What you can buy for a trillion dollars

Two little items from the last few days' papers. One is that Bill Gates, head of Microsoft, looks like becoming the world's first trillionaire - a personal fortune of more than $1,000 billion - in the next seven years, or so calculates The New York Times. The other, from the Mirror, reports that there are now 130,000 sterling millionaires in Britain and that there will be 200,000 by 2000.

You can quarrel with the NYT sums, because they assume that Microsoft shares will carry on rising at the present rate of 58 per cent a year, which they won't. But the message still carries weight. Mr Gates, at present worth $42 billion, is just the most extreme example of the way economic growth in America is creating personal wealth on a scale that the world has not known for two or three generations. On a much smaller scale the same process is taking place here.

With wealth comes power. In many ways the world, and particularly the US, is reverting to the sort of balance of power that existed before the First World War. Then, individual governments were relatively less important. There was a global financial market so that, like now, they had little control over exchange rates or interest rates. Private sector money, rather than state funds, was used to finance big infrastructural projects, as is increasingly happening at the moment. And the most vibrant commercial organisations, the booming companies of the day, tended to be run by powerful individuals rather than salaried managers, again rather as seems to be happening today.

So the shift of power is not just from public sector to private sector; within the private sector there is a shift from bureaucratically managed corporations to ones run by owner-managers. The new heroes are charismatic businessmen, not corporate suits.

If a government wants something done, it find itself increasingly turning to these people. Look at the cheer that went up when Bill Gates backed the plan to set up a research centre in Cambridge; George Soros has been supporting the rebuilding of eastern Europe; here we tend to look to Richard Branson whenever a businessman is needed to fix things. The reason is that the self-made billionaire can operate with a freedom that is denied to both governments and shareholder-owned companies. Governments are answerable to taxpayers for every cent they spend; managers are answerable to shareholders. The billionaires are answerable only to themselves - they are free to spend their money in the most conspicuous way possible.

And they do. Bill Gates does so by building the largest private palace in America since the war. The Fayed family do so by using the second largest yacht in private ownership to pull triple-A crumpet.

Here, rich human beings are behaving exactly as they did a century ago. I happened a couple of days ago to pick up Thorstein Veblen's economic classic The Theory of the Leisure Class, published in 1899, in which he invented the expression "conspicuous consumption". He was writing at the time when enormous wealth had been accumulated by a few American families - the Vanderbilts, the Harrimans, the Goulds, the banker J P Morgan and a generation later the oil magnate J D Rockefeller. These families were determined to display that wealth in the most conspicuous way possible. It was not good enough to spend money to be comfortable; money had to be wasted and the more wasteful the spending, the greater the social status conferred on the spender.

Veblen notes many aspects of late-nineteenth century consumption which are familiar today. Some of his conspicuous leisure activities, such as owning racehorses and yachts, live on; though now there are new ones such as heli-skiing or, in the case of Mr Branson, going round the world in a balloon. Veblen also remarks on the preference for a hand-crafted product rather than a machine-made one, even though the latter does the job just as well. This still goes on, for the rich still buy expensive watches. A Swatch tells the time just as accurately as a Rolex. And no- one gets mugged for a Swatch.

Other aspects of conspicuous consumption have changed slightly in form. Thus the trophy wives of Veblen's era had to wear uncomfortable clothes to maintain their status, whereas now they have to put in uncomfortable hours in the gym to maintain their figures. And the personal servants of his day were footmen, butlers and maids, whereas now these would be personal secretaries, publicists and bodyguards.

All this might seem a little depressing, or at least it is until you consider the alternative. Two or three generations of peaceful wealth generation will enable a large number of people to have enough money to live well and still have plenty to spare. What ended that period last time was the First World War and no-one should wish that on the world again. If global peace continues, there will be more rich people around, bringing with them values very similar to our Victorian forebears.

Besides, the values of Bill Gates, George Soros or Richard Branson give a fizz to the world which it would not otherwise have. (I suppose even Dodi gives a certain something too.) That fizz makes things happen in a way impossible in a world led by politicians, bureaucrats or salaried managers.

To see this different quality, look at the way global telecommunications are being revolutionised at the moment. This is the most important single change happening in the world economy. The driving force is not governments, which have tended to stifle competition by regulation and only recently have learned to let the market determine what should happen. Nor is the driver the old telephone companies, which have fought to maintain their mono-polies as long as possible. Nor is it big computer companies.

No. The drive comes from individuals who have broken the old rules. Bill Gates is at the apex of that pyramid, but there are many, many, more on the ladder behind. The new industries of the next century will be created by new money, and will in turn create new money. The vigour will come from some of those 200,000 British millionaires, and from the vastly greater number of new millionaires being created in countries like India and the tiger economies of East Asia.

We are used to living in a world run by governments and corporations. They will of course continue, but they will be less important. In the future the world will be not be changed by them. It will be changed by rich people, bringing with them their values, good and bad; and the changes that they make will generate yet more rich people.

Concentration of power in a few hands of course brings dangers, though it is worth remembering that the American fortunes of the last century were generated - and spent - within the world's most assuredly democratic nation. It is worth remembering too (though Veblen did not make this point) that much of the wealth was redistributed by conspicuous charity; another way of achieving social status. Still, a lot of the new wealth is going to be wasted - expect more conspicuous consumption in the years ahead.