10 Startling Facts
About Global Wealth Inequality
By Ezra Klein - January 22, 2014
1. On Monday, Oxfam published a startling report showing that the richest 85 people in the world are worth more than the poorest 3.5 billion.
2. The numbers Oxfam is using come from Credit Suisse's 2013 Global Wealth Report. There are a lot of amazing numbers in that report.
3. For instance, Switzerland leads in average wealth, with each adult worth, on average, $513,000. Australia is in second place, at $403,000. The U.S. is in the $250,000-300,000 range.
4. But that's average wealth — which is to say, that number spikes if Bill Gates moves into your country. Median wealth is a more interesting measure. There, Australia leads with $220,000. They're followed by Luxembourg, Belgium, France, Italy, the UK, and Japan. The U.S. falls way back on this measure, with a median wealth of just $45,000.
5. Think about that for a minute: Most Americans are worth less than most Italians, Belgians and Japanese.
6. Some researchers think Credit Suisse overestimates median wealth in the U.S. Other estimates put us in 27th place.
7. The tremendous difference between average wealth and median wealth is the country's level of wealth inequality at work.
8. Global wealth inequality is even more startling, of course. After accounting for debts, assets of more than $4,000 put a person in the wealthiest half of world citizens. Assets of more than $75,000 put them in the top 10 percent. Assets of more than $753,000 put them in the top 1 percent.
9. This leads to the most startling figure in the report: "Our estimates suggest that the lower half of the global population possesses barely 1% of global wealth, while the richest 10% of adults own 86% of all wealth, and the top 1% account for 46% of the total. "
10. There's a lot of turnover amidst the world's top billionaires. Of the 100 top billionaires in 2001, only 37 remained on the list in 2013.
3. For instance, Switzerland leads in average wealth, with each adult worth, on average, $513,000. Australia is in second place, at $403,000. The U.S. is in the $250,000-300,000 range.
4. But that's average wealth — which is to say, that number spikes if Bill Gates moves into your country. Median wealth is a more interesting measure. There, Australia leads with $220,000. They're followed by Luxembourg, Belgium, France, Italy, the UK, and Japan. The U.S. falls way back on this measure, with a median wealth of just $45,000.
5. Think about that for a minute: Most Americans are worth less than most Italians, Belgians and Japanese.
6. Some researchers think Credit Suisse overestimates median wealth in the U.S. Other estimates put us in 27th place.
7. The tremendous difference between average wealth and median wealth is the country's level of wealth inequality at work.
8. Global wealth inequality is even more startling, of course. After accounting for debts, assets of more than $4,000 put a person in the wealthiest half of world citizens. Assets of more than $75,000 put them in the top 10 percent. Assets of more than $753,000 put them in the top 1 percent.
9. This leads to the most startling figure in the report: "Our estimates suggest that the lower half of the global population possesses barely 1% of global wealth, while the richest 10% of adults own 86% of all wealth, and the top 1% account for 46% of the total. "
10. There's a lot of turnover amidst the world's top billionaires. Of the 100 top billionaires in 2001, only 37 remained on the list in 2013.
Ezra Klein is
the editor of Wonkblog and a columnist at the Washington Post, as well
as a contributor to MSNBC and Bloomberg. His work focuses on domestic
and economic policy making, as well as the political system that’s
constantly screwing it up. He really likes graphs, and is on Twitter, Google+ and Facebook.
The statistic on median wealth is the most revealing. First, the US is obsessed with GDP. GDP only says how much we make, and doesn't account for the wealth factor. It can lead to bad policy. For example, we theoretically could increase GDP by 2% entirely through automation and cutting employment, are the country's PEOPLE better off? No.
So it's better to look at wealth per person. The median cut off is better than average. It shows, that the US is not all that when you want to talk about rich countries, certainly if you are talking about spreading it throughout. Interestingly, Australia is looking at more indicators, including wealth, to see how well the country is doing. If we looked at that median wealth number, we could come up with better private sector and public sector policy.
I will add though, we need to add a PPP twist to the number. The US may be able to buy more with less money. But that's no excuse not to pay attention to the median wealth number.
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x:
"They're followed by Luxembourg, Belgium, France, Italy, the UK, and Japan. The U.S. falls way back on this measure, with a median wealth of just $45,000."
Given the level of debt in France, Italy and Japan, whatever they are doing, I'm not sure I'd want to copy it. Second, whatever the impact of inequality, I suspect the US has a larger share of its population who are first generation immigrants and are likely to cluster at the bottom of the income scale.
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Z Responds:
U.S. level of debt is 72% of GDP. Luxembourg is 18%. Belgium, France and UK are in the U.S. ballpark.
Likewise, U.S. is ballpark with first generation with
Better check your facts before you make an argument.
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Wealth Restoration
Last month President Obama gave a speech which helped to explain the importance of family wealth: "millions of families were stripped of whatever cushion they had left", " the top 1 percent has a net worth 288 times higher than the typical family, which is a record for this country", "gaps [in all social welfare measures including education] are now as much about growing up rich or poor as they are about anything else".
In this article, Ezra Klein takes on the rich god of "American Exceptionalism" by pointing out our mediocrity and inviting us to face the fact that most Italians, Belgians, Japanese and those from 23 other countries are, on average, wealthier then we are. It was not always so. Since 1995 the poorer half of the U.S. population lost an astonishing 70% of their net wealth. See http://www.taxnetwealth.com/01_The_Wealth_Gap.aspx
The political solution begins with government recognition of families as the primary economic unit. Families need work and wealth to sustain marriage, procreation, child rearing, care for the elderly and life in general. Inequality may be a part of life but economic “exclusion” from a life sustaining share is the line beyond which no civilized country should tolerate.
The economic solution must consider net wealth as one factor in tax reform. A net wealth tax does not have to soak the rich and might actually work best if it is an optional feature paired with very low income tax rates. Consider tax reform that offers the same rates for rich and poor – 8% on income, no payroll taxes and 2% on net wealth (excluding $15,000 cash and $500,000 in retirement savings). Over time these reforms would restore the net wealth lost by the poorer half of the U.S. population. Even C corporations could be taxed at a flat 8% with a 4% VAT - (considered the fairest way to apportion taxes among businesses worldwide).
Individuals could avoid a wealth tax by optionally paying a flat 26% income tax (and estate taxes later).
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