Shifting Wealth and Global Wealth Inequality

Piketty’s (2014) celebrated analysis has focused on wealth inequality within countries[1].  But world wealth inequality also depends on the rise or fall of wealth in different countries and regions. An important element in the current evolution of wealth inequality is the role played by the fast growing developing economies. The table below will show that Shifting Wealth seems to have contributed – as it did for global income equality – to slightly more global wealth equality. Since 2010, the Credit Suisse Research Institute’s Global Wealth Report has been the leading reference on global household wealth[2]. A wealth of data on household wealth throughout the world is available in the annual issues of the Credit Suisse Global Wealth Databook. It offers detailed country and regional information not available at present on http://wid.world/.

Net household wealth is defined as the marketable value of financial assets plus non-financial assets (principally housing and land) less debts. World total net household wealth has risen from $ 117 trillion end 2000 (a mean of $31,415 and a median of $1,867 for the 3.7 billion adults[3] alive then) to $ 280.3 trillion by mid-2017 (a mean $ 56,541 and a median of $ 3,582 for 5.0 billion adults).

Table 1: Net Household Wealth, % of world total

	2000	2010	2017
Africa	0.9	1.2	0.9
Asia-Pacific (ex Japan)	7.3	11.1	11.2
China	4.1	7.5	10.3
India	1.0	1.7	1.8
Latin America	3.0	3.7	2.9
Total South	16.3	25.2	27.1
Europe	29.6	33.7	28.4
Japan	17.0	10.7	8.4
North America	37.1	30.4	36.0
Total North	83.7	74.8	72.8

Source: Credit Suisse Global Wealth Databook 2017 and 2010

Over the period 2000-2017, net household wealth has indeed shifted South (actually more East than South). In relative terms, the group of rich countries has lost more than ten percentage points of the world household wealth. Consequently, global wealth inequality has been reduced during the 2000s as median levels of net household wealth are much higher in rich than in developing countries. Most of the shift toward the South occurred during the first decade when income convergence was rapid, not least due to booming raw materials. In the 2010s, by contrast, gains in the percentage share of world household wealth were given back by Africa and Latin America; only China kept on gaining a higher relative share in world wealth.

Table 2: Median Net Wealth per Adult, in constant $

	2000	2010	2017
Africa	499	939	438
Asia-Pacific*	1,322	3,400	2,997
China	2,349	4,628	6,689
India	704	1,301	1,295
LAC	3,099	6,388	5,159
World	1,867	3,709	3,582

Note: Asia-Pacific including Japan

Source: Credit Suisse Global Wealth Databook 2017 and 2010

For lack of data on standard deviation underlying the various data on household wealth, Table 2 does not provide evidence on skewness nor on Asia-Pacific excluding Japan. Still, Table 2 reveals that the first decade of the 21^st century did not only lower global wealth inequality but also went along with remarkable gains in median wealth. Broadly, median net household wealth doubled in all non-OECD regions listed in Table 2 during the period 2000-2010. Since then (post the Great Financial Crisis; GFC), however, median household wealth only kept rising in China while it dropped sharply in Africa. Despite being shown in constant US dollar, the numbers may indicate that sharp real currency depreciation of local currencies in countries with net raw material exports have dented mean household wealth since the GFC and as a result of lower commodity demand by China, including by inflating household debt.

To sum up, the 2000-2010 episode of rapid income convergence of low- and middle-income convergence in the wake of China´s commodity-hungry growth spurt has not only lowered global income inequality. It also helped lower global wealth inequality, despite higher within-country income and wealth inequality. Median household wealth rose in all developing regions while it dropped or stagnated in Japan and North America. During the present decade, alas, Africa and Latin America have seen median household wealth levels drop again.

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[1] Th. Piketty (2014), Capital in the Twenty-First Century, Harvard University Press.

[2] J. B. Davies, R. Lluberas and A. Shorrocks (2010):  Global Wealth Databook, Credit Suisse Research Institute. The same authors explain the estimation methodology and draw lessons learned about trends in the level and distribution of global wealth up to 2014 in “Estimating the level and distribution of global wealth, 2000–14”, WIDER Working Paper 2016/3, UNU-Wider.

[3] Defined as individuals aged 20 or above.