Home > Uncategorized > Unequal wealth of nations

Unequal wealth of nations

from David Ruccio

global wealth

The premise and promise of capitalism, going back to Adam Smith, have been that global wealth would increase and serve as a benefit to all of humanity.* But the experience of recent decades has challenged those claims: while global wealth has indeed grown, most of the increase has been captured by a small group at the top. The result is that an obscenely unequal distribution of the world’s wealth has become even more unequal—and, if business as usual continues, it will turn out to be even more grotesquely unequal in the decades ahead. 

The alarm was most recently sounded by Michael Savage, in the Guardian, who cited a projection produced by the House of Commons library to the effect that, if trends seen since the 2008 financial crash were to continue, then the top 1% will hold 64% of the world’s wealth by 2030.”

Byrne

I finally managed to track down that report, which was commissioned by MP Liam Byrne, who is the chair of the All-Party Parliamentary Group on Inclusive Growth. It relies on data compiled by Credit Suisse and a projection assuming that total wealth grows at the same rates as during the period 2008-17.

The problem, of course, is global wealth is notoriously difficult to calculate—for both empirical and theoretical reasons—and Credit Suisse doesn’t reveal its methodology.

That’s why the work of the World Inequality Lab is so important.** They’re doing the painstaking work of calculating the wealth that has been generated by global capitalism and how its ownership is distributed.

Thus far, they have reasonably good data for a selection of nations: China, Europe (represented by three countries, France, Spain, and the United Kingdom), and the United States. Those are the numbers illustrated in the chart at the top of this post (with the vertical green line, at 2015, separating past trends from future projections). What they find is that

At the global level represented by China, Europe, and the United States), wealth is substantially more concentrated than income: the top 10% owns more than 70% of the total wealth. The top 1% wealthiest individuals alone own 33% of total wealth in 2017. This figure is up from 28% in 1980. The bottom of the population, on the other hand, owns almost no wealth over the entire period (less than 2%).

The share owned by the top 1 percent is less than reported by Byrne but it’s still an one-third of global wealth. (The share for the top 1 percent in the United States is even higher: an astounding 41.8 percent in 2012.)

But the projection looking forward is similarly dramatic: according to the World Inequality Lab, if present trends continue the share of each of the top groups—the top 1 percent, the top 0.1 percent, and the top 0.01 percent—would growth by one percentage point every five years. What that means is that, by 2050, the share of each group would increase dramatically. In particular, the share owned by the top 0.1 percent would eventually match that of the declining middle group—at a quarter of global wealth.

What we’ve been seeing in recent decades is that an unequal distribution of wealth leads to even more inequality, since wealth inequality is amplified as wealth is concentrated in the hands of a small group at the top. First, past wealth is capitalized at a faster pace, since the rate of return on wealth is faster than the rate of growth of the economy. Moreover, this effect is reinforced by the fact that rates of return tend to increase with the level of wealth: the rates of return available to large financial portfolios are usually much higher than those open to small bank deposits and the other savings vehicles available to everyone else.

None of this is new. Those in the small group at the top have long been able to put distance between themselves and everyone else precisely because they’ve been able to capture the surplus and then convert their share of the surplus into ownership of wealth. And the returns on their wealth allow them to capture even more of the surplus produced within global capitalism.

In short, unless radical economic changes are made within nations, the unequal distribution of global wealth created by contemporary capitalism is both the premise and promise of an even more unequal distribution of wealth in the decades to come.

 

*To be clear, the “wealth of nations” that Smith referred to was current production or, as it is currently measured, Gross Domestic Product—the “immense accumulation of commodities” produced and exchanged in a country’s economy over a particular period of time. Mainstream economists (such as Robert Barro) often claim that inequality in global capitalism is decreasing, because of “convergence,” that is, growth rates in developing countries of the Global South are faster than in the developed North and the gap in GDP per capita is closing. Today, wealth refers to the ownership of assets, both financial (stocks, bonds, etc.) and nonfinancial (especially housing)—as against income (flows of value associated with either doing or owning) or sums of transactions (which is what is captured in GDP).

**The other major sources of information on global wealth are Forbes (which publishes global rankings on the world’s billionaires) and the French business consulting company Capgemini (which issues an annual World Wealth Report focused on the wealth of global High Net Worth Individuals).

  1. June 7, 2018 at 9:21 pm

    “When you are on a sinking ship, your thoughts will be about sinking ships” (George Orwell, 1948) http://orwell.ru/library/articles/leviathan/english/e_wal

  2. David Harold Chester
    June 8, 2018 at 9:25 am

    There was a famous picture of an aircraft crash where many people of various emergency kinds are rushing towards, but one person is walking away. The picture is titled “The Engineer’ And as for our ship, Wordsworth said it all:

    Thou, too, sail on, O Ship of State!
    Sail on, O Union, strong and great!
    Humanity with all its fears,
    With all the hopes of future years,
    Is hanging breathless on thy fate!

