But 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 percent of the world’s population — some 37 million adults with a net worth of at least $515,000 — accounted for about 40 percent of the world’s total net worth, according to the report.
The bottom half of the population owned merely 1.1 percent 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.
The widening gap between the global haves and the have-nots in large measure reflects the failure of less- developed countries to develop, while rich countries — particularly the United States — have experienced fast economic growth and a spectacular buildup of assets.
“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.
Global inequality in wealth may well be somewhat lower today. The data in the report is six years old. Fast growth and wealth accumulation in China and India since 2000 are likely to have closed the average gap between the rich world and the poor.
Americans have amassed much of the world’s treasure. According to the report, in 2000 the United States accounted for 4.7 percent of the world’s population but 32.6 percent of the world’s wealth. Nearly 4 out of every 10 people in the wealthiest 1 percent 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 percent of the world’s wealth. And India, with 16.8 percent of the world’s people, accounted for only 0.9 percent 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 percent of Americans held 32 percent of the nation’s wealth in 2001. (This excludes the billionaires in the Forbes list, who control roughly another 2 percent 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 percent of Americans earned a higher share of the nation’s income than at any time since the 1920s. Still, that share was only 16 percent.
The authors of the new study acknowledged that their results were a little rough. Wealth is difficult to measure accurately, and many countries do not even try. For many countries, the authors had to impute data, making several assumptions.
Worldwide wealth comparisons become somewhat less skewed when they use so-called purchasing power parities — the exchange rates at which products like a quart of milk or a TV set would cost the same thing everywhere. They correct distortions resulting from, for instance, the undervaluing of the Chinese yuan, and reflect more accurately the purchasing power of typical consumers in different countries.
Using this method, the United States still comes out on top but with a smaller share — about a quarter of the world’s wealth. And China’s share jumps to about 8.8 percent.
Income inequality shows few signs of abating in most countries. Still, there is evidence that the global gap in wealth may close somewhat over coming years. Paradoxically, the reason is the fast growth of China and India.
Inequality is growing rapidly in both those countries. As tens of millions of Chinese and Indians climb out of poverty, they are leaving tens of millions of less fortunate Chinese and Indians behind.
But even as wealth and income become more unevenly distributed within China and India, these hundreds of millions of people making their way into the middle class and accumulating assets will actually make global wealth distribution more equal than it was before.
“China and India are definitely an offsetting factor,” said James B.
Davies, a professor of economics at the University of Western Ontario and
director of the world institute’s program to study global wealth accumulation
and a co-author of the report. “If they weren’t rising in the ranks of the
world’s wealthy, inequality would be increasing at a fairly good rate.”