Sunday, October 19, 2014

Reports: Richest 1% Own Nearly Half Of Global Wealth

Credit Suisse
The logo of Swiss bank Credit Suisse is pictured at an office building in Zurich, Switzerland, on May 12, 2010. (Keystone / Steffen Schmidt)

Andrea Janus | CTV

The richest 10 per cent of the global population holds a whopping 87 per cent of the world’s wealth, says a new report, which also warns that a hike in interest rates could dampen overall growth in wealth.

The Credit Suisse Global Wealth report  for 2013-14 has found that an individual needs only US$3,650, in addition to the equity in their home, to be among the wealthiest half of the world’s citizens.

However, more than $77,000 is required to be a member of the top 10 in global wealth-holders, and $798,000 to be among the top one per cent, the report said

“Taken together, the bottom half of the global population own less than one per cent of total wealth,” the report says. “In sharp contrast, the richest (10 per cent) hold 87 per cent of the world’s wealth, and the top percentile alone account for 48.2 per cent of global assets.”

The report notes that wealth distribution may change, particularly if “a sufficient number” of low-wealth countries experience rapid growth, or if China and India “fulfill their potential to be major catalysts of global change.

“The combination of unusual stock market growth, robust housing markets and favourable exchange rate movements is unlikely to be repeated soon, so future prospects for wealth are more muted,” the report also warns.

“Indeed, they may well be negative if the downward trend in interest rates in recent years goes into reverse, and asset prices begin to fall.”

Overall, though, global wealth is growing “at a record pace,” and has surpassed the $250-trillion mark for the first time ever.

According to the report, total global wealth rose 8.3 per cent, or $20.1 trillion, between 2013 and 2014 to hit a new record of $263 trillion.

Wealth is still highest in North America, where growth was “particularly strong” at 11.4 per cent year-on-year, according to the report. At $91 trillion, wealth in North America represents 34.7 per cent of total global wealth.

Europe came in second, with growth of 10.6 per cent year-on-year, to $85.2 trillion. That represents 32.4 per cent of total wealth.

Wealth inequality
A particular focus of this year’s report is wealth inequality, which fell slightly in many countries before the financial crisis of 2007-08. However, it has been on the rise since 2008, “especially in the developing world.”

In nearly all countries, the mean wealth of the top 10 per cent is more than ten times median wealth, while mean wealth for the top one per cent is more than 100 times median wealth, the report found. In the most unequal nations, the mean wealth of the top one per cent can be 1,000 times the median wealth.

“A combination of factors” has sent wealth inequality on a downward trend throughout much of the 20th century, the report said, suggesting that “a new era” had emerged.

“That downward trend now appears to have stalled, and possibly gone into reverse.”

Looking at current wealth inequality trends, only three developed countries fall into the “very high inequality” category, meaning the top 10 per cent control more than 70 per cent of wealth. Those countries are Hong Kong, Switzerland and the United States.

Meanwhile, 12 emerging markets fall into that category, including Brazil, India, Russia and South Africa.

Canada falls into the “medium inequality” category, meaning that the top 10 per cent control more than 50 per cent of the wealth. That is in line with Australia, Finland, France, the Netherlands and the United Kingdom, among other countries.

Between 2000 and 2014, wealth inequality rose in half of the 46 countries monitored in the report. Of the G7 nations, however, wealth inequality only grew in the United Kingdom.

The report notes that several factors contribute to the level of and changes in wealth inequality. Asset prices, such as housing and stock prices, have a major impact in the short term, the report says. In the long term, economic growth, demographics, savings behaviours, homeownership, inheritance, and government policy can all impact wealth inequality.

According to the report, some 3.3 billion people, or more than 70 per cent of adults worldwide, have their wealth fall below US$10,000. Another one billion adults, or 21 per cent of the adult population, fall in the $10,000 to $100,000 range.

Some 408 million adults, or eight per cent of the population, each have a net worth above $100,000.

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