2007-11-30 05:31:52
By Helen Williamson
BBC Money Programme
Britain has more rich people than ever before, and it is not just footballers
like David Beckham and Wayne Rooney.
With a global economy, successful people in all sorts of professions can now
command global-scale pay packets.
The mega-successful at the top of their profession are taking advantage of a
phenomenon known as the "Superstar Premium".
Advances in multi-media technology mean that today's superstars operate in a
global marketplace.
By being the best in their field, they attract a disproportionate amount of
business compared to less successful competitors.
Global exposure
Economist Sherwin Rosen developed the idea of the Superstar Premium in the
early 1980's to explain why some musicians were earning so much money.
Before recording technology, even the most popular artists had their earnings
limited by the number of people who could hear them perform live.
When I was about seven, I said to my mother 'how much money do I have to earn
to be able to eat caviar every day?'
Vanessa Mae
But with the advent of records, CDs and now the internet, the most popular
artists can reach a much wider audience, and therefore earn much more money
from doing the same amount of work.
Vanessa-Mae is the world's most popular violinist, but unlike violinists 50
years ago, she has a global fan base.
She has been able to take advantage of the Superstar Premium and is aware how
the life of a musician has changed.
"The exposure that you get around the world is only thanks to technology," she
says.
"If I had to flog my albums 50 years ago by taking a boat, I mean, it would
have taken me five years to promote one album."
It has allowed her to sell more than 10 million records world-wide and has
subsidised the super-rich lifestyle she dreamed of as a child.
"When I was about seven, I said to my mother 'how much money do I have to earn
to be able to eat caviar every day?'"
Television means that today's top footballers are also economic superstars.
When England captain Bobby Moore lifted the World Cup in 1966 he earned 100 a
week.
Today's England captain, John Terry, holds the same position, but reportedly
earns over 130,000 a week.
As economist Prof Danny Quah, from the London School of Economics points out
the English Premier League is "a global franchise".
"It is watched by half a billion people in the world, more people than we've
lifted out of poverty in the last 20 years," he says.
And the top players don't just get huge salaries for their performance on the
pitch. Their famous faces are found on advertising billboards across the globe
- adding even more to their incomes.
David Beckham earned over 11m from endorsements alone last year.
It is not just the famous who are affected by the superstar premium.
Demand for luxury
Technology has enabled humble bookies to become financial superstars.
By setting up an online betting agency, the founders of Betfair serve punters
around the world and co-founder Edward Wray is aware of the superstar premium:
"It's very important for us to be number one," he says. "I mean, ours is a
model that in many ways the bigger you are, the more efficient the model
becomes."
And because they are number one they pull in the most punters - earning Wray
and his partner Andrew Black superstar fortunes.
With personal fortunes of tens and sometimes hundreds of millions of pounds,
economic superstars have plenty of cash to splash.
Superstars are boosting the luxury goods market, with worldwide sales in the
sector topping 75bn last year.
"Aston Martin has gone from a cottage industry to a global one. We've gone from
selling 200 cars a year to 7,000" says Craig Davison, from Broughton's Aston
Martin in Cheltenham.
Similarly, private jet firm NetJets, whose cheapest deal is 85,000 for 25
hours flying time, has seen its business expand rapidly.
"Five years ago we had 18 aircraft and 89 customers, whereas today we have 135
aircraft and 1500 customers," says its marketing executive Robert Dranitzke.
"If you compare us to the airlines, we have the 7th largest fleet in Europe and
we're growing faster than anybody else."
'Trickling down?'
But what is the impact of all this wealth on the rest of us?
Not all of these fortunes are being spent or invested in Britain, says Peter
Charrington, head of Citi's UK private banking arm.
"Although these are people who will clearly have significant interests here in
the UK and invest here in the UK, they're also looking to place their money
around the world," he says.
Mr Charrington says the super-rich are looking for opportunities in China,
India and Latin America "whether that be in private equity or hedge fund
businesses".
In the US, 1% of the population control almost 40% of wealth
"That's particularly important to our types of clients."
There are some who think the Superstar Premium does benefit society thanks to
the "trickle down effect".
"Big spenders will have to spend their money on the things that the rest of
society provides," says Professor Quah.
"So almost mechanically, the marketplace disseminates that wealth."
So whether we love them or hate them, the fortunes of the superstars are only
set to increase as the opportunities of the global marketplace grow and grow.