“Global wealth inequality has declined since 2000”
Jørgen Sloth and Thomas Due Bostrup, courtesy of CEPOS
Summary and commentary
This analysis is about the evolution of global inequality. Among other things, it shows that wealth inequality has decreased over the past 20 years. Thus, the richest 10 per cent share of global wealth has fallen from 88.5 per cent. in 2000 to 81.7 per cent. in 2019.
“Inequality in wealth is very much in the public debate and will probably do so during the Davos summit this week. What has so far been completely overlooked is that global wealth has been reduced over the past 20 years. The 10 per cent. the richest share of global wealth has been reduced from 88.5 per cent. in 2000 to 81.7 per cent. in 2019, ”says CEPOS chief consultant Jørgen Sloth.
“Every year, when Oxfam IBIS publishes its inequality report, they always fail to mention that global wealth inequality has been declining for almost two decades. When Oxfam IBIS is so preoccupied with wealth, they should rejoice that wealth has dropped so significantly, ”says CEPOS chief consultant Jørgen Sloth.
“Also when looking at other targets for the global wealth opportunity such as Gini, top 1 per cent. and the top 5 per cent share of wealth, the inequality in global wealth has decreased since 2000, ”says CEPOS chief consultant Jørgen Sloth.
“When wealth inequality has declined since 2000, it is primarily due to a decline in wealth between countries. Among other things. China’s wealth has grown tremendously since the year 2000. The rising wealth in China is moving towards lower wealth opportunities on a global scale, because it raises Chinese wealth closer to wealth in, say, Europe and the United States, thereby reducing differences between countries, “says chief consultant Jørgen Sloth, CEPOS.
Summary
Global wealth inequality has decreased over the past 20 years:
- The top 10 per cent share of global wealth has been reduced from 88.5 per cent. in 2000 to 81.7 per cent. in 2019 according to Credit Suisse, cf. the figure.
- This is offset by the fact that bottom 90 per cent’s share has grown from 11.5 per cent. in 2000 to 18.3 per cent. in 2019.
- Other targets for global wealth (Gini, top 1% and top 5%) also show that inequality in global wealth has decreased since 2000.
In the public debate, inequality in global wealth gets a lot of attention. For example, in January 2019 Oxfam IBIS released a report showing that the 26 richest people have as much wealth as the 50 per cent. with the least wealth in the world. However, a more true picture would be to state that the wealth of the 26 richest is 0.4 per cent. of total global wealth.
What has not yet emerged in the debate about wealth is that global wealth inequality has actually been reduced over the past 20 years. For example, the top 10 per cent share of global wealth has been reduced from 88.5 per cent. in 2000 to 81.7 per cent. in 2019 according to Credit Suisse, cf. Chart 1.
Credit Suisse also points out that wealth has been reduced since 2000: “The conclusion to be drawn is that… global wealth gaps have generally narrowed over the last two decades.”
According to Credit Suisse, when wealth has declined since 2000, this is primarily due to a decrease in wealth between countries. Among other things, wealth in China has grown a lot since the year 2000, when China was among the low-wealth countries. The rising wealth in China is moving towards lower wealth opportunities on a global scale, because it elevates the Chinese wealth closer to the wealth in, for example, Europe and the United States, thereby reducing differences between countries.
Other targets for wealth also show a declining trend since the year 2000
Also, when looking at other common assets targets, global wealth opportunities have decreased since the year 2000.
Looking at the top 5 per cent share of global wealth, this is roughly the same picture as for the top 10 per cent. with a decline in wealth from 75.6 per cent. in 2000 to 70.2 per cent. in 2019. Here, however, the proportion of assets has remained largely constant since 2008, ie. the fall occurred at the beginning of the period.
Top 1% worldwide, 45 per cent. of the total wealth in the world in 2019. This is lower than in 2000, when their wealth was 46.9 per cent, but higher than in 2011 when they had 41.3 per cent. of total assets.
Also measured by the Gini coefficient, wealth is reduced: From 91.9 per cent. in 2000 to 88.5 per cent. in 2019 [1] .
The richest 26 people have 0.4 per cent. of global wealth
In January 2019, Oxfam Ibis published a report showing that the 26 richest have as much wealth as the 50 per cent. with the least wealth in the world. This does not matter as much as the 40 per cent. with least wealth have a total wealth of around DKK 0 (since some people for natural reasons have negative wealth – for example, it is natural to incur debt as a young person). Ie that a person who has $1 in wealth has more wealth than the 40 per cent. with the lowest wealth [2] .
A more true picture of the wealth of the 26 richest is obtained by comparing their net wealth to the total wealth in the world. The wealth of the 26 richest is 0.4 per cent. of total global wealth. When Oxfam chooses in January 2019 to compare the 26 richest in the world with the poorest half in the world, it gives a misleading picture of wealth. If Oxfam really wanted to show how much the 26 richest owners in the world, they should measure it in terms of total wealth. And this shows that the wealth of the 26 richest is 0.4 per cent. of total global wealth.
Wealth is not a good expression of living standards
As mentioned, wealth has been very promising in the public debate. One has to be careful about comparing wealth (and thus wealth) at the personal level, because it doesn’t necessarily say anything about living standards. An imagined example can illustrate this point: A person who earns $ 1 million every year. and every year spend them all, will have no wealth. But they will have a high standard of living.
That the size of the wealth does not necessarily say anything about the standard of living is also reflected when you look at how bottom 10 per cent. in the global wealth distribution comes from. Bottom 10% is made up, inter alia, of 9.5 per cent. from Europe and 7.4 per cent. from North America (USA and Canada), while according to Credit Suisse no one is included from China, cf. Chart 4, despite living standards (GDP per capita) being much higher in Europe, the US and Canada than in China.
If you are basically 10 per cent, you have either negative wealth or a wealth close to 0[3] . When the bottom 10 per cent is made up of so many from Europe, the United States and Canada, it is largely due to the fact that prosperous countries have well-developed financial systems (eg banks) that allow them to borrow, for example, to start a business or to finance consumption under Box 1. In this way, the possibility of raising debt is a positive thing because it allows, for example, to spend as a student where the income is low (and pay back later when you get a job and have higher income).
Jørgen Sloth Bjerre Hansen is chief consultant at CEPOS and has been employed since 2015. His primary area of work is register analysis and economic policy in general. Thomas Due Bostrop is an economist with CEPOS.
