Global wealth highest in history despite downturn
Despite the financial crisis of 2008 and the difficulties in the Eurozone, global wealth has more than doubled since 2000, reaching over £150 trillion, according to the latest global wealth report from Credit Suisse.
Economic growth in developing countries and rising populations have played a significant part in the figures. Aggregate total wealth rocketed past the pre-crisis peak in 2010 and has been climbing higher ever since. Average wealth per adult has reached £32,167 after a rise of 4.9 per cent during the year to mid-2013.
Change in household wealth by region 2012-2013:
|Region||Total Wealth 2013 (USD billion)||Percentage Change 2012-13|
|Asia-Pacific (including China and India)||73,879||-3.7|
The countries experiencing the largest wealth gains of over £620bn included the US, Japan, China, Germany and France. The UK came sixth in total wealth gains with over £125bn.
A large part of the gains made in the US were due to rising house prices and a strengthening equity market driving up the Dow Jones. The US increased the global wealth stock by £5.05 trillion, a 54 per cent increase since the downturn of 2008.
Switzerland remains the richest nation in the world, on average, with wealth rising to £319,805 per adult. Australia, Norway and Luxembourg all saw an increase in wealth per adult and retained their respective second, third and fourth places from 2012.
In terms of global distribution, once debts have been subtracted, £2493 in assets will place an adult in the top half of the worlds wealthiest citizens. Wealth of £46,000 is required for an adult to reach the top 10 per cent of global wealth holders, while personal wealth of £469,422 places an adult in the top one per cent.
The report forecasts that wealth will rise by close to 40 per cent in the next five years with emerging markets to increase their share of global wealth to 23 per cent by 2018. China is expected to see household wealth dramatically, growing by 10.1 per cent over the next five years.
Just 8.4% of all the 5bn adults in the world own 83.4% of all household wealth (that’s property and financial assets, like stocks, shares and cash in the bank). About 393 million people have net worth (that’s wealth after all debt is accounted for) of over $100,000, that’s 10% own 86% of all household wealth! But $100,000 may not seem that much, if you own a house in any G7 country without any mortgage. So many millions in the UK or the US are in the top 10% of global wealth holders. This shows just how little two-thirds of adults in the world have – under $10,000 of net wealth each and billions have nothing at all.
This is not annual income but just wealth – in other words, 3.2bn adults own virtually nothing at all. At the other end of the spectrum, just 32m people own $98trn in wealth or 41% of all household wealth or more than $1m each. And just 98,700 people with ‘ultra-high net worth’ have more than $50 million each and of these 33,900 are worth over $100 million each. Half of these super-rich live in the US.
All this is in a new global wealth report published Credit Suisse Bank and authored by Professors Anthony Shorrocks and Jim Davies – see the report here (global wealth report and the database wealth database). The professors find that global wealth has reached a new all-time high of $241 trillion, up 4.9% since last year, with the US accounting for most of the rise. Average wealth hit a new peak of $51,600 per adult but the distribution of that wealth is wildly unequal.
There is nothing new in this report in one sense because Tony Shorrocks previously authored a UN report back in 2010 (see my post, https://thenextrecession.wordpress.com/2010/01/10/20/) that found virtually the same wealth inequality and Branko Milanovic also found similar figures in various World Bank studies. But what is also interesting is that Professor Shorrocks finds that there is little or no social mobility between rich and poor over generations – 87% of people stay rich or poor, hardly moving up or down the wealth pyramid.
Moreover, according to the Credit Suisse report, the ‘American dream’ or the British idea of ‘rags to riches’ is a myth. Two-thirds of American adults are in the same wealth decile as their parents were. Even globally, “while some individuals do alternate wildly between rags and riches, many stay for their whole lifetime in the same wealth neighborhood for people of their age. Dividing the population into wealth quintiles, about half the population remains in the same quintile after ten years and we estimate that at least a third would be in the same quintile after thirty years.”
Global wealth is projected to rise by nearly 40% over the next five years, reaching $334 trillion by 2018. Emerging markets will be responsible for 29% of the growth, although they account for just 21% of current wealth, while China will account for nearly 50% of the increase in emerging economies’ wealth. Wealth will primarily be driven by growth in the middle segment, but the number of millionaires will also grow markedly over the next five years.
All class societies have generated extremes of inequality in wealth and income. That is the point of a rich elite (whether feudal landlords, Asiatic warlords, Incan and Egyptian religious castes, Roman slave owners etc) usurping control of the surplus produced by labour. But past class societies considered that normal and ‘god-given’. Capitalism on the other hand talks about free markets, equal exchange and equality of opportunity. But the reality is no different from previous class societies.