Global wealth disparity

Image: Pille Kirsi
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By FERNANDO NOGUEIRA DA COSTA*

Large differences in average wealth levels between countries are reinforced by high wealth inequality within nations

A global perspective on the disparity in wealth per adult between countries and regions is presented by the World Wealth Map, presented in Global Wealth Report 2023 from Credit Suisse/UBS. Nations with high wealth per adult (above $100.000) are concentrated in North America, Western Europe and the richest parts of East Asia, the Pacific and the Middle East, with a “sprinkle of outposts” in tax havens. .

China and Russia are core members of the “middle wealth” group of countries, with average wealth per adult in the range of US$25.000 to US$100.000. This group also includes the most recent members of the European Union and important emerging market economies in Latin America – including Brazil, having surpassed the intermediate group threshold in 2022 –, the Middle East and East Asia.

Below, in the range of $5.000 to $25.000 per adult (“bordering wealth and poverty”), is a heterogeneous group, encompassing densely populated countries such as India, Indonesia, and the Philippines, as well as many countries in South America and many of the coastal nations of Africa. Asian countries, although rapidly developing, such as Cambodia, Laos and Vietnam, still fall under this category.

Countries with an average wealth of less than 5.000 US dollars constitute the poorest group. Central African countries predominate.

North America and Europe, together, accounted for 56% of total household wealth, although they have only 16% of the world's adult population (over 20 years old) totaling 5,4 billion in 2022. The percentage of wealth in Asia-Pacific region (excluding India but including China) is quite similar to its percentage of adults. But the proportion of the adult population is more than twice the proportion of total household wealth in Latin America, five times the proportion of wealth in India and ten times the proportion of wealth in Africa.

No ranking By average wealth among the 60 markets with the highest total wealth, excluding countries with smaller populations like Monaco, Switzerland again tops the list with an average wealth per adult of US$685.230. The United States ($551.350) is in second place, slightly above Hong Kong ($551.190) and the latter ahead of Australia ($496.820).

There is then a substantial gap, before a group of countries emerges (Denmark, New Zealand, Norway, Singapore, Canada, the Netherlands and Belgium), all with wealth per adult between 350.000 and 410.000 dollars.

Average wealth is obtained by dividing total aggregate wealth by the number of adults. Median wealth divides the distribution of wealth into two equal groups, where half of adults have wealth above it and the other half below it.

Sorting by median wealth favors markets with lower levels of wealth inequality and results in a different list. Switzerland ($167.350) comes in sixth place according to this criterion, while the United States ($107.740) drops to thirteenth place.

The decline in financial wealth (stocks) compared to non-financial wealth (real estate) in the United States in 2022 led to median wealth increasing, while average wealth fell. That year, Belgium (US$249.940) overtook Australia (US$247.450) at the top of this ranking.

Belgium, Spain, Italy and Japan are among the markets that rank higher on the median wealth criterion compared to average wealth, while the United States, Sweden and Germany rank lower. Those are more egalitarian, these are less…

Large differences in average wealth levels between countries are reinforced by high wealth inequality within nations. The Pyramid of Wealth, presented in Global Wealth Report 2023 from Credit Suisse/UBS, summarizes the distribution of wealth among adults around the world. A large base of low-wealth holders supports the higher tiers, which are occupied by fewer and fewer adults.

According to the estimate, 2,8 billion individuals – 53% of all adults in the world – had wealth less than 10.000 dollars in 2022. They accumulated US$5,3 trillion, just 1,2% of the total.

The next segment covered those with average wealth in the range of $10.000 to $100.000. It recorded the biggest increase in adult numbers this century, rising from 503 million in 2000 to 1,8 billion in mid-2022.

It reflected the growing prosperity of emerging economies, especially China, and the expansion of the middle class in the developing world. The average wealth of this group is $33.573 or about 40% of the world's average wealth level. Total assets of US$61,9 trillion (13,6%) provide this segment as a whole with considerable economic leverage.

The upper-middle segment, with wealth varying between 100.000 and 1 million dollars, also tripled in size this century, going from 208 million to 642 million adults. Members of this group had net assets totaling US$178,9 trillion or 39,4% of global wealth, more than three times their percentage of the adult population (12%). The rich middle class in developed countries generally belonged to this group.

Above them, the top tier of high net worth (HNW) individuals, that is, US dollar millionaires, remained relatively small in size, totaling 59,4 million or 1,1% of all adults. This percentage was reached in 2020 and maintained, although the absolute number fell by 3,5 million in 2022.

In terms of wealth ownership, the HNW group is increasingly dominant. HNW aggregate wealth has increased fivefold in the current century, rising from US$41,4 trillion in 2000 to US$208,3 trillion in 2022. Their share of global wealth (US$454,4 trillion) has increased from 35% to 46% % during the same period.

The properties of the layers of the wealth pyramid are quite different in terms of residence and other components of wealth.

In advanced economies, around 30% of adults fall into the basic level. For most of them, the transition is transitory – for example, due to business losses or unemployment – ​​or due to the life cycle phase associated with youth or old age. In contrast, in lower-income countries, more than 80% of the adult population falls into this first wealth bracket – and lifelong stay there is often the norm.

The main characteristic of the two middle segments of the pyramid is the dominance of the Chinese. They represent 36% of total members, compared to 10% in India, 7% in Latin America and just 4% in Africa. They add up to 57%.

Regional representation is even more skewed among millionaires, where 42% of all members reside in North America, 27% in Europe, and 17% in Asia-Pacific (excluding China and India). In sharp contrast to the base of the Wealth Pyramid, characterized by a wide variety of people from all countries and all stages of the life cycle, HNW individuals are heavily concentrated in specific regions and countries and have similar lifestyles.

They participate in the same global markets for luxury goods, vacations and educational opportunities for their children, even when they reside on different continents. The wealth portfolios of these HNW individuals are also more similar, with an emphasis on financial assets, particularly stocks, as well as bonds and other securities traded in international markets.

A person needed to have $8.654 in liquid assets to be among the richest half of the world's citizens at the end of 2022. However, it took $137.333 to be in the richest 10% of the world and $1.081.342 to be in the top 1%. more rich. The minimum wealth requirement in 2021 was US$1.152.602, so the threshold for entering this elite group has dropped.

The rapid growth of wealth in emerging markets is the reason global wealth inequality has declined this century through reduced inequality between countries. Median wealth is increasing faster than average wealth. But such social inequality is still absurd!

The 2022 World Inequality Report also presents a mapping of inequity: the richest 10% hold 76% of the wealth and 52% of the income, while half of the world's population has just 2% of the wealth and 8,5% of the income. Only.

*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Brazil of banks (EDUSP). [https://amzn.to/3r9xVNh]


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