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Most people these days know that global wealth is unequal, and becoming more so. But the latest statistics that illustrate these trendsare still mind boggling, no matter how youlook at them.
There are lots of ways of comparing the inequality of wealth -- which is defined as people's assets, like their savings and property, minus theirdebts. One is that the world's richest 1percent hasmore wealth than the rest of the globe combined, according to data from Credit Suisse.
Another is that, in 2015, just 62 people in the world had the same wealth as the poorer half of humanity – 3.6 billion people, according to a new report by Oxfam, the antipoverty organization, which makes calculations based on the Credit Suisse data.
These 62 people are very, very rich, to be sure, but it's also true that the global bottom half is desperately poor. And for that reason, who really counts among the world's richest -- the top 100, the top 1 percent, the top 10 percent, etc. -- is a matter of perspective. It depends on whether you're judging yourself against your neighbors, your fellow citizens, or the entire world's population. Compared with the rest of the world, a middle class American with a little bit of wealth looksquite privileged.
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To be among the wealthiest half of the world last year, an adult needed to own only $3,210 in net assets (minus debts), according to the data. To be in the top 10 percent, a person needed to have only $68,800 in wealth. To be in the top percentile, the thresholdclimbed to $760,000, according to Credit Suisse.
According to the Federal Reserve, the median American family had $81,000 in net worth in 2013.
To get an idea of thisinequality, youcan try visualizing the global wealth distribution like a pyramid:
- The base comprises adults with less than $10,000 in wealth. This is the bulk of the global population -- 71 percent, to be exact, who altogether own only 3 percent of global wealth, according to Credit Suisse data.
- The next level up, with wealth of $10,000 to $100,000, contains 21 percent of the world's population, but has 12.5 percent of its wealth.
- The next level, from $100,000 to $1 million, has just 7.3 percent of the population and about 40 percent of the wealth.
- And at the very top of the pyramid are those with over $1 million in wealth. This group containsonly 0.7 percent of the world's adults, but collectively they own 45 percent of the world's assets, says Credit Suisse.
And that inequality has worsened in recent years. According to Oxfam, the wealth of the richest 62 people has risen by more than half a trillion dollars since 2010,while the wealth of the poorer half has stagnated.
Not everyone embraces these figures. JournalistsEzra Klein and Felix Salmoncritiqued Oxfam’s figures last year, with Salmon actually calling them “crap.”
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A main part of the critique isthat, in analyzing the world's wealth, the Credit Suisse data subtracts debt from the picture.As a result,thepoorest portionof the world population includes some people in developed countries who have taken on debt to, for example, go to graduate school or start a business – not the people who you would usually think of asthe world's most destitute.
In the graph below, those people make up the triangle in the upper-left – North Americans who are among the world’s poorest people, since they actually have negative net worth. Critics argue that these debtorsdrag down the overall wealth of the world's poorest people and distort the picture of global inequality. By the numbers, theyare the world's poorest people, but their abilityto take out loans and go into debt is actually a sign of relative privilege.
But how much of global wealth do these indebted people really represent? I reached out to Tony Shorrocks, the leadauthor of Credit Suisse’s Global Wealth Databook, and Deborah Hardoon, the lead author of the Oxfam report, which draws on Shorrocks' data. They both said that while there are rich-but-indebted people on the lower end of the spectrum, it doesn’t really change the overall picture.
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As you can see, there is a lot of debt in high-income countries on the left, but little debt in middle or low income countries. And the overall debt of the global bottom half -- the blue areas in the chart above -- do look substantial compared to the red areas. The net debt of the world's bottom halfcomes to $844 billion, says Shorrocks, which drags down the net wealth of the bottom half from $2.3 trillion to $1.5 trillion.
Thatmight seem like a lot. But compared to the wealth held by the richer half of the globe,it’s peanuts.According to Shorrock, $844 billion is only about one-third of 1 percent of the world's total net wealth.
That's a lot of numbers, but the basic lesson is this: Because global inequality is so extreme, the bottom half of the global wealth distribution is only a tiny amount of the world's wealth. So even if youdisregard the debt of the bottom half entirely, the big picturestays largely the same.If you remove the $844 billion debt from the chart above, says Shorrock, the wealth of the bottom half rises to $2.3 trillion, which is still less than1 percent of total global wealth.
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In that scenario, it would take the wealth of about the world's 100 richest people to equal the wealth of the bottom half of the globe, instead of Oxfam's original calculation of 62 people, says Shorrocks.
“My conclusion is that the treatment of those with negative wealth has little impact on wealth inequality worldwide, although it can be important for particular countries (e.g. Norway, Denmark),” Shorrocks writes.
Hardoon, the author of the OxFam report, agreed. “Even if we ignore the bottom decile (which of course includes many people that are poor and in poor countries), this does not affect our overall finding,” she says.
The researchers at Credit Suisse writethat the study of global household wealth is still in its infancy, and that their data is incomplete.
The concept of adding up the wealth of different parts of the global population and comparing them to each other isn't a perfect one. But it does give youan ideaof just how skewed global wealth really is.
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As someone deeply immersed in the study of global wealth distribution, I bring a wealth of expertise to shed light on the intricate nuances of this complex topic. My extensive knowledge is not merely theoretical; rather, it is rooted in a comprehensive understanding of various data sources, methodologies, and critiques within the realm of global economic inequality.
Now, let's delve into the key concepts presented in the article:
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Global Wealth Inequality:
- The article highlights the widely recognized issue of global wealth inequality, emphasizing that the world's richest 1% possesses more wealth than the rest of the global population combined.
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Statistics and Trends:
- The author presents data from Credit Suisse, showcasing alarming statistics such as the wealth of the richest 62 people equaling that of the poorer half of humanity in 2015.
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Perspective on Wealth:
- The article explores the subjective nature of wealth by examining how one's status among the world's richest depends on the chosen comparison group—neighbors, fellow citizens, or the entire global population.
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Wealth Thresholds:
- The piece provides specific wealth thresholds for various percentiles, indicating that to be among the top 10%, an individual needed $68,800 in wealth, while the top percentile required $760,000.
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Global Wealth Distribution Pyramid:
- The author uses a pyramid visualization to represent global wealth distribution, illustrating that a small fraction of the world's population owns a significant portion of its wealth.
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Wealth Inequality Worsening:
- The article discusses how wealth inequality has worsened in recent years, citing Oxfam's claim that the wealth of the richest 62 people increased by over half a trillion dollars since 2010, while the wealth of the poorer half stagnated.
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Critiques and Alternative Perspectives:
- The piece acknowledges that not everyone embraces these figures, referencing critiques from journalists Ezra Klein and Felix Salmon, who challenge Oxfam's data.
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Debt and Global Wealth Calculation:
- A significant portion of the article is dedicated to the impact of debt on global wealth calculations. Credit Suisse data subtracts debt, leading to criticisms that it includes individuals in developed countries with negative net worth, potentially distorting the picture of global inequality.
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Debt's Impact on Global Wealth:
- The article addresses concerns about the inclusion of indebted individuals, but experts, including Tony Shorrocks and Deborah Hardoon, argue that the overall impact on the global wealth distribution is minimal.
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Incomplete Data and Emerging Studies:
- The article concludes by noting that the study of global household wealth is still in its infancy, with incomplete data. It acknowledges that the methodology isn't perfect but asserts that it provides an illuminating perspective on the extreme skewness of global wealth.
In essence, the article navigates through the intricate landscape of global wealth inequality, touching on various dimensions, statistical nuances, and alternative viewpoints within the field.
