Distribution of wealth

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https://en.wikipedia.org/wiki/Distribution_of_wealth

Global share of wealth by wealth group, Credit Suisse, 2021

World distribution of wealth, GDP, and population by region in the year 2000. Created with openoffice.org Calc. Data obtained from the UNU-WIDER report on worldwide distribution of household wealth: Press release. The World Distribution of Household Wealth. December 5, 2006. By James B. Davies, Susanna Sandstrom, Anthony Shorrocks, and Edward N. Wolff. Tables to the 2006 report in Excel (including Gini coefficients for 229 countries). UNU-WIDER.

The distribution of wealth is a comparison of the wealth of various members or groups in a society. It shows one aspect of economic inequality or economic heterogeneity.

The distribution of wealth differs from the income distribution in that it looks at the economic distribution of ownership of the assets in a society, rather than the current income of members of that society. According to the International Association for Research in Income and Wealth, "the world distribution of wealth is much more unequal than that of income."

For rankings regarding wealth, see list of countries by wealth equality or list of countries by wealth per adult.

Definition of wealth

Main article: Wealth

Wealth of an individual is defined as net worth, expressed as: wealth = assets − liabilities

A broader definition of wealth, which is rarely used in the measurement of wealth inequality, also includes human capital. For example, the United Nations definition of inclusive wealth is a monetary measure which includes the sum of natural, human and physical assets.

The relation between wealth, income, and expenses is: change of wealth = saving = income − consumption (expenses). If an individual has a large income but also large expenses, the net effect of that income on her or his wealth could be small or even negative.

Conceptual framework

There are many ways in which the distribution of wealth can be analyzed. One common-used example is to compare the amount of the wealth of individual at say 99 percentile relative to the wealth of the median (or 50th) percentile. This is P99/P50 is one of the potential Kuznets ratios which is the inverted U shape that indicates the relationship between the inequality and the income per capita. Another common measure is the ratio of total amount of wealth in the hand of top say 1% of the wealth distribution over the total wealth in the economy. In many societies, the richest ten percent control more than half of the total wealth.

The Pareto Distribution has often been used to mathematically quantify the distribution of wealth at the right tail (the wealth of the very rich); stating that the upper 20% owns 80%, the upper 4% owns 64%, the upper 0.8% owns 51.2%, etc. In fact, the tail of wealth distributions, similar to that of income distribution, behaves like a Pareto distribution but with a thicker tail.

Wealth over people (WOP) curves are a visually compelling way to show the distribution of wealth in a nation. WOP curves are modified distribution of wealth curves. The vertical and horizontal scales each show percentages from zero to one hundred. We imagine all the households in a nation being sorted from richest to poorest. They are then shrunk down and lined up (richest at the left) along the horizontal scale. For any particular household, its point on the curve represents how their wealth compares (as a proportion) to the average wealth of the richest percentile. For any nation, the average wealth of the richest 1/100 of households is the topmost point on the curve (people, 1%; wealth, 100%) or (p=1, w=100) or (1, 100). In the real world two points on the WOP curve are always known before any statistics are gathered. These are the topmost point (1, 100) by definition, and the rightmost point (poorest people, lowest wealth) or (p=100, w=0) or (100, 0). This unfortunate rightmost point is given because there are always at least one percent of households (incarcerated, long term illness, etc.) with no wealth at all. Given that the topmost and rightmost points are fixed ... our interest lies in the form of the WOP curve between them. There are two extreme possible forms of the curve. The first is the "perfect communist" WOP. It is a straight line from the leftmost (maximum wealth) point horizontally across the people scale to p=99. Then it drops vertically to wealth = 0 at (p=100, w=0).

The other extreme is the "perfect tyranny" form. It starts on the left at the Tyrant's maximum wealth of 100%. It then immediately drops to zero at p=2, and continues at zero horizontally across the rest of the people. That is, the tyrant and his friends (the top percentile) own all the nation's wealth. All other citizens are serfs or slaves. An obvious intermediate form is a straight line connecting the left/top point to the right/bottom point. In such a "Diagonal" society a household in the richest percentile would have just twice the wealth of a family in the median (50th) percentile. Such a society is compelling to many (especially the poor). In fact it is a comparison to a diagonal society that is the basis for the Gini values used as a measure of the disequity in a particular economy. These Gini values (40.8 in 2007) show the United States to be the third most dis-equitable economy of all the developed nations (behind Denmark and Switzerland).

More sophisticated models have also been proposed.

Theoretical approaches

To model aspects of the distribution and holdings of wealth, there have been many different types of theories used. Before the 1960s, the data regarding this was collected mostly from wealth tax and estate tax records, with further proof gathered from small unrepresentative examinations and a variety of other sources. The results from these sources tended to show that the distribution of wealth was very unequal, and that material inheritance had a big role in the matter of wealth differences and in the transmission of the status of wealth from generation to generation. There was also reason to believe that the inequality in wealth was shrinking over time, and also the distribution's shape demonstrated particular statistical regularities that could not have been caused by coincidence. Thus, early theoretical work on the distribution of wealth wanted to explain the statistical regularities, and also comprehend the relationship of basic forces which could be an explanation for the concentration of wealth to be high and the trend of declining over time.

More lately, the research about wealth distribution has moved away from the worry with overall distributional characteristics, and in its place focuses more on the grounds of individual differences in the holdings of wealth. This change was caused partly because the importance of saving for retirement increased, and it is reflected in the vital role now assigned to the model of lifecycle savings developed by Modigliani and Brumberg (1954), and Ando and Modigliani (1963). Another important progress has been the increase in availability and finesse in sets of micro-data, which offer not just estimations of individuals' asset holdings and savings but also a variety of other household and personal characteristics that can assist in explain the differences in wealth.

Wealth inequality

See also: Criticism of capitalism

Wealth inequality refers to uneven distribution of wealth among individuals and entities. Although most research depends on written sources, archaeologists and anthropologists often view large houses as occupied by wealthy households. The distribution of contemporaneous house sizes in a society (perhaps analyzed using the Gini coefficient) then can regarded as a measure of wealth inequality. This approach has been used at least since 2014 and has shown, for example, that ancient wealth disparities in Eurasia were greater than those in North America and in Mesoamerica following the earliest Neolithic period.

Global inequality statistics

Share of wealth globally by year, as seen by Oxfam, based on the net worth

A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned 1% of global wealth. A 2006 study found that the richest 2% own more than half of global household assets. The Pareto distribution gives 52.8% owned by the upper 1%.