  3. June 21, 2018 at 10:21 am

    And we did it to ourselves. Before 5,000 BCE Sapiens tended toward social and economic equality. In their small societies the core economic institutions were collective or common ownership of land and resources, generalized reciprocity in the distribution of food, and generally egalitarian political relations. “In other words, people shared with and helped each other with no rulers and no ruled, no rich and no poor.” This way of life was maintained by cutting the arrogant and boastful down to size (sometimes literally) and by ensuring group members who had fallen on hard times got the help they needed to get back to active group membership. In the words of Jesuit missionary P. LeJeune (1635), “The two tyrants who provide hell and torture for many of our Europeans do not reign in their great forests – I mean ambition and avarice – not one of them has given himself to the devil to acquire wealth.” This 100,000-year history went by the wayside. Monarchs, economic adventurers of many types, many versions of academics, poets, prose artists, and many others all played a role in lying about and subverting humans into things that looked nothing like this 100,000-year history. And we end up with humans defined by religious documents like the Bible with its Garden of Eden and Cain and Able; by prose and academic texts as “encultured savages,” living hard and miserable in a “state of nature” with a bitter and bloody struggle to wrest a livelihood matched by a “war of all against all,” which made human life “nasty, brutish, and short,” (Thomas Hobbes, Robert Ardrey, Richard Dawkins) Those who benefited from this false history of humanity, supported and spread it, while efforts to do what humans had always done to control the arrogant and boastful were undercut. 5,000 years latter here we sit. Nearing the end of our species. According to anthropologist Richard Lee, “It is the long experience of egalitarian sharing that has molded our past. Despite our seeming adaptation to life in hierarchical societies, and despite the rather dismal track record of human rights in many parts of the world, there are signs that humankind retains a deep-rooted sense of egalitarianism, a deep-rooted commitment to the norm of reciprocity, a deep-rooted… sense of community.” An experience from 3rd grade helped me understand this early in life. My class had a bully that made all our lives miserable. Verbal reprimands, visits to the principal’s office, and counseling did not change the situation. So, one day on the playground our teacher instructed us to beat our bully, to hit him as hard as we could. She stopped the beating after five minutes. The effects were clear. The bullying stopped. Bennie (our bully) became a quite and productive adult who attacked no one. Amazing sometimes what the fists of 21 3rd graders can accomplish over five minutes. Some will not understand this, but I believe we can save ourselves by focusing less on individual rights and more on community rights. And then working very hard to make these communities like those described by Lee.

  4. Helen Sakho
    June 22, 2018 at 2:47 am

    “Bennie” should have been expelled or treated by bullying experts. Violence breeds violence in my experience. The best individuals are quiet people who can neither read nor write but never harm or hurt anyone and simply observe. It may take a long time or one critical accident-incident (Qualitative Research Methodology – grounded in the sociology of the dying) to teach humanity but if the initial intuition or talent is there from the beginning and the teaching is reciprocally respectful, then the outcome is close to ideal and produces exceptional human beings who are now absolutely rare and equally necessary for every school and society.
    Most ” Bennies ” remain on the loose and harm the quiet or the quietened ones.
    But, I do see what you mean. The particular beating you describe might well have been very productive in the circumstances. Here, it is the Principal who should have been beaten by the teacher and the kids.

    • June 22, 2018 at 5:11 am

      Helen, I agree with much of what you say. Our knowledge of the first 100,000 years of Sapiens life on earth indicates wars were rare. But ritual killings did occur, as did ritualized punishment. Some of it physical. These were rare since it seems Sapiens found other ways to control the arrogant and boastful in their communities. But my 3rd grade class was in 1955. Long after the way of life of humans prior to 5,000 BCE. I think my 3rd grade teacher thought a little stronger measure was needed. But still not one dangerous to Bennie or the other pupils in the class. Early humans weren’t supernatural or saints. They used violence against one another, but they used it rarely and caringly. They used it to protect the solidity and survival of their communities. Humans still use violence against one another today. Difference being that today most of that violence is driven by ideological struggles, to take resources, and to subdue the population of other nations or regions. Very different goals and motivations.

  5. June 22, 2018 at 2:26 pm

    A couple of relevant comments. Sure the Bible has its stupid and obnoxious characters, but the point of the story is not to offer them as role models but to denigrate them. The other is that at the age of 6 (so 1943) I was bullied, and I didn’t need my teacher to permit me to: I just hit him. He was one of my best friends for years after. And indeed, in my teens I once got so angry with my father that I hit him, and got a black eye for my pains. I was intelligent enough to realise “I deserved that”, so the incident generated respect for my father, not fear.

  6. Helen Sakho
    June 22, 2018 at 2:42 pm

    Very well done Dave. You did not deserve any of it, rest assured.
    As for your father, if he is still with us or not, I just hope he learned to respect you back.
    All holy books (from the torah to marxist manifestos and way before these) have to be interrogated and interpreted in their rightful historical contexts. Once you go with the most legitimate interpretations, it sticks with you and your children forever. Very difficult task.

  7. June 22, 2018 at 7:01 pm

    David Ruccio’s note * on ‘wealth’ is so clear it is very helpful.

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