The top 1% of the adult wealth holders in the world own 51% of all global wealth, while the bottom half of adults own only 1%. Indeed, the top 10% of adults own 89% of all the world’s wealth! This is the new figure reached for 2016 by the annual Credit Suisse global wealth report. Every year, Credit Suisse presents this report, authored by Professor Tony Shorrocks, James Davies and Rodrigo Lluberas, who used to do it for the UN. I report on the results each year and it is usually the one of the most popular posts I write.
The last time that I discussed the Credit Suisse results, the top 1% had 48% of global wealth. So, in the last year and a half, global inequality on this measure has risen yet again. The shares of the top 1% and top 10% in world wealth fell between 2000 and 2007: for instance, the share of the top percentile declined from 50% to 46%. However, the trend reversed after the financial crisis and the top shares have returned to the levels observed at the start of the century.
The Credit Suisse researchers reckon these changes mainly reflect the relative importance of financial assets in the household portfolio, which have risen in value since 2008, pushing up the wealth of many of the richest countries, and of many of the richest people, around the world. Although the share of financial assets fell this year, the shares of the top wealth groups continued to edge upwards. At the other end of the global pyramid of wealth, the bottom half of adults collectively own less than 1% of total wealth.
The main reason for this huge inequality is that there are so many poor (in wealth) people in the world. You see, it does not take that much to get into the top 1% of wealth holders. Once debts have been subtracted, a person needs only $3,650 to be among the wealthiest half of the world’s citizens. However, about $77,000 is required to be a member of the top 10% of global wealth holders and $798,000 to belong to the top 1%. So if you own a home in any major city in the rich North on your own and without a mortgage, you are part of the top 1%. Do you feel rich if you do? This just shows how poor the vast majority of people in the world are: with no property, no cash and certainly no stocks and bonds!
The research shows that 3.5 billion individuals – 73% of all adults in the world – have wealth below $10,000 in 2016. A further 900 million adults (19% of the global population) fall in the $10,000–100,000 range. The poor in wealth are concentrated in India and Africa and the poorer Asian nations, with 73% of those in the bottom wealth holders. But there are also significant numbers of people who are wealth poor by global standards in North America and Europe, with 9% of North Americans, most with negative net worth, in the global bottom quintile and 34% of Europeans in the global bottom half. These people not only have no wealth, they are in debt.
And who is getting better off? Well, it is not Indians. India has just 3.1% of ‘middle-class’ people globally (wealth of $10-100k) and that share has hardly changed. In contrast, China accounts for a huge 33% of middle wealth people, ten times that of India – and that proportion has doubled since 2000. What this tells you is that China’s unprecedented economic expansion has taken hundreds of millions out of poverty, even if inequality of wealth has risen.
Indeed, the number of millionaires, which fell in 2008, showed a fast recovery after the financial crisis and is now more than double its 2000 figure. There are now 32.9m millionaires globally i.e. adults with more than $1m in property or savings after debt. Indeed, there are only 140,000 people in the whole world who have more than $50m in wealth. And there are now over 2000 billionaires – these are the people that really own the world.
Assuming no change in global wealth inequality, another 945 billionaires are expected to appear in the next five years, raising the total number of billionaires to nearly 3,000. More than 300 of the new billionaires will be from North America. China is projected to add more billionaires than all of Europe combined, pushing the total from China above 420.
Credit Suisse estimates that total global wealth is now $334trn, or about four times annual world GDP. After the turn of the century, there was at first a rapid rise in global wealth, with the fastest growth in China, India, and other emerging economies, which accounted for 25% of the rise in wealth, although they owned only 12% of world wealth in the year 2000. Global wealth declined in 2008, but has trended slowly upwards since, at a significantly lower rate than before the financial crisis. In fact, wealth has fallen in dollar terms in all regions other than North America, Asia-Pacific, and China since 2010. On a per-adult basis, wealth has barely grown at all and median wealth has fallen each year since 2010. The average adult is getting poorer.
In the past 12 months, global wealth has risen by 1.4% and has barely kept pace with population growth. As a result, in 2016, mean wealth per adult was unchanged for the first time since 2008, at approximately 52,800 dollars. So the world’s population as a whole has not got wealthier in the last year and a half, while inequality has risen.
For more on inequality of wealth and income and what it means, see my Essays on Inequality.