According to the OECD in 2012 the top 0.6% of world population (consisting of adults with more than US$1 million in assets) or the 42 million richest people in the world held 39.3% of world wealth. The next 4.4% (311 million people) held 32.3% of world wealth. The bottom 95% held 28.4% of world wealth. The large gaps of the report get by the Gini index to 0.893, and are larger than gaps in global income inequality, measured in 2009 at 0.38. For example, in 2012 the bottom 60% of the world population held the same wealth in 2012 as the people on Forbes' Richest list consisting of 1,226 richest billionaires of the world.

A 2021 Oxfam report found that collectively, the 10 richest men in the world owned more than the combined wealth of the bottom 3.1 billion people, almost half of the entire world population. Their combined wealth doubled during the pandemic.

‘Global wealth Report 2021’, published by Credit Suisse, shows a substantial worldwide increase in wealth inequality during 2020. According to Credit Suisse, wealth distribution pyramid in 2020 shows that the richest group of adult population (1.1%) owns 45.8% of the total wealth. When compared to the 2013 wealth distribution pyramid, an overall increase of 4.8% can be seen. The bottom half of the world’s total adult population, the bottom quartile in the pyramid, owns only 1.3% of the total wealth. Again, when compared to the 2013 wealth distribution pyramid, a decrease of 1.7% can be observed. In conclusion, this comparison shows a substantial worldwide increase in wealth inequality over these years.

One of the main explanations for the ongoing increase of wealth inequality are the repercussions of the COVID-19 pandemic. Credit Suisse claims that the economic impact of the pandemic on employment and incomes in 2020 are likely to have a negative effect for the lowest groups of wealth holders, forcing them to spend more from their savings or incur higher debt. On the other hand, top wealth groups appeared to be relatively unaffected in this negative way. Moreover, they seemed to benefit from the impact of lower interest rates on share and house prices.

According to the ‘Global Wealth Report 2021’ published by Credit Suisse, there are 56 million millionaires in the world in 2020, increasing by 5.2 million from a year earlier. The biggest number of dollar millionaires is reported in the USA, with 22 million millionaires (approximately 39% of the world total). This is far ahead of China, holding second place, with 9.4% of all global millionaires. The third place is currently being held by Japan, with 6.6% of all global millionaires.

Real estate

While sizeable numbers of households own no land, few have no income. For example, the top 10% of land owners (all corporations) in Baltimore, Maryland own 58% of the taxable land value. The bottom 10% of those who own any land own less than 1% of the total land value. This form of analysis as well as Gini coefficient analysis has been used to support land value taxation.

Wealth distribution pyramid

Pyramid of global wealth distribution in 2013

In 2013, Credit Suisse prepared a wealth pyramid infographic (shown right). Personal assets were calculated in net worth, meaning wealth would be negated by having any mortgages. It has a large base of low wealth holders, alongside upper tiers occupied by progressively fewer people. In 2013 Credit-suisse estimate that 3.2 billion individuals – more than two thirds of adults in the world – have wealth below US$10,000. A further one billion (adult population) fall within the 10,000 – US$100,000 range. While the average wealth holding is modest in the base and middle segments of the pyramid, their total wealth amounts to US$40 trillion, underlining the potential for novel consumer products and innovative financial services targeted at this often neglected segment.

The pyramid shows that:

• half of the world's net wealth belongs to the top 1%,
• top 10% of adults hold 85%, while the bottom 90% hold the remaining 15% of the world's total wealth,
• top 30% of adults hold 97% of the total wealth.

Wealth distribution pyramid in 2020

In 2020, Credit Suisse created an updated wealth pyramid infographic. The infographic was constructed similarly to the pyramid in 2013, thus personal assets were calculated in net worth. In 2020, Credit Suisse estimated that approximately 2.88 billion people (55% of adult population) have wealth below US$10,000. Further, 1.7 billion individuals (38.2% of adult population) have wealth within the range of 10,000 – US$100,000. To continue, 583 million people have wealth within the range of 100,000 – US$1,000,000 and approximately 56 million people (1.1% of adult population) have wealth over US$1,000,000.

Comparison of 2013 and 2020 pyramids

Vast differences between 2013 and 2020 infographic can be observed. For the first time, more than 1% of all global adults have wealth over US$1,000,000. Credit Suisse explains in the ‘Global Wealth Report 2021’, that this increase reflects the economic disruption caused by the pandemic and disconnect between the improvement in the financial and real assets of households. However, the biggest difference can be seen in the 10,000 – US$100,000 segment. Since 2013, there had been an increase of almost 10% of total adult population. According to Credit Suisse, the number of adults in this segment tripled since 2000. Credit Suisse explains this fact by stating that this increase was a result of growing prosperity of emerging economies, especially China, and the expansion of the middle class in the developing world. The upper-middle segment, with wealth in a range of 100,000 – US$1,000,000 has increased by 3.4%. Credit Suisse in the report states that the middle class in developed countries typically belong to this group.

Wealth outlook for 2020-2025

According to the ‘Global wealth Report 2021’, published by Credit Suisse, global wealth is projected to rise by 39% over the next five years reaching USD 583 trillion by 2025. Wealth per adult is also projected to increase by 31% and so is the number of global millionaires. The wealth pyramid, an infographic used to determine wealth distribution, will also change. The bottom segment covering adults with a net worth below USD 10,000 will likely decrease by approximately 108 million over the next five years. The lower-middle segment of the pyramid containing adults with a net worth in the range of USD 10,000 and USD 100,000 is projected to rise by 237 million adults. Most of these new members are most likely to be from lower-income countries. The upper-middle segment, consisting of adults with wealth between USD 100,000 and USD 1 million is projected to rise by 178 million adults. Most of these new members (approximately 114 million) are likely to come from upper-middle-income countries. Number of global millionaires is also projected to increase. According to the estimates made by Credit Suisse, the number of global millionaires could exceed 84 million by 2025, a rise of almost 28 million from 2020. The increase of millionaires will not only occur in developed countries such as the USA or other developed countries in Europe, but it is also expected to rapidly increase in lower-income countries. The biggest increase is expected in China, with a change of 92.7%, which is about 4.8 million new dollar millionaires. As a consequence, the number of Ultra High Net Worth Individuals (UHNWI) with net worth exceeding USD 50 million, will also increase.

Gini Coefficient

Gini coefficient is often used to determine wealth inequality. According to the Credit Suisse ‘Global wealth Report 2021’, Brunei had the highest Gini coefficient in 2021 (91.6%), therefore the wealth distribution in Brunei is vastly unequal. Slovenia had the lowest Gini coefficient in 2021 (50.3%) out of all countries, which makes Slovenia the most equal country in terms of wealth distribution. When compared to the report made by Credit Suisse in 2019, an increasing trend of wealth inequality can be observed. This may be the result of repercussions of the Covid-19 pandemic. The biggest increase was recorded in Brazil. The Gini coefficient in 2019 was 88.2% and 89% in 2021, with an increase of 0.8% over this period.

