Global inequality continues to grow. A just-released Credit Suisse report shows that half of the world’s wealth now rests in the hands of just 1% of the population.
This isn’t surprising news. The top tier of the economic ladder, both globally and domestically, has been growing for decades. Especially in more developed countries, the income and wealth of the middle and bottom portion of the population has stagnated.
There are numerous reasons for the growing inequality seen in the world, but Adam Smith, the author of The Wealth of Nations and the godfather of modern economics, summed up much of the problem over 200 years ago: “Money, says the proverb, makes money. When you have got a little, it is often easy to get more. The great difficulty is to get that little.”
According to the report by Credit Suisse, the growth at the top has come at the expense of the middle class. And now, for the first time in modern history, there are more middle class individuals in China than in the U.S., at 109 million compared to 92 million. Measured by wealth (not income), there are also more poor people in the U.S. than in China.
A chief executive at Credit Suisse, Tidjane Thiam, says “Middle class wealth has grown at a slower pace than wealth at the top end. This has reversed the pre-crisis trend which saw the share of middle-class wealth remaining fairly stable over time.”
The report highlights the fact that a person needs just $3,210 to be among the wealthiest 50% on the globe. Roughly $70,000 places someone among the wealthiest 10% in the world, and the top 1% have over $759,900. Just over 70% of the world’s adult population, or 3.4 billion people, have wealth of less than $10,000.
The report defines wealth by the value of assets, including property and stock market investments, and does not take debt into account.
While these staggering numbers are not exactly new, they reinforce one of the greatest problems associated with capitalism, and cater to the inequality debate that rages on in American politics.
Inequality and the redistribution of wealth have always been contentious issues. During Obama’s 2008 campaign, he was quoted as saying “When you spread the wealth around, it’s good for everybody.” Those words quickly became a talking point for opponents.
The issue of income inequality doesn’t just resonate with populist rhetoric though; multiple studies have shown that inequality has a negative effect on economic growth. The Gini Index, which measures the distribution of income, shows that worldwide, the U.S. falls somewhere in the middle, near China, when it comes to income inequality.
Income inequality, and the quickly growing disparities, have become more and more important in the political landscape, especially as far left-leaning politicians like Bernie Sanders have entered the arena.
Perhaps President Andrew Jackson summed up the issue best in 1832, writing that “It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes…to make the rich richer and the potent more powerful, the humble members of society… have a right to complain of the injustice to their Government.”
For more detailed figures of worldwide standards of living, check out the United Nations’ Human Development Report.