The question of wealth distribution can be approached from two angles: first, it is obviously of interest to look at how wealth is concentrated - how big is the slice of the cake held by the richest households? – se- cond, the question of participation is also significant – how many people have any wealth to speak of? As in previous years, we have made a distinction between the national and global level.
Global wealth middle class swells considerably
It is not the wealth lower class that has reaped the most benefits from this development - their share of total global assets has only grown by a percentage point or so over the past 14 years. The real winner is the middle class, which has upped its share by more than ten percent and now holds almost 17% of global assets. This is also reflected in the number of people who fall into this category: last year, the number of people that fell into the wealth middle class surpassed the one-billion-mark for the first time as a result of population growth and the ”relegation” of Japanese and Italian households from the high wealth category. In a longer-term analysis, however, it becomes clear that the growth in the middle class is being fed not only by ”relegated” but primarily by ”promoted” households: since 2000, almost 600 million people from the ”low wealth” category have been promoted to the wealth middle class. This means that, all in all, taking population growth into account, membership of this group has trebled since the turn of the millennium. The fact that the wealth lower class has not shrunk to the same extent can be explained by the strong population growth within this wealth category, which made up virtually in full for the number of people being promoted. Nevertheless, more than anything else, this development highlights the inclusive nature of asset growth in a global comparison: more and more people are managing to participate in global prosperity. So from this angle, inequality certainly cannot be said to be on the increase.
The development cannot, however, be described as an evenly distributed one, because the momentum is concentrated primarily in only one region, or actually in only one country: China. Around two-thirds of the global wealth middle class are now recruited from Asia - and 85% of them hail from China. The Asian population that falls into the middle class bracket in global terms has increased almost tenfold since the start of the millennium. Developments in other regions are lagging behind this spectacular growth. It is particularly striking that the middle class in the other two emerging regions, Latin America and eastern Europe, is growing at a much more subdued rate. Although current growth problems are certainly a factor, especially in the most 47 populous countries in these two regions, Brazil and Russia, the fact that these countries lag so far behind is testimony to the massive amount of catch-up work they need to do. Whereas in 2000, the percentage of the population that was considered to be middle-class in Asia was still much lower than in eastern Europe and Latin America, it is now almost twice as high as in these two regions at 20% - despite the fact that India, the second biggest country in Asia, is still light-years away from exploiting its potential in full. And finally, a word on the growth of the wealth middle class in western Europe and North America: along-side population growth, which mainly applies to the US, the growth seen here is attributable exclusively to households being demoted from the ”high wealth” segment, meaning that it is much more a sign of ”fallout” from the major financial crisis than reason to celebrate.
Asia and Latin America: Moving in the right direction
The Gini wealth distribution coefficients for the countries in Latin America, Asia and eastern Europe look more or less as one would expect: wealth distribution in the Latin American countries is, on average, less equal than in more egalitarian regions like Asia; exceptions like Indonesia confirm the rule. The Latin American Gini coefficients are also well above the international average. Developments in recent years, however, are unreservedly positive: with the exception of Colombia, where wealth distribution has barely changed since 2000, all other Latin American countries have made real progress in terms of moving towards greater social participation, i.e. the Gini coefficient has dropped. These positive changes are particularly pronounced in the two economies in the region that have made the most economic progress over the past decade: Mexico and Brazil. So while growth would appear to pay off when it comes to more equal distribution, the fact that the Gini coefficients remain high suggests that further action needs to be taken. The wealth picture in Asia, on the other hand, is not just a much more mixed one - while Gini coefficients in China, Japan and South Korea are below the international average, conditions in countries like Indonesia, Malaysia and Thailand are more ”Latin American”. The picture is equally mixed in terms of the progress made: in four of the countries in our analysis, there has been a deterioration over the past decade (=increase in the Gini coefficient). Developments in Japan are particularly striking. There is no doubt that Japan is paying the price of the prolonged economic standstill, which slowly but surely threatens to leave what was once the most homogenous society in the world frayed around the edges. But the standstill in India and Indonesia also comes as a disappointment. Without substantial reform and growth impetus, wealth distribution in these countries is unlikely to see any long-term improvement in the future either. The new governments in both countries have huge challenges on their hands.
Thailand, Malaysia and also South Korea, on the other hand, can look back on what has certainly been a successful decade. China, on the other hand, has seen a virtual standstill in wealth distribution, despite the many reports on new Chinese billionaires. This shows that the question of wealth distribution is not determined solely by the top echelons of the population - where wealth accumulates at a rapid rate - but rather, first and foremost, among the broad sections of the population. And this is where the Chinese story of growth and ascent is still intact: over the past few years, millions of Chinese households have managed to go from having virtually nothing to accumulating a small (or more substantial) asset base, as is reflected in the relatively low Gini coefficients.
Growth is the best medicine for distribution
It is virtually impossible to draw a universally valid conclusion from our tour d’horizon through the national statistics on wealth distribution, since developments vary so much from country to country. Most impor- tantly, there is no sign of any reversion to the mean: our analysis has identified countries with above-average inequality of distribution where the situation has deteriorated further in recent years, but also more egalitarian countries that have continued to make progress. In general, however, high asset growth would appear to go hand-in-hand with increasingly ”equal” distribution, even if this is by no means an automatic mechanism. There is, however, no question that, wherever total assets experience rapid growth, there is a better chance of more and more people being able to participate in this prosperity. If you choose only to look at the (similarly meteoric) rise in the number of millionaires, you lose sight of the positive developments taking place ”lower down”, among the population at large. The progress made by many countries in Asia, Latin America and eastern Europe is, on the whole, a success story from a distribution policy perspective, too.
But the opposite holds true as well: low growth tends to be correlated with a (slow) erosion in equitable distribution, with Japan serving as a prime example of this. As a result, the best distribution policy is likely to be one that promotes asset development on the whole. Here, too, there is real truth in the theory that growth is the best way of achieving social justice.
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