This table was created from information provided by the Credit Suisse Research Institute's "Global Wealth Databook", Table 3-1, published 2021.

Country	Adults (In 1,000)	Wealth per adult (USD)		Distribution of adults (%) by wealth range (USD)				Gini (%)
		Mean	Median	Under 10k	10k – 100k	100k – 1M	Over 1M
Afghanistan	18,356	1,744	734	97.6	2.4	0.1	0.0	72.8
Albania	2,187	30,524	15,363	41.0	54.2	4.7	0.1	68.2
Algeria	27,620	8,871	2,302	87.0	11.7	1.2	0.1	84.8
Angola	14,339	3,529	1,131	93.5	6.2	0.2	0.0	80.6
Argentina	30,799	7,224	2,157	88.2	11.2	0.6	0.0	81.2
Armenia	2,176	22,573	9,411	52.3	44.0	3.5	0.1	73.0
Australia	19,159	483,755	238,072	9.8	20.7	60.0	9.4	65.6
Austria	7,271	290,348	91,833	14.2	36.9	44.1	4.8	73.5
Azerbaijan	7,155	11,926	5,022	73.5	25.2	1.3	0.0	72.7
Bahamas	278	56,737	7,507	54.0	39.7	5.7	0.6	91.4
Bahrain	1,318	87,559	14,520	45.0	48.0	6.1	0.9	88.9
Bangladesh	106,060	7,837	3,062	84.6	14.6	0.7	0.0	75.2
Barbados	221	63,261	21,071	41.0	46.0	12.4	0.6	80.4
Belarus	7,367	23,278	12,168	45.9	51.3	2.8	0.1	66.7
Belgium	8,993	351,327	230,548	11.9	20.1	62.3	5.7	60.3
Belize	245	10,364	3,015	82.0	16.6	1.4	0.0	83.4
Benin	5,839	2,558	890	95.6	4.3	0.1	0.0	78.2
Bolivia	7,088	12,286	3,804	78.1	20.5	1.3	0.1	81.0
Bosnia and Herzegovina	2,637	30,597	15,283	41.0	54.1	4.8	0.1	68.6
Botswana	1,358	15,598	3,680	80.0	16.8	3.1	0.1	87.3
Brazil	153,307	18,272	3,469	79.5	17.5	2.8	0.1	89.0
British Caribbean	567	45,109	14,684	44.0	47.7	7.9	0.4	80.8
Brunei	309	39,098	5,122	64.0	32.1	3.5	0.4	91.6
Bulgaria	5,586	36,443	17,403	38.7	54.9	6.2	0.2	70.1
Burkina Faso	9,480	1,681	622	98.0	1.9	0.1	0.0	76.8
Burundi	5,381	728	281	99.5	0.5	0.0	0.0	75.1
Cambodia	10,180	5,895	2,031	90.7	8.7	0.6	0.0	78.7
Cameroon	12,716	3,042	941	94.3	5.5	0.2	0.0	81.6
Canada	29,934	332,323	125,688	20.7	25.1	48.6	5.6	71.9
Central African Republic	2,161	840	212	98.8	1.2	0.0	0.0	85.9
Chad	7,059	1,117	355	98.7	1.3	0.1	0.0	80.6
Chile	14,259	53,591	17,747	39.1	51.6	8.8	0.5	79.7
China	1,104,956	67,771	24,067	20.9	66.1	12.5	0.5	70.4
Colombia	35,612	16,928	4,854	72.0	25.4	2.5	0.1	82.7
Comoros	447	5,397	1,466	91.5	7.9	0.6	0.0	84.8
Congo, Dem. Rep.	39,740	1,240	356	98.3	1.6	0.1	0.0	83.2
Congo, Rep.	2,707	2,180	582	95.6	4.2	0.1	0.0	84.7
Costa Rica	3,696	44,337	14,662	44.0	47.4	8.4	0.3	79.9
Croatia	3,303	69,140	34,945	27.0	57.0	15.5	0.5	68.5
Cyprus	679	142,304	35,300	23.0	57.0	18.3	1.7	80.7
Czechia	8,528	78,103	23,794	29.6	55.7	14.0	0.7	77.7
Denmark	4,557	376,069	165,622	15.4	25.4	52.5	6.7	73.6
Djibouti	618	3,112	1,077	94.0	6.0	0.0	0.0	78.8
Dutch Caribbean	258	40,909	16,810	40.0	52.7	7.1	0.2	69.1
Ecuador	11,361	17,151	5,444	69.9	27.9	2.1	0.1	80.8
Egypt	59,547	19,468	6,329	66.5	30.7	2.6	0.1	79.2
El Salvador	4,201	34,003	11,372	47.6	46.0	6.2	0.2	79.1
Equatorial Guinea	776	18,246	4,561	77.0	18.8	4.1	0.1	86.3
Eritrea	1,728	2,846	1,086	95.2	4.7	0.1	0.0	75.7
Estonia	1,044	77,817	38,901	30.5	53.5	15.3	0.7	73.8
Ethiopia	57,104	3,540	1,527	94.4	5.4	0.2	0.0	71.1
Fiji	564	15,708	5,764	69.0	28.3	2.6	0.1	77.4
Finland	4,373	167,711	73,775	27.8	35.2	35.1	1.9	74.0
France	49,967	299,355	133,559	14.8	27.0	53.3	4.9	70.0
French Caribbean	631	68,443	23,740	36.0	44.0	19.5	0.5	73.8
Gabon	1,216	13,696	4,685	74.0	24.5	1.4	0.1	79.3
Gambia	1,115	2,500	658	94.9	4.9	0.2	0.0	84.9
Georgia	2,959	14,162	4,223	77.7	20.7	1.5	0.1	81.3
Germany	68,015	268,681	65,374	10.6	45.2	39.8	4.3	77.9
Ghana	16,617	6,132	2,198	88.5	11.1	0.4	0.0	77.5
Greece	8,462	104,603	57,595	22.1	49.3	27.7	0.9	65.7
Guinea	6,078	2,942	938	94.5	5.4	0.2	0.0	80.8
Guinea-Bissau	949	1,828	670	97.0	3.0	0.0	0.0	77.6
Guyana	497	12,280	4,637	74.0	24.6	1.4	0.0	76.5
Haiti	6,621	767	193	99.2	0.7	0.0	0.0	85.2
Hong Kong	6,292	503,335	173,768	13.7	23.7	54.3	8.3	74.6
Hungary	7,769	53,664	24,126	21.4	67.6	10.7	0.3	66.5
Iceland	255	337,787	231,462	6.0	18.0	70.7	5.3	50.9
India	900,443	14,252	3,194	77.2	21.1	1.7	0.1	82.3
Indonesia	180,782	17,693	4,693	67.2	30.8	1.9	0.1	77.7
Iran	57,987	22,249	7,621	59.1	37.1	3.7	0.1	78.6
Iraq	21,247	14,506	6,378	68.3	30.1	1.6	0.1	71.0
Ireland	3,619	266,153	99,028	30.8	19.7	44.5	5.0	80.0
Israel	5,626	228,268	80,315	15.8	41.2	40.1	2.9	73.4
Italy	49,746	239,244	118,885	15.5	30.1	51.4	3.0	66.5
Jamaica	2,041	19,893	5,976	66.7	30.3	2.9	0.1	82.0
Japan	104,953	256,596	122,980	11.0	32.6	52.9	3.5	64.4
Jordan	5,866	28,316	10,842	48.3	47.1	4.5	0.2	75.9
Kazakhstan	12,226	33,463	12,029	46.3	49.3	4.2	0.2	76.4
Kenya	27,473	12,313	3,683	79.6	18.8	1.5	0.1	82.2
Korea, South	42,490	211,369	89,671	14.8	38.3	44.4	2.5	67.6
