Let's get our heads around that. Only a tiny fraction of the roughly 7 billion people in the world accounts for 46% of the estimated $241 trillion in money, property and other material resources available.
The richest 10%, meanwhile, can claim 86% of global wealth, leaving 90% of the world's population to divvy up whatever's left.
These extraordinary figures were included in a report this week from Credit Suisse Research Institute. It found that the gravy train is chugging along, but with relatively few passengers.
Former Labor Secretary Robert Reich has been sounding the alarm over wealth inequality for years. He's at the center of a recent documentary, "Inequality for All," which explains the problem in frightening detail.
"When so much of the purchasing power, so much of the economic gain, goes to the very top," Reich told me, "there's simply not enough purchasing power in the rest of the economy."Robert Reich, readers will recall, is the guy chronicled by this blog as peddling unsubstantiated statistics and advancing a bizarre interpretation of history to support his views on income inequality.
That has profound implications. In the United States, consumer spending accounts for about 70% of all economic activity. If most consumers are getting by with less, the inevitable outcome is that they'll have fewer dollars to pump into the economy.But why should we assume people are getting by with less? Does Lazarus not realize that while someone's slice of a pie can shrink that its overall size can still increase as long as the pie is also growing? It's also not apparent why the 70% figure is significant. While it's true that household final consumption expenditure accounts for 72% of US GDP according to the World Bank, it is only 54% of GDP in Australia (which has not experienced a recession in a generation), 58% in Canada and 48% in Sweden, neither of which are considered economic basket-cases. Why then must this figure be maintained?
Reich noted that wealth inequality was greatest in this country in 1928 and 2007. In both years, the top 1% represented about a quarter of total income.
And shortly thereafter, in 1929 and again in 2008, the U.S. economy tanked, dragging down the rest of the world with it.Note that no causal connection is presented, likely because none exists. It should furthermore be kept in mind that Reich is discussing wealth inequality rather than income inequality, which is much more dependent on asset prices such as real estate or stocks. Both 1929 and 2008 saw the popping of massive asset bubbles which had driven up the wealth of those with large holdings in those assets -- i.e. the rich. The bubbles were the problem, and the fact that wealth inequality had zoomed upwards was a symptom of that rather than the underlying cause.
Other nations, Reich said, have taken steps to address wealth inequality. They've invested more in infrastructure and education in an effort to create more economic opportunities throughout the social spectrum.
The United States, for its part, has been content to let the problem grow.
"We are far more unequal than any other advanced society in the world, and we are surging toward greater and greater inequality," Reich said.It is unclear how infrastructure is related to wealth inequality, or how education would impact the equation. Indeed, it's worth noting that the US, as measured by the percentage of its population with a tertiary degree, already ranks 4th in the world. Also note Lazarus's assertion that wealth inequality is a problem, even though he has yet to explain why it should be regarded as such.
The Credit Suisse report bears that out. Average adult wealth in Switzerland is $513,000, the world's highest, followed by Australia ($403,000), Norway ($380,000) and Luxembourg ($315,000).
Average adult wealth in the United States is $301,000, but that number is heavily skewed by the fact that this country has, by far, the greatest number of "ultra-high net worth" individuals, with personal assets exceeding $50 million.
Most of the rise in [Swiss] wealth since 2000 is due to the appreciation of the Swiss franc. Measured instead in Swiss francs, household wealth fell in 2001 and 2002, and then showed a gentle upward trend, interrupted only by the global financial crisis.Australia (page 57):
Interestingly, the composition of wealth is heavily skewed towards real assets, which amount on average to USD 294,100 and form 59% of gross household assets. This average level of real assets is the second highest in the world after Norway. In part, it reflects a sparsely populated country with a large endowment of land and natural resources, but it is also a manifestation of high urban real estate prices.
Being successful, obviously, isn't a bad thing. There's much to be said for the whole land-of-opportunity idea, in which people are rewarded for a job well done.
But that's not what's actually happening. The rich are gaming the system so they can accumulate a greater share of wealth to the detriment of others.
They do this by using their financial (and hence political) clout to reduce their share of taxes, thus placing a greater burden on the rest of society to fund government programs and the public sector's investment in economic growth.