THE past decade was probably the most exuberant period of wealth creation in human history. It also produced an unprecedented number of wealthy people. Despite the recent disappearance of some well-known dotcom tycoons, the count of millionaires and billionaires still went up last year. The world now has 7.2m people with investable assets of at least $1m, up from 5.2m in 1997. Those 7.2m dollar millionaires control about a third of the world's wealth. According to Forbes magazine's “rich list”, there are also 425 billionaires, 274 of them in America alone.

Why was so much new wealth created in the 1990s? How did so much of it end up in the hands of the rich? And what are the economic, social and political implications of wealth creation when it goes hand in hand with rising inequality? This survey will consider these and other questions facing the wealthy, particularly the new rich, but will assume that they will have little difficulty finding ways of spending their money. Wilfred Beckerman, an Oxford economist, surely has it wrong when he says that “The problem of creating sufficient wants...to absorb productive capacity may become chronic in the not too distant future.” Look no further than the imitation Japanese palace being built by Larry Ellison, the billionaire boss of Oracle, an IT company, or the state-of-the-art armoured vehicles that are all the rage amongst the rich of Moscow and Sao Paolo, to be reassured that the supply of wants is infinite. The recent $20m trip on a Russian rocket taken by Dennis Tito, a rich American with a taste for space tourism, is unlikely to prove the final frontier.

But what exactly does it take to be rich nowadays? As Bradford De Long, an economist, writes in his forthcoming “History of the 20th Century Economy: Slouching Towards Utopia”, most Americans today enjoy standards of material comfort that “were beyond the reach of even the richest of previous centuries. Even lower-middle-class households in relatively poor countries have today material standards of living that would make them, in many respects, the envy of the powerful and lordly of past centuries.”

Common-or-garden millionaires

Equally, millionaires are not what they used to be. In industrial countries, almost anybody prepared to work hard, save diligently and live like Scrooge can become one. In 1956, when Cole Porter launched his song, “Who wants to be a millionaire?”, it carried connotations of flashy flunkeys, a marble swimming pool and a country estate. Today, $1m would not buy you much of a house in the better parts of New York, San Francisco, London or Tokyo. “The millionaire has become common in numbers, common in the source of wealth, common in the usage of bygone snobberies in social origin, common in the continued narrowing of the gap between his fortune and that of the normally affluent middle class,” notes Robert Heller, an author.

Having investable assets in the $250,000-5m range simply makes you one of the “mass affluent”, as the financial-services industry now calls them. To be truly rich, you need quite a bit more than that. Silicon Valley has a useful, if gratuitously rude, phrase for the sort of money that will free you from ever having to take a job again: “Fuck-you money”. This is currently reckoned to be around $10m, enough to generate an annual income of around $500,000. Above $100m, you are one of the super-rich, able to meet any conceivable need that you (or your family) might have in your lifetime. Your main worries will be about what will happen to your money when you die.

For richer, for poorer

“Riches, in spite of the most violent regulations of law to prevent their dissipation, very seldom remain long in the same family,” noted Adam Smith 225 years ago in “The Wealth of Nations”. The rich man, he suggested, “frequently has no bounds to his expense, because he frequently has no bounds to his vanity or to his affection for his own person.” To this day it remains exceptional for families to retain great wealth for more than three generations, if not always for the reason Smith suggested.

Will today's new rich once again dissipate their wealth? The temptation to spend may be as strong as ever, but the opportunities for conserving, or even increasing, wealth through astute investment strategies have multiplied. The rich can invest in hedge funds to minimise their exposure to a sharp decline in the stockmarket; they can earn higher returns on their money by investing in venture capital and private equity funds, which are not available to the less well-off; and they can minimise their tax liability by using offshore financial centres, carefully designed trusts or special insurance policies.

“Getting this right is a huge challenge for the new rich, because the complexity of wealth management increases geometrically as they get richer,” says Maria Elena Lagomasino, head of J.P. Morgan's private bank. But they can also buy better wealth-management advice and administration than ever before, though choosing the right adviser requires great care.

“Who is rich?”, asked Benjamin Franklin, one of the wealthiest of America's founding fathers. “He who is content. Who is that? Nobody.” Money does not gurarantee happiness, and the rich have their share of troubles, as well as some extra ones that arise directly from their wealth—though that is not to suggest for a moment that they would rather not be wealthy, nor that they deserve any special sympathy. The Silicon Valley affliction known as “affluenza” or “sudden-wealth syndrome” has been widely reported. Rich people of all kinds are increasingly worried that their wealth will demotivate their children and make them selfish and unappreciative of the value of money.

In a famous essay entitled “Wealth”, published in 1889, Andrew Carnegie, then one of America's richest men, claimed that “The problem of our age is the proper administration of wealth, so that the ties of brotherhood may still bind together the rich and poor in harmonious relationship.” Carnegie believed that the inequality between rich and poor resulted from the pursuit of maximum economic efficiency. In a free-market system, winners did very well and the rest did not. As this generated more wealth than any alternative system, “much better this great irregularity than universal squalor.” However, to prevent the rise of rival philosophies such as socialism, the accumulators of great wealth should use it “for the common good” by spending it “for public purposes, from which the masses reap the principal benefit.” He also argued that wealthy parents should not leave much to their children, and that the state should impose death duties in “condemnation of the selfish millionaire's unworthy life”.

Does any of this still hold true more than a century later? Broadly speaking, in the developed world the recent growth in inequality does reflect greater economic efficiency, though not a perfect meritocracy. Bill Gates, Larry Ellison, George Soros and Warren Buffett have joined the ranks of the world's richest men on merit—which is not the same as saying they became rich by being good. And as the rich have got much richer, the large majority of people in developed countries have also got quite a bit richer. Wealth seems to be trickling down from those at the top.

Not so in some less developed corners of the world. Russia's new rich have become wealthy as the majority of the people have got poorer. According to Hernando de Soto, a Peruvian economist and author of “The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else”, many of the rich in the developing world have prospered through gaining favours from the state. “The rich of the West were winners in a competitive system, the rich of the developing world won a competition for political favours.” That is why the growing wealth of a developing-world elite should not be regarded as a precursor for broader prosperity on the American model, says Mr de Soto. He fears that unless capitalism is made truly meritocratic and inclusive, there may be a revolutionary backlash against it in some poorer countries.

Certainly the public seems far more tolerant of the rich in countries where capitalism is considered to be broadly fair. In parts of the developing world, the rich constantly fear attack. “Sao Paolo has the highest number of helicopters in the world because the rich don't feel it is safe to drive,” says Victor Siaulys, boss of Ache, a Brazilian pharmaceutical firm, and a campaigner for change. “My family all drive armoured cars. It's no good.”

And what of Carnegie's belief that the best way to help the masses and defeat non-capitalist political and economic models is private philanthropy? In America philanthropy plays a crucial part in financing the country's hospitals, universities, libraries, museums and concert halls, whereas in Europe and Japan the rich are taxed more heavily and therefore expect such institutions and facilities to be provided by the state. In Latin America, meeting social needs has often been seen as a job for the Catholic Church.

Barring a prolonged economic crisis and stockmarket collapse, the next 20 years are likely to see a huge increase in American philanthropy. Not all of this will be worthwhile or well done. But it will engage many of America's most creative entrepreneurs in trying to meet the country's social needs. A great deal of money will go to help the less well-off, particularly in health and education. And the rich in other countries may well follow suit.

But in order to give away lots of money, would-be philanthropists first have to make it. The next section will take a closer look at how the new rich got so wealthy.