Kuwait	3,146	129,890	28,698	42.8	44.0	10.7	2.5	86.5
Kyrgyzstan	3,927	5,816	2,238	89.7	9.8	0.5	0.0	75.7
Laos	4,288	7,379	1,610	91.6	7.0	1.3	0.0	87.9
Latvia	1,477	70,454	33,884	36.0	50.5	12.7	0.8	80.9
Lebanon	4,548	55,007	18,159	40.6	50.5	8.4	0.5	79.7
Lesotho	1,243	1,226	264	97.8	2.2	0.1	0.0	88.6
Liberia	2,502	4,453	1,464	91.9	7.8	0.3	0.0	80.1
Libya	4,440	17,198	6,512	67.0	31.0	1.9	0.1	76.0
Lithuania	2,166	63,500	29,679	29.3	58.0	12.2	0.5	71.0
Luxembourg	498	477,306	259,899	13.0	19.0	59.2	8.8	67.0
Madagascar	13,812	1,962	666	96.9	3.0	0.1	0.0	79.3
Malawi	8,887	2,045	606	96.2	3.7	0.1	0.0	82.4
Malaysia	22,315	29,287	8,583	55.0	41.1	3.7	0.2	82.9
Maldives	409	25,511	8,519	56.0	39.3	4.5	0.2	79.8
Mali	8,625	2,424	869	96.0	3.9	0.1	0.0	77.6
Malta	358	148,934	84,390	13.0	45.0	40.6	1.4	61.7
Mauritania	2,370	2,788	1,037	95.2	4.7	0.1	0.0	76.3
Mauritius	968	63,372	27,456	31.0	56.0	12.5	0.5	72.1
Melanesia	711	31,106	12,183	46.0	48.6	5.2	0.2	75.8
Mexico	85,136	42,689	13,752	44.7	46.9	8.1	0.3	80.5
Micronesia	341	13,193	4,876	74.0	23.9	2.1	0.0	77.9
Moldova	3,188	15,491	7,577	61.8	36.5	1.7	0.0	69.4
Mongolia	2,053	6,324	2,546	88.0	11.5	0.5	0.0	74.4
Montenegro	476	60,310	30,739	29.0	57.0	13.6	0.4	68.4
Morocco	24,654	13,459	3,874	78.4	19.7	1.9	0.1	81.9
Mozambique	14,186	1,003	345	98.9	1.0	0.1	0.0	79.1
Myanmar	35,734	5,025	2,458	91.7	8.0	0.3	0.0	67.0
Namibia	1,375	15,294	3,677	80.5	16.4	3.0	0.1	86.6
Nepal	17,887	4,056	1,437	93.3	6.3	0.3	0.0	78.1
Netherlands	13,462	377,092	136,105	13.6	29.4	49.3	7.7	75.3
New Zealand	3,600	348,198	171,624	21.2	20.0	52.5	6.3	69.9
Nicaragua	4,107	12,239	3,694	78.2	20.5	1.3	0.1	81.0
Niger	9,739	1,287	492	98.7	1.3	0.1	0.0	75.6
Nigeria	95,931	6,451	1,474	91.7	7.6	0.7	0.0	85.8
Norway	4,184	275,880	117,798	28.0	19.0	48.8	4.2	78.5
Oman	3,765	39,434	9,886	50.5	43.1	6.0	0.4	86.7
Pakistan	123,522	5,258	2,187	90.5	9.2	0.4	0.0	73.2
Panama	2,843	43,979	13,147	45.3	46.6	7.8	0.3	82.5
Papua New Guinea	4,941	6,710	1,790	91.3	7.7	1.0	0.0	84.3
Paraguay	4,454	11,962	3,644	78.8	19.9	1.2	0.1	81.6
Peru	22,530	17,017	5,445	70.4	27.4	2.1	0.1	80.1
Philippines	66,960	15,290	3,155	83.1	14.8	2.0	0.1	86.9
Poland	30,315	67,477	23,550	19.8	64.8	14.9	0.5	70.7
Polynesia	423	37,998	14,076	44.0	49.3	6.4	0.3	77.9
Portugal	8,339	142,537	61,306	23.2	45.1	30.0	1.6	70.5
Qatar	2,396	146,730	83,680	12.0	45.3	41.7	1.0	58.1
Romania	15,208	50,009	23,675	32.1	58.5	9.1	0.3	70.1
Russia	111,845	27,162	5,431	72.8	23.8	3.1	0.2	87.8
Rwanda	6,581	4,188	1,266	92.8	6.9	0.3	0.0	81.9
Sao Tome and Principe	104	4,029	1,702	92.4	7.3	0.2	0.0	73.1
Saudi Arabia	24,186	68,697	15,495	46.4	44.4	8.2	1.0	86.7
Senegal	7,975	4,702	1,570	91.4	8.3	0.3	0.0	79.7
Serbia	5,480	31,705	14,954	41.7	52.9	5.3	0.1	70.6
Seychelles	69	63,427	24,651	36.0	51.0	12.5	0.5	75.9
Sierra Leone	3,937	995	370	99.0	0.9	0.0	0.0	76.7
Singapore	4,887	332,995	86,717	16.2	38.6	39.7	5.5	78.3
Slovakia	4,346	68,059	45,853	11.6	69.8	18.4	0.2	50.3
Slovenia	1,672	120,173	67,961	18.0	53.0	28.2	0.8	67.1
South Africa	37,590	20,308	4,523	75.8	20.2	3.9	0.2	88.0
Spain	37,798	227,122	105,831	16.7	31.6	48.6	3.0	69.2
Sri Lanka	14,732	23,832	8,802	54.3	42.0	3.7	0.1	76.8
Sudan	21,941	1,014	383	99.0	0.9	0.1	0.0	75.9
Suriname	382	5,644	1,349	91.2	8.1	0.7	0.0	87.1
Sweden	7,794	336,166	89,846	34.0	18.4	40.3	7.3	87.2
Switzerland	6,958	673,962	146,733	11.9	33.7	43.2	11.2	78.1
Syria	10,811	2,197	807	96.3	3.6	0.1	0.0	77.2
Taiwan	19,633	238,862	93,044	13.9	38.6	44.4	3.1	70.8
Tajikistan	5,227	4,390	1,844	92.4	7.3	0.3	0.0	73.1
Tanzania	27,744	3,647	1,433	93.7	6.1	0.2	0.0	74.5
Thailand	54,054	25,292	8,036	55.5	41.9	2.5	0.2	77.1
Timor-Leste	689	5,185	2,838	91.4	8.3	0.3	0.0	62.6
Togo	4,084	1,484	468	98.0	2.0	0.1	0.0	81.2
Trinidad and Tobago	1,032	44,182	15,649	42.5	49.0	8.2	0.3	78.0
Tunisia	8,207	17,550	6,177	67.4	30.2	2.3	0.1	77.8
Turkey	57,768	27,466	8,001	57.6	38.8	3.4	0.2	81.8
Turkmenistan	3,722	20,328	9,030	54.0	43.2	2.7	0.1	70.6
Uganda	19,830	1,994	646	96.6	3.3	0.1	0.0	80.4
Ukraine	34,639	13,104	2,529	79.1	19.5	1.3	0.1	84.4
United Arab Emirates	8,053	115,476	21,613	45.1	46.0	6.8	2.1	88.8
United Kingdom	52,568	290,754	131,522	18.0	27.8	49.5	4.7	71.7
United States	249,969	505,421	79,274	26.3	28.5	36.4	8.8	85.0
Uruguay	2,530	60,914	22,088	37.0	51.3	11.2	0.4	77.2
Venezuela	18,359	21,040	7,341	60.5	36.8	2.5	0.1	78.1
Vietnam	68,565	14,075	4,559	76.3	21.9	1.8	0.1	80.2
Yemen	15,281	5,581	1,223	93.0	6.2	0.8	0.0	88.0
Zambia	8,331	3,068	692	94.3	5.5	0.2	0.0	87.7
Zimbabwe	7,086	7,131	2,356	86.9	12.5	0.6	0.0	79.8

