World News: Study finds wealth Inequality is widening worldwide

Eduardo Porter, New York Times, December 6, 2006, via Ed Dodson

Even as income inequality has reached near record levels in many countries, the distribution of the world's wealth — things like stocks, bonds or physical assets like land — has become even more narrowly concentrated than income, according to a new report by the World Institute for Development Economics Research of the United Nations University. In 2000, the top 1% of the world's population — some 37 million adults with a net worth of at least $515,000 — accounted for about 40% of the world's total net worth. The bottom half of the population owned merely 1.1% of the globe's wealth. The net worth of the world's typical person — whose wealth was above that of half the world's population and below that of the other half — was under $2,200.

"Developed countries have pulled ahead of the rest of the world," said Edward N. Wolff, a professor of economics at New York University who is a co-author of the new study. "With the notable exception of China and India, the third world has drifted behind." Moreover, poorer nations face many obstacles to amassing wealth, including sketchy property rights and land tenure systems, and underdeveloped financial markets. Rich countries have developed financial products like 401(k) defined-contribution pension accounts, which spur wealth accumulation.

The U.S. accounted for 4.7% of the world's population but 32.6% of the world's wealth. Nearly 4 out of every 10 people in the wealthiest 1% of the global population were American. The average American had a net worth of nearly $144,000, losing only to the average Japanese, who had $180,000, at market exchange rates; the average person in Luxembourg, who had $183,000; and the average Swiss, who had $171,000. By contrast, in 2000 the average Chinese had a net worth of roughly $2,600, at the official exchange rate. China, home to more than a fifth of the world's population, had only 2.6% of the world's wealth. And India, with 16.8% of the world's people, accounted for only 0.9% of the world's wealth.

Among Americans, wealth is distributed about as unequally as it is around the globe. The new study cited data from the Federal Reserve's Survey of Consumer Finances, which found that the richest 1% of Americans held 32% of the nation's wealth in 2001. (This excludes the billionaires in the Forbes list who control roughly another 2% of the nation's wealth.) This tops the inequity in every country but Switzerland, among the 20 nations that measure these wealth disparities and are cited in the report. And it vastly outstrips the inequality in the distribution of income.

A recent study by Emmanuel Saez of the University of California, Berkeley, and Thomas Piketty of the École Normale Supérieure in Paris, found that in 2004 the top 1% of Americans earned a higher share of the nation's income than at any time since the 1920s. Still, that share was only 16%.

What did one organ for capitalists have to say? "The three richest people in the world have more money than the poorest 48 nations combined. The fastest growing population of wealthy people is in China. Look out when they transition from saving to spending. It's going to change the composition of the world economy dramatically, and it may just help prevent the world from becoming more of an aristocracy than it already is." – Thomas Kostigen, MarketWatch, Dec 12, 2006

Editor: Income could swell from rent dividends, while taxes – even good ones – are still an expense and can help close the income gap only indirectly.

-- from The Georgist News, Volume Nine, Number Seven, January 1, 2007

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