Social scientists have noted with concern the phenomenon of rising inequality between individuals and nations in the world. The gap between rich and poor countries has been widening posing a threat to world peace. A report entitled Global Wealth Report has been recently published by Credit Suisse, a global financial services company, which says that the richest one per cent own half of all the wealth in the world. The report points out that since 2000, the gap between the rich and the poor has widened on a scale not seen for more than a century.
The Credit Suisse report, which tries to gauge the financial and physical assets of 4.7 billion people, presents a comprehensive picture of global wealth, covering all regions and countries, and all parts of the wealth spectrum, from the very base of the wealth pyramid to what it categorises as ultra-high net worth individuals (UHNWIs).
It is relevant to add here that the report is an up-to-date source of information on global household wealth. It reveals that the United States continued adding to global wealth at an impressive rate, with solid growth also seen in China. Elsewhere, local currency wealth gains were offset by depreciation against the US dollar, so that world wealth declined overall by USD 12.4 trillion. The share of financial assets rose again as a percentage of total wealth and may help explain why wealth inequality is surging upwards. Since 2008, there has been a rise in the financial assets, which has been advantageous mainly to the moneyed sections of society, who retain a disproportionate amount of capital. In the last decade- and-a-half, since 2000, about 34 million people have ownership and control over $112.9 trillion of assets, or 45.2 percent of the world’s wealth.
The number of millionaires around the world has increased by 146 per cent since 2000, and there are now more than 120,000 ultra-high net worth individuals – each worth more than $US50 million. Eight per cent of them are in China, whose wealth has grown five-fold since the turn of the millennium.
Strong economic and equity market performance helped create 920,000 new millionaires globally last year, as High Net Worth Individuals grew in both number and wealth to 14.6 million and US$56.4 trillion, respectively. Asia-Pacific expanded its HNWI population at the fastest rate globally which pushed it past North America as the region with the most HNWIs.
By Credit Suisse’s reckoning, over $250 trillion US worth of wealth has been amassed by households. At the top sit the ultra-rich, which the bank defines as having a net worth of at least $50 million in assets. Just below the ultra-rich are 34 million people, each with a net worth of at least $1 million. Collectively, people in that part of the pyramid make up 0.7 per cent of the world’s population, but own 45.2 per cent of the world’s wealth. If you extend the cut-off to one per cent of the world’s population, they own more than half of all wealth in the world. The boom in wealth at the very top marks the reversal of a trend that had lasted from the turn of the millennium until the financial crisis of 2008-09. In 2000, the share of wealth owned by the richest 1 per cent was 48.9 per cent. This fell to 44.2 per cent in 2009. Now the wealthy are ascendant once more.
Apart from computing the wealth of the super rich, the report also examines the wealth of the so-called middle class, the definition of which varies from country to country. The study reveals that 14% of world adults constituted the middle class in 2015 and held 32% of world wealth. According to Credit Suisse, anyone worth between $50,000 and $500,000 would be considered middle class for the purposes of the survey. In some countries, the cut-off is higher, for example, in Switzerland, where the middle class starts at $72,000. In China, it drops to $28,000, while in India, it is at $13,700. China’s middle class — estimated at 109 million — is larger than America’s, which counts for 92 million people.
On the bottom rung of the global wealth pyramid are 3.4 billion adults – 71 per cent of the world’s population — who are worth less than $10,000. It means that median wealth, which best captures the circumstances of the average adult, has fallen around the world over the past five years to $US3200. The only parts of the world where median wealth has continued to rise are China and North America.
Where does Pakistan stand in the global wealth perspective? According to the Credit Suisse report, Pakistan’s middle class consists of over 6.27 million people, which is the 18th largest in the world. The share of middle-class adults in Pakistan’s total adult population of 111 million is 5.7% as opposed to India’s 3% and Australia’s 66%. Middle-class Pakistani adults constitute 0.9% of the worldwide middle-class population.
Being a lower per-capita country, Pakistan has lower prices and consequently a reduced middle-class threshold. To be a member of the middle class in 2015, according to Credit Suisse, a Pakistani adult must have wealth of at least $14,413. In terms of the local currency that buys one dollar for Rs114 these days, a Pakistani adult should be considered part of the middle class if they have wealth of between Rs1.5 million and Rs15 million. With $14,413, Pakistan has the third lowest “middle-class lower bound wealth”, followed by India ($13,662) and Ukraine ($11,258). This suggests Pakistan has lower prices in general, which enables people to join the middle class by crossing a relatively lower threshold of wealth band.
According to Credit Suisse, total wealth in Pakistan amounted to $495 billion in 2016. Given that the figure stood at $170 billion in 2000, total wealth in Pakistan has increased at an annual rate of 7.4% for the last 15 years. By comparison, total wealth of the world increased on an average by 5.2% annually over the same 15-year period. A little more than 90% Pakistani adults had wealth less than $10,000 in 2016. The share of Pakistani adults with wealth between $10,000 and $100,000 in 2016 was 9.8% while only 0.1% adults own wealth in the range of $100,000 and $1 million.