Geographical distribution

Main articles: World distribution of wealth, List of countries by distribution of wealth, and List of countries by income equality

Wealth is unevenly distributed across different world regions. At the end of the 20th century, wealth was concentrated among the G8 and Western industrialized nations, along with several Asian and OPEC nations. In the 21st century, wealth is still concentrated among the G8 with United States of America leading with 30.2%, along with other developed countries, several Asia-pacific countries and OPEC countries.

Countries by total wealth (trillions USD), Credit Suisse

• 
  World distribution of wealth by country (PPP)
• 
  World distribution of wealth by region (PPP)
• 
  World distribution of wealth by country (exchange rates)
• 
  World distribution of wealth by region (exchange rates)

Worlds regions by total wealth (in trillions USD), 2018

By region

Region	Proportion of world (%)
	Population	Net worth		GDP
		PPP	Exchange rates	PPP	Exchange rates
North America	5.2	27.1	34.4	23.9	33.7
Central/South America	8.5	6.5	4.3	8.5	6.4
Europe	9.6	26.4	29.2	22.8	32.4
Africa	10.7	1.5	0.5	2.4	1.0
Middle East	9.9	5.1	3.1	5.7	4.1
Asia	52.2	29.4	25.6	31.1	24.1
Other	3.2	3.7	2.6	5.4	3.4
Totals (rounded)	100%	100%	100%	100%	100%

World distribution of financial wealth. In 2007, 147 companies controlled nearly 40 percent of the monetary value of all transnational corporations.

In the United States

See also: Wealth inequality in the United States, Income inequality in the United States, and Affluence in the United States

 

Net personal wealth in the U.S. since 1962

The average personal wealth of people in the top 1% is more than a thousand times that of people in bottom 50%.

 

The logarithmic scale shows how wealth has increased for all percentile groups, though more so for wealthier people.

Average net worth—which heavily weights extremely high-wealth families—substantially exceeds median net worth (families in the fiftieth percentile). Further, average net worth outgrew median net worth from 2019 through 2022.

According to PolitiFact, in 2011 the 400 wealthiest Americans "have more wealth than half of all Americans combined." Inherited wealth may help explain why many Americans who have become rich may have had a "substantial head start". In September 2012, according to the Institute for Policy Studies, "over 60 percent" of the Forbes richest 400 Americans "grew up in substantial privilege".

In 2007, the richest 1% of the American population owned 34.6% of the country's total wealth (excluding human capital), and the next 19% owned 50.5%. The top 20% of Americans owned 85% of the country's wealth and the bottom 80% of the population owned 15%. From 1922 to 2010, the share of the top 1% varied from 19.7% to 44.2%, the big drop being associated with the drop in the stock market in the late 1970s. Ignoring the period where the stock market was depressed (1976–1980) and the period when the stock market was overvalued (1929), the share of wealth of the richest 1% remained extremely stable, at about a third of the total wealth. Financial inequality was greater than inequality in total wealth, with the top 1% of the population owning 42.7%, the next 19% of Americans owning 50.3%, and the bottom 80% owning 7%. However, after the Great Recession which started in 2007, the share of total wealth owned by the top 1% of the population grew from 34.6% to 37.1%, and that owned by the top 20% of Americans grew from 85% to 87.7%. The Great Recession also caused a drop of 36.1% in median household wealth but a drop of only 11.1% for the top 1%, further widening the gap between the 1% and the 99%.

Dan Ariely and Michael Norton show in a study (2011) that US citizens across the political spectrum significantly underestimate the current US wealth inequality and would prefer a more egalitarian distribution of wealth, raising questions about ideological disputes over issues like taxation and welfare.

Wealth proportion by population by year (including homes)

Year	Bottom 99%	Top 1%
1922	63.3%	36.7%
1929	55.8%	44.2%
1933	66.7%	33.3%
1939	63.6%	36.4%
1945	70.2%	29.8%
1949	72.9%	27.1%
1953	68.8%	31.2%
1962	68.2%	31.8%
1965	65.6%	34.4%
1969	68.9%	31.1%
1972	70.9%	29.1%
1976	80.1%	19.9%
1979	79.5%	20.5%
1981	75.2%	24.8%
1983	69.1%	30.9%
1986	68.1%	31.9%
1989	64.3%	35.7%
1992	62.8%	37.2%
1995	61.5%	38.5%
1998	61.9%	38.1%
2001	66.6%	33.4%
2004	65.7%	34.3%
2007	65.4%	34.6%
2010	64.6%	35.4%

Wealth inequality in the United States increased from 1989 to 2013.

