Miguel Ángel Muñoz Luna. Professor. IE Business School
10 January 2012
Finding out that 43% of the world’s wealth is in the hands of 1% of the population is bad enough, but the fact that this wealth level is rising in spite of the crisis makes it even more unacceptable.
We are all aware of the inequality affecting the distribution of wealth in the world. The fact that 50% of the adult population accounts for 90% of the wealth in the world comes as no surprise. The fact that 10% of the population possesses 83% of the wealth is a little more surprising. But the fact that 43% of the world´s wealth is in the hands of only 1% of the population is not easy to accept and probably very unfair. These are some of the conclusions drawn from the report published by the Credit Suisse Research Institute under the title of Global Wealth Report in October 2010.
Unlike others published by a variety of specialist organisations, the report focuses on the distribution of what is referred to as global wealth, covering the entire population spectrum from the base of the so-called ´wealth pyramid´ to its apex, where we find the megarich, such as Carlos Slim, Bill Gates and Warren Buffett. As another distinguishing feature, the study takes into account not only financial assets, but also non-financial assets, which include ownership of the first home as a family’s most important asset, especially in countries with lower wealth levels. This is the case of India, where at least 80% of the family´s net worth often corresponds to the value of the home and the land off which they live. The report also takes into account debt levels when determining net worth.
In the first decade of this century, on which the Credit Suisse report focuses, the so-called ´adult population´ grew from 3,600 to 4,400 million people. This figure is fundamental and is the result of the spectacular 142% growth of the world population in the second half of the 20th century. In said decade, total wealth increased by 72%. However, as a result of the population increase, wealth per adult stands at 43% if it is measured in US dollars and 24% if the effect of the depreciation of the dollar over this period is deducted. Accordingly, the average net worth per adult is calculated as $43,800, after deducting a debt level of $8,400 per person. This level of wealth is distributed 50-50 between financial and non-financial assets.
The geographical distribution of wealth is logically concentrated in the areas with the highest levels of economic development. Europe accounts for 32% of the world´s wealth. North America accounts for 31% and the Pacific basin (excluding India and China) accounts for 22%. The remaining 15% is divided between China (8%), Latin America (4%), India (2%) and Africa (1%), which together account for 50% of the population. In terms of countries, the top places on the ranking correspond to Switzerland, Norway, Australia, Singapore and France as the five countries with the highest level of individual wealth, in excess of $250,000 per adult. On the second level, above $200,000, we have the United States, Japan, United Kingdom and Canada. The countries with the highest increase in wealth in the last decade include Russia and Indonesia, where levels have grown fivefold. Special mention must also be made of countries such as China, Australia, New Zealand, Poland and Romania, whose individual wealth has grown threefold. At the other end, we have countries such as Argentina and Iceland, where wealth levels have fallen by 30%.
The distribution of wealth in each geographical area differs. On a global level, around 70% of the population has a net worth below $10,000. In the cases of India and Africa, this percentage is higher than 90%. However, in North America this segment is below 30% of the population and in Europe, it is 40%. At the other end of the scale, where individuals have a net worth of more than $100,000, the world figure does not reach 10%. However, this population segment in North America is above 30% and, in Europe, it is around 25%. In terms of individuals with a net worth of more than one million dollars, 41% of them are in the United States, 10% in Japan, 9% in France, 6% in Italy, 5% in the United Kingdom, 5% in Germany, 4% in Canada, 3% in China and 3% in Australia.
It is interesting to note that, despite the three important crises that have affected the markets in the last decade, global wealth has increased notably. Today´s challenge consists of making sure that the debt crisis affecting us at the moment does not hinder the positive evolution of wealth and that it contributes to a more equal distribution of it.