A number of newspapers are reporting, breathlessly, the news that millionaires have 50% of the world’s wealth. This is, of course, entire nonsense, nonsense to the point of being complete scrotals. It is only when we narrow it down to the specific definitions that it becomes true, but then when it does become true it’s just boringly normal.
That is, this isn’t news at all, it’s olds:
Personal wealth around the globe reached $201.9 trillion last year, a 12 per cent gain from 2016 and the strongest annual pace in the past five years, Boston Consulting Group said in a report released Thursday. Booming equity markets swelled fortunes, and investors outside the US got an exchange-rate bonus as most major currencies strengthened against the greenback.
The growing ranks of millionaires and billionaires now hold almost half of global personal wealth, up from slightly less than 45 per cent in 2012, according to the report.
We need to have a quick look at what is meant by wealth here, for it’s not what an economist would say it is. What’s being included here is property and financial wealth. Houses, buildings, land, stocks and bonds, bank balances. That’s a reasonable enough definition of what it is, financial wealth, but it’s not a good description of wealth. For example, the household financial wealth of the US might be this roughly $90 trillion:
In North America, which had $86.1 trillion of total wealth, 42 percent of investable capital is held by people with more than $5 million in assets. Investable assets include equities, investment funds, cash and bonds.
But there’s another $100 trillion and more of wealth which is either natural wealth (yes, nature has a value) or things owned by governments. That is, we’re specifically stating that the wealth of the type which is owned individually by people seems to be concentrated among those who own a lot of the type of wealth owned by individuals. Not all that surprising a finding really, is it? Millionaires are those with lots of financial capital, lots of financial capital is owned by millionaires. Well, I’m just flabberghasted myself. And any wider definition of wealth this concentration seems to dilute at least, doesn’t it?
But we can and should go further, human capital vastly outweighs any other form of capital in the world. It’s also hugely more equally distributed.
So, we’re talking about a small subset of all wealth and who owns it, noting that we use a particular word. millionaire, to describe those who have a lot of this specific type of wealth. Our finding is then that those we describe a having a lot of this type of wealth have a lot of this type of wealth extant.
And it’s also not a surprise in the least. The Saez and Zucman paper is the state of the art on wealth distribution, in which they tell us:
The bottom half of the distribution always owns close to zero wealth on net.
As they also point out, wealth distributions are very much more unequal than income ones – and both more than consumption – and there’s pretty much no wealth distribution ever where the top 10% haven’t had well over 50% of the wealth.
That is, this wealth distribution that people are complaining about is normal, boringly so. Which does make us all wonder why they are complaining so vociferously.