in the sector with ‘the economics of mining under pressure’, and go on to suggest ways to ‘enhance productivity’. Well, you have to wade through a good deal of economists’ jargon here, which they use generally to avoid facing up to the reality that they are actually screwing real people by reducing wages, cutting back on work-force numbers and skimping on safety measures.
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Another delightful press release you can read on the BCG site deals with the ‘Daunting Challenges facing Wealth Managers’ in the next few years. The text begins with the good news that ‘the growth of private wealth surpassed expectations in 2013’, but goes on to warn that ‘wealth managers nonetheless need to take action on multiple fronts if they hope to gain market share and increase profits over the next few years.’
“The key challenge in developed economies is how to make the most of a large existing asset base amid volatile growth patterns,” said Brent Beardsley, a BCG senior partner and a coauthor of the report. “The task in the developing economies is to attract a sizable share of the new wealth being created there. Overall, the battle for assets and market share will become increasingly intense in the run-up to 2020.”
I suspect that Brent B is not seeking ways to ‘attract’ the new wealth being created in those developing economies to the impoverished citizens of those countries whose children are dying of malnutrition and easily preventable diseases caused by lack of access to uncontaminated drinking water . . . but I could be wrong.
I am currently reading a history of Byzantium, the eastern Roman Empire centred on Constantinople back in medieval days. In the early chapters, the author, Cyril Mango, examines reasons for the decline of the Empire up to the 7th century CE. Let me share a quote or two.
‘Service in the army was a lifelong occupation and was meant to be well-rewarded. Even so, there was little enthusiasm for it in the more civilized parts of the Empire and evasion was widespread. By Justinian’s time recruitment had become voluntary and depended very largely on some of the ruder provinces.’
‘It is a commonplace of late Roman history that the municipal gentry was in a state of decline . . . [They] made increasing efforts to avoid their responsibilities which were openly regarded as a servitude . . . [T]he rich ones grew richer at the expense of their neighbours. They became magnates who bullied their fellow-citizens and usually had enough leverage at court to win for themselves posts in the imperial administration that exempted them from municipal duties . . . there was a staggering disparity between the rich and the poor . . . government service normally led to considerable riches . . . there must have been a very large number of people living on the subsistence level.’
Does any of that sound familiar? By good luck or good management (who knows?) Turkey managed to escape the worst of that 2008 global downturn. It seems to me that if a few local oligarchs have to make do with a little less than $100 million in personal wealth so that some others can get off subsistence level, it may not be altogether a bad thing.