Wealth concentration

Wealth concentration is a process by which created wealth, under some conditions, can become concentrated by individuals or entities. Those who hold wealth have the means to invest in newly created sources and structures of wealth, or to otherwise leverage the accumulation of wealth, and are thus the beneficiaries of even greater wealth.

Economic conditions

Global share of wealth by wealth group

The first necessary condition for the phenomenon of wealth concentration to occur is an unequal initial distribution of wealth. The distribution of wealth throughout the population is often closely approximated by a Pareto distribution, with tails which decay as a power-law in wealth. (See also: Distribution of wealth and Economic inequality). According to PolitiFact and others, the 400 wealthiest Americans had "more wealth than half of all Americans combined." Inherited wealth may help explain why many Americans who have become rich may have had a "substantial head start". In September 2012, according to the Institute for Policy Studies, "over 60 percent" of the Forbes 400 Richest Americans "grew up in substantial privilege".

The second condition is that a small initial inequality must, over time, widen into a larger inequality. This is an example of positive feedback in an economic system. A team from Jagiellonian University produced statistical model economies showing that wealth condensation can occur whether or not total wealth is growing (if it is not, this implies that the poor could become poorer).

Joseph E. Fargione, Clarence Lehman and Stephen Polasky demonstrated in 2011 that chance alone, combined with the deterministic effects of compounding returns, can lead to unlimited concentration of wealth, such that the percentage of all wealth owned by a few entrepreneurs eventually approaches 100%.

Correlation between being rich and earning more

Given an initial condition in which wealth is unevenly distributed (i.e., a "wealth gap"), several non-exclusive economic mechanisms for wealth condensation have been proposed:

• A correlation between being rich and being given high-paid employment (oligarchy).
• A marginal propensity to consume low enough that high incomes are correlated with people who have already made themselves rich (meritocracy).
• The ability of the rich to influence government disproportionately to their favor thereby increasing their wealth (plutocracy).

In the first case, being wealthy gives one the opportunity to earn more through high paid employment (e.g., by going to elite schools). In the second case, having high paid employment gives one the opportunity to become rich (by saving your money). In the case of plutocracy, the wealthy exert power over the legislative process, which enables them to increase the wealth disparity. An example of this is the high cost of political campaigning in some countries, in particular in the US (more generally, see also plutocratic finance).

Because these mechanisms are non-exclusive, it is possible for all three explanations to work together for a compounding effect, increasing wealth concentration even further. Obstacles to restoring wage growth might have more to do with the broader dysfunction of a dollar dominated political system particular to the US than with the role of the extremely wealthy.

Counterbalances to wealth concentration include certain forms of taxation, in particular wealth tax, inheritance tax and progressive taxation of income. However, concentrated wealth does not necessarily inhibit wage growth for ordinary workers with low wages.

Markets with social influence

Product recommendations and information about past purchases have been shown to influence consumers choices significantly whether it is for music, movie, book, technological, and other type of products. Social influence often induces a rich-get-richer phenomenon (Matthew effect) where popular products tend to become even more popular.

Redistribution of wealth and public policy

See also: Redistribution of income and wealth and Wealth distribution by country

In many societies, attempts have been made, through property redistribution, taxation, or regulation, to redistribute wealth, sometimes in support of the upper class, and sometimes to diminish economic inequality.

Examples of this practice go back at least to the Roman republic in the third century B.C., when laws were passed limiting the amount of wealth or land that could be owned by any one family. Motivations for such limitations on wealth include the desire for equality of opportunity, a fear that great wealth leads to political corruption, to the belief that limiting wealth will gain the political favor of a voting bloc, or fear that extreme concentration of wealth results in rebellion. Various forms of socialism attempt to diminish the unequal distribution of wealth and thus the conflicts and social problems arising from it.

During the Age of Reason, Francis Bacon wrote "Above all things good policy is to be used so that the treasures and monies in a state be not gathered into a few hands… Money is like fertilizer, not good except it be spread."

The rise of Communism as a political movement has partially been attributed to the distribution of wealth under capitalism in which a few lived in luxury while the masses lived in extreme poverty or deprivation. However, in the Critique of the Gotha Program, Marx and Engels criticized German Social Democrats for placing emphasis on issues of distribution instead of on production and ownership of productive property. While the ideas of Marx have nominally influenced various states in the 20th century, the Marxist notions of socialism and communism remains elusive.

On the other hand, the combination of labor movements, technology, and social liberalism has diminished extreme poverty in the developed world today, though extremes of wealth and poverty continue in the Third World.

In the Outlook on the Global Agenda 2014 from the World Economic Forum the widening income disparities come second as a worldwide risk. According to a 2009 meta-analysis by Paul and Moser, countries with high income inequality and poor unemployment protections experience worse mental health outcomes among the unemployed.

Redistribution of income and wealth

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Redistribution_of_income_and_wealth

 

Redistribution of income and wealth is the transfer of income and wealth (including physical property) from some individuals to others through a social mechanism such as taxation, welfare, public services, land reform, monetary policies, confiscation, divorce or tort law. The term typically refers to redistribution on an economy-wide basis rather than between selected individuals.

Interpretations of the phrase vary, depending on personal perspectives, political ideologies and the selective use of statistics. It is frequently used in politics, to refer to perceived redistribution from those who have more to those who have less.

Occasionally, albeit rarely, the term is used to describe laws or policies that cause redistribution in the opposite direction, from the poor to the rich.

The phrase is often coupled with the term class warfare, with high-income earners and the wealthy portrayed as perpetrators of unfairness and discrimination.

Redistribution tax policy should not be confused with predistribution policies. "Predistribution" is the idea that the state should try to prevent inequalities from occurring in the first place rather than through the tax and benefits system once they have occurred. For example, a government predistribution policy might require employers to pay all employees a living wage and not just a minimum wage, as a "bottom-up" response to widespread income inequalities or high poverty rates.

Many alternate taxation proposals have been floated without the political will to alter the status quo. One example is the proposed "Buffett Rule", which is a hybrid taxation model composed of opposing systems intended to minimize the favoritism of special interests in tax design.

The effects of a redistributive system are actively debated on ethical and economic grounds. The subject includes an analysis of its rationales, objectives, means, and policy effectiveness.

History

In ancient times, redistribution operated as a palace economy. These economies were centrally based around the administration, meaning the dictator or pharaoh had both the ability and the right to say who was taxed and who received special treatment.

Another early form of wealth redistribution occurred in Plymouth Colony under the leadership of William Bradford. Bradford recorded in his diary that this "common course" bred confusion, discontent, distrust, and the colonists looked upon it as a form of slavery.

