Who owns the world's money?
Sometimes, bombarded by media, we think that world goes down and people are getting poorer. Actually the true is opposite. In recent decades, extreme world poverty has declined significantly and many millions of people have joined middle class – particularly in China,. Situation improves as well in Eastern Europe (e.g. recent update of Poland to developed market), as well some parts of Africa (South Africa, Kenya) and Latin America (however that region still rely significantly on tourism and struggle with corruption as well as crime). China’s rapid growth over the past four decades has been responsible for much of the decline in extreme poverty and as World Bank data showed the rate of poverty reduction had halved since 2013.However - In sub-Saharan Africa, extreme poverty was on the increase.
With some exceptions, overall economic shifts are positive and we can be happy with it, it’s the other end of the global wealth spectrum that attracts the most attention. A high degree of wealth creation is amassed by those at the top of the economic pyramid.
Let's start from some take aways:
In the 10 years since the financial crisis, the number of billionaires has nearly doubled.
Between 2017 and 2018 a new billionaire was created every two days.
The world’s richest man, Jeff Bezos, the owner of Amazon, saw his fortune increase to $112bn. Just 1% of his fortune is equivalent to the whole health budget for Ethiopia, a country of 105 million people.
The poorest 10% of Britons are paying a higher effective tax rate than the richest 10% (49% compared with 34%) once taxes on consumption such as VAT are taken into account.
The top-heavy wealth spectrum
Less than 1% (0.7%) of the world’s adult population occupies the $1M+ wealth range.
This elite group collectively controls 46% of the world’s wealth, valued at approximately $129 trillion.
On the flip side of the equation, 70% of world’s population fall into the sub-$10K wealth band.
This majority of people around the world collectively control a mere 2.7% of the world’s wealth.
Even as “the rich get richer”, there is good news for the majority. The percentage of people in that lowest wealth band has been shrinking over the years. However we shouldn't stop the improvements. Just to mention the numbers - about 10,000 people per day die for lack of healthcare and there were 262 million children not in school, often because their parents were unable to afford the fees, uniforms or textbooks. But, that post is about rich - so let's come back to the subject. Where do they live?
Not only is money concentrated among a small portion of the population, those people tend to gravitate towards global cities such as London, Hong Kong, and New York.
In fact, 70% of ultra high net worth individuals (UHNWIs) – persons with investable assets of $30 million or more – reside in just ten cities around the world.
According to Credit Suisse, emerging markets now account for 22% of growth in the UHNWIs category – up from just 6% growth in 2000 – with China alone adding over 16,000 UHNWIs to the mix. Many members of this elite class may generate their wealth in emerging economies around the world, but as we can see from the map above, the world’s richest people end up very concentrated, geographically speaking.
Wealth accumulates in Europe and North America. Which is rather obvious. We can check on Fortune 500 who accumulated most. Worth to mention my recent posts about top 3 people whose net worth hit $100 bln. Short list:
and from 19th of June 2019 - Bernard Arnault. His fortune now equals more than 3% of France’s economy (!)
And ... Warren Buffet is really close to join the club (ar. $98, 2 bln - June 2019).
The trend "rich get richer" can be really dangerous for economy. The growing concentration of the world’s wealth has been highlighted by a report showing that the 26 richest billionaires own as many assets as the 3.8 billion people who make up the poorest half of the planet’s population. And that number of billionaires owning as much wealth as half the world’s population fell from 43 in 2017 to 26 last year. In 2016 the number was 61. Can we end up with one person controlling over 50% of wealth on the world? That is really scary, even more scary than 51% attack on Blockchain when BTC will became mainstream (joke :)).
Oxfam’s director of campaigns and policy, Matthew Spencer, said:
“The massive fall in the number of people living in extreme poverty is one of the greatest achievements of the past quarter of a century but rising inequality is jeopardising further progress".
Yes, definitely we are doing well to help poor nations, decrease poverty and help people "survive" through the day (one meal a day, access to healthcare). But the problem with concentrating the wealth is growing. M. Spencer concludes:
“It doesn’t have to be this way – there is enough wealth in the world to provide everyone with a fair chance in life. Governments should act to ensure that taxes raised from wealth and businesses paying their fair share are used to fund free, good-quality public services that can save and transform people’s lives.”
But..will the governments change the approach and make it more equal, will the governments act to ensure that taxes are paid, that contribution from rich will go to poorer, will the governments invest money in a public services? Seems that they are failing in that, not mention about lack of transparency which we see almost in all countries, not only emerging ones. I am not saying that all governments are corrupted, however it seems that what is happening now, is not good enough to change dangerous trend.