Granted, displaced millionaires get little if any sympathy, but no country gains by losing the talent and capital of its wealthiest residents, particularly not emerging countries like India. Stunningly, India in 2017 suffered a net loss of 7,000 members, or 2 percent, of its millionaire population. That exodus came despite global optimism about India’s growth prospects and matched the flight from the stagnant and sanction-battered economy of Russia, which also lost 2 percent of its millionaire population.
This unusual flight from India’s high-growth economy may be driven by the elite’s growing concerns about an official anticorruption drive and “tax terrorism” — unlimited authority given to tax officials to target the rich. Under Prime Minister Narendra Modi, the government has lately begun catering to the nation’s deep socialist streak, wielding state power to flush out and tax hidden pockets of wealth.
In the worst cases, bouts of capital flight can gain momentum until the value of the currency collapses, plunging the nation into crisis. Balance of payments records show that 10 of the last 12 major currency crises, dating back to the Mexican peso meltdown of 1994, began when residents started sending money abroad, which was typically two years before the currency collapsed. Often politicians blamed “evil” and “immoral” foreign speculators for these crises, but it was the locals who first saw trouble coming.
Right now, this forensic accounting offers clear evidence of looming financial difficulty in only one major country: Turkey. Starting early last year, affluent Turks began effectively moving large sums of money out of the country by exchanging their lira bank deposits for dollars and euros, while foreigners continued to buy Turkish assets.
The 12 percent decline in Turkey’s millionaire population last year was by far the largest of any major economy, and second only to the 16 percent decline in Venezuela, with its small, hyperinflationary economy. Turkey’s millionaires appear to be fleeing both deteriorating financial conditions marked by very high inflation, and President Recep Tayyip Erdogan’s crackdown on his critics, including those in business.
Millionaire migrations can be a positive sign for a nation’s economy. The losses for India, Russia and Turkey were gains for havens like Canada and Australia, joined lately by the United Arab Emirates. Owing largely to the stability and glitter of the most famous emirate, Dubai, the United Arab Emirates in 2017 had a net inflow of 5,000 millionaires, increasing the size of its affluent population by 6 percent, the largest gain in the world. Britain was among the millionaire havens until 2016, but may continue losing ground until it can resolve the uncertainties raised by Brexit.