A closely related term, distributism (also known as distributionism or distributivism), refers to an economic ideology that developed in Europe in the late 19th and early 20th century. It was based on the principles of Catholic social teaching, particularly the teachings of Pope Leo XIII in his encyclical Rerum Novarum and Pope Pius XI in Quadragesimo Anno. More recently, Pope Francis echoed the earlier Papal statements in his Evangelii Gaudium.

Role in economic systems

Different types of economic systems feature varying degrees of interventionism aimed at redistributing income, depending on how unequal their initial distributions are. Free-market capitalist economies tend to feature high degrees of income redistribution. However, Japan's government engages in much less redistribution because its initial wage distribution is much more equal than Western economies. Likewise, the socialist planned economies of the former Soviet Union and Eastern bloc featured very little income redistribution because private capital and land income were restricted. To attain an efficient allocation of resources with the desired distribution of income, if the assumptions of the competitive model are satisfied by the economy, the sole role of the government is to alter the initial distribution of wealth – the major drivers of income inequality in capitalist systems – was virtually nonexistent; and because the wage rates were set by the government in these economies.

A comparison between Socialist and Capitalist Systems in terms of distribution of income is much easier as both these systems stand practically implemented in a number of countries under compatible political systems. Inequality in almost all the Eastern European economies has increased after moving from socialist controlled systems to market-based economies.

For the Islamic distribution, the following are the three key elements of the Islamic Economic System, which have significant implications for the distribution of income and wealth (if fully implemented) and are markedly different from Capitalism. The Islamic system is defined by the following three key elements: Ushr and Zakat, the prohibition of usury, and the Inheritance Law. Ushr is an obligatory payment from agriculture output at the time of harvesting. If agricultural land is irrigated by rain or some other natural freely available water the producer is obliged to pay ten percent of the output as Ushr.

In case irrigation water is not free of cost then the deduction would be five percent, while Zakat is a major instrument of restricting the excessive accumulation of wealth and helping the poor and most vulnerable members of the society, Secondly, usury, or charging interest, is prohibited. Elimination of interest from the economic system is a revolutionary step with profound effects on all spheres of economic activities. Finally, the Inheritance Law Of Islam is the distribution of the property of a deceased person from closest family members and moving towards a more distant family. Son(s), daughter(s), wife, husband and parents are the prime recipients. This distribution is explicitly illustrated in Qur’an and cannot be changed or modified. Under varying conditions, the share received by different relatives accordingly changes. The important principle is that the owner at the time of his/her death cannot change these shares. 

How views on redistribution are formed

The context that a person is in can influence their views on redistributive policies. For example, despite both being Western civilizations, typical Americans and Europeans do not have the same views on redistribution policies. This phenomenon persists even among people who would benefit most from redistributive policies, as poor Americans tend to favor redistributive policy less than equally poor Europeans. Research shows this is because when a society has a fundamental belief that those who work hard will earn rewards from their work, the society will favor lower redistributive policies. However, when a society as a whole believes that some combination of outside factors, such as luck or corruption, can contribute to determining one's wealth, those in the society will tend to favor higher redistributive policies. This leads to fundamentally different ideas of what is ‘just’ or fair in these countries and influences their overall views on redistribution.  

Another context that can influence one's ideas of redistributive policies is the social class that one is born into. People tend to favor redistributive policy that will help the groups that they are a member of.  This is displayed in a study of Latin American lawmakers, where it is shown that lawmakers born into a lower social class tend to favor more redistributive policies than their counterparts born into a higher social class. Research has also found that women generally support redistribution more than men do, though the strength of this preference varies across countries. While literature remains mixed on if monetary gain is the true motivation behind favoring redistributive policies, most researchers accept that social class plays some role in determining someone's views towards redistributive policies. Nonetheless, the classic theory that individual preferences for redistribution decrease with their income, leading to societal preferences for redistribution that increase with income inequality has been disputed. Perhaps the most important impact of government on the distribution of “wealth” is in the sphere of education—in ensuring that everyone has a certain amount of human capital. By providing all individuals, regardless of the wealth of their parents, with a free basic education, government reduces the degree of inequality that otherwise would exist.

Income inequality has many different connotations, three of which are of particular importance:

1. The moral dimension, which leads into the discussion of human rights. What kinds of reasons should a society accept for the emergence or existence of inequality and how much inequality between its members is reconcilable with the right of each individual to human dignity?
2. The second dimension links inequality to political stability. How much inequality can a society endure before a significant number of its members begin to reject the existing pattern of distribution and demand fundamental changes? In societies with very rigid forms of the income distribution, this may easily lead to public protest, if not violence. Authorities are then faced with the option of reacting to protests with repression or reform. In societies with flexible tools of negotiation and bargaining on income, smoother mechanisms of adaptation may be available.
3. The third dimension – in many cases the dominant pattern in the social debate – links inequality to economic performance. Individuals who achieve more and perform better deserve a higher income. If everybody is treated the same, the overall willingness to work may decline. The argument includes the scarcity of skills. Societies have to provide incentives to ensure that talents and education are allocated to jobs where they are needed most. Not many people doubt the general accuracy of these arguments – but nobody has ever shown how to correctly measure performance and how to find an objective way of linking it to the prevailing level of the income distribution. Inequality is needed – to some extent – but nobody knows how much of it is good.

Inequality in developing countries

The existence of high inequality within many developing countries, alongside persistent poverty, began to draw attention in the early 1970s. However, throughout the 1980s and into the 1990s, the dominant view among development economists was that inequality in poor countries was a less pressing issue compared to ensuring sufficient growth, which was believed to be the primary means of reducing poverty. The policy recommendation for developing countries was clear: it was not possible to simultaneously decrease poverty and inequality. This perspective was based on the belief that economic growth would eventually lead to a trickle-down effect, where the benefits of growth would eventually reach the poorest members of society. However, evidence began to emerge in the 1990s that challenged this notion and suggested that the link between economic growth and poverty reduction was not as strong as previously thought. This shift in thinking led to a reconsideration of the importance of addressing inequality in the pursuit of development.

Modern forms of redistribution

The redistribution of wealth and its practical application are bound to change with the continuous evolution of social norms, politics, and culture. Within developed countries income inequality has become a widely popular issue that has dominated the debate stage for the past few years. The importance of a nation's ability to redistribute wealth in order to implement social welfare programs, maintain public goods, and drive economic development has brought various conversations to the political arena. A country's means of redistributing wealth comes from the implementation of a carefully thought out well described system of taxation. The implementation of such a system would aid in achieving the desired social and economic objective of diminishing social inequality and maximizing social welfare. There are various ways to impose a tax system that will help create a more efficient allocation of resources, in particular, many democratic, even socialist governments utilize a progressive system of taxation to achieve a certain level of income redistribution. In addition to the creation and implementation of these tax systems, "globalization of the world economy [has] provided incentives for reforming the tax systems" across the globe. Along with utilizing a system of taxation to achieve the redistribution of wealth, the same socio-economic benefit can be achieved if there are appropriate policies enacted within a current political infrastructure that addresses these issues. Modern thinking towards the topic of the redistribution of wealth, focuses on the concept that economic development increases the standard of living across an entire society.

Today, income redistribution occurs in some form in most democratic countries, through economic policies. Some redistributive policies attempt to take wealth, income, and other resources from the "haves" and give them to the "have-nots", but many redistributions go elsewhere.

Progressive Income Tax

For example, the U.S. government's progressive-rate income tax policy is redistributive because much tax revenue goes to social programs such as welfare and Medicare.

In a progressive income tax system, a high income earner will pay a higher tax rate (a larger percentage of their income) than a low income earner; and therefore, will pay more total dollars per person.

Other taxation-based methods of redistributing income are the negative income tax for very low income earners and tax loopholes (tax avoidance) for the better-off.

Government Redistribution

Two other common types of governmental redistribution of income are subsidies and vouchers (such as food stamps or Section-8 housing vouchers). These transfer payment programs are funded through general taxation, but benefit the poor or influential special interest groups and corporations. While the persons receiving transfers from such programs may prefer to be directly given cash, these programs may be more palatable to society than cash assistance, as they give society some measure of control over how the funds are spent.

Benefit redistribution

In addition to having a progressive tax rate, the U.S. Social Security system also redistributes wealth to the poor via its highly progressive benefit formula.

Governmental redistribution of income may include a direct benefit program involving either cash transfers or the purchase of specific services for an individual. Medicare is one example. Medicare is a government-run health insurance program that covers people age 65 or older, certain younger people with disabilities, and people with end-stage renal disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD). This is a direct benefit program because the government is directly providing health insurance for those who qualify.

Gini Index

The difference between the Gini index for the income distribution before taxation and the Gini index after taxation is an indicator for the effects of such taxation.

Property redistribution

Wealth redistribution can be implemented through land reform that transfers ownership of land from one category of people to another, or through inheritance taxes, land value taxes or a broader wealth tax on assets in general. Before-and-after Gini coefficients for the distribution of wealth can be compared.

Interventions like rent control can impose large costs. Some alternative forms of interventions, such as housing subsidies, may achieve comparable distributional objectives at less cost. If the government cannot costlessly redistribute, it should look for efficient ways of redistributing—that is, ways that reduce the costs as much as possible. This is one of the main concerns of the branch of economics called the economics of the public sector.

Class analysis

One study suggests that "the middle class faces a paradoxical status" in that they tend to vote against income redistribution, even though they would benefit economically from it.

Objectives

The objectives of income redistribution are to increase economic stability and opportunity for the less wealthy members of society and thus usually include the funding of public services.

One basis for redistribution is the concept of distributive justice, whose premise is that money and resources ought to be distributed in such a way as to lead to a socially just, and possibly more financially egalitarian, society. Another argument is that a larger middle class benefits an economy by enabling more people to be consumers, while providing equal opportunities for individuals to reach a better standard of living. Seen for example in the work of John Rawls, another argument is that a truly fair society would be organized in a manner benefiting the least advantaged, and any inequality would be permissible only to the extent that it benefits the least advantaged.

Some proponents of redistribution argue that capitalism results in an externality that creates unequal wealth distribution.

Many economists have argued that wealth and income inequality are a cause of economic crises, and that reducing these inequalities is one way to prevent or ameliorate economic crises, with redistribution thus benefiting the economy overall. This view was associated with the underconsumptionism school in the 19th century, now considered an aspect of some schools of Keynesian economics; it has also been advanced, for different reasons, by Marxian economics. It was particularly advanced in the US in the 1920s by Waddill Catchings and William Trufant Foster. More recently, the so-called "Rajan hypothesis" posited that income inequality was at the basis of the explosion of the 2008 financial crisis. The reason is that rising inequality caused people on low and middle incomes, particularly in the US, to increase their debt to keep up their consumption levels with that of richer people. Borrowing was particularly high in the housing market and deregulation in the financial sector made it possible to extend lending in sub-prime mortgages. The downturn in the housing market in 2007 halted this process and triggered the financial crisis. Nobel Prize laureate Joseph Stiglitz, along with many others, supports this view.

There is currently a debate concerning the extent to which the world's extremely rich have become richer over recent decades. Thomas Piketty's Capital in the Twenty-First Century is at the forefront of the debate, mainly focusing on within-country concentration of income and wealth. Branko Milanovic provided evidence of increasing inequality at the global level, showing how the group of so-called "global plutocrats", i.e. the richest 1% in the world income distribution, were the main beneficiaries of economic growth in the period 1988–2008. More recent analysis supports this claim, as 27% of total economic growth worldwide accrued to the top 1% of the world income distribution in the period 1980–2016. The approach underpinning these analyses has been critiqued in certain publications such as The Economist.

Moral obligation

Peter Singer's argument contrasts to Thomas Pogge's in that he states we have an individual moral obligation to help the poor. The rich people who are living in the states with more redistribution, are more in favor of immigrants than poorer people, because this can make them pay less wages. 

Economic effects of inequality

See also: Effects of economic inequality on economic growth

Number of high-net-worth individuals in the world in 2011

Using statistics from 23 developed countries and the 50 states of the US, British researchers Richard G. Wilkinson and Kate Pickett show a correlation between income inequality and higher rates of health and social problems (obesity, mental illness, homicides, teenage births, incarceration, child conflict, drug use), and lower rates of social goods (life expectancy, educational performance, trust among strangers, women's status, social mobility, even numbers of patents issued per capita), on the other. The authors argue inequality leads to the social ills through the psychosocial stress, status anxiety it creates.

A 2011 report by the International Monetary Fund by Andrew G. Berg and Jonathan D. Ostry found a strong association between lower levels of inequality and sustained periods of economic growth. Developing countries (such as Brazil, Cameroon, Jordan) with high inequality have "succeeded in initiating growth at high rates for a few years" but "longer growth spells are robustly associated with more equality in the income distribution." The Industrial Revolution led to increasing inequality among nations. Some economies took off, whereas others, like many of those in Africa or Asia, remained close to a subsistence standard of living. General calculations show that the 17 countries of the world with the most-developed economies had, on average, 2.4 times the GDP per capita of the world's poorest economies in 1870. By 1960, the most developed economies had 4.2 times the GDP per capita of the poorest economies. Regarding to GDP indicator, GDP has nothing to say about the level of inequality in society. GDP per capita is only an average. When GDP per capita rises by 5%, it could mean that GDP for everyone in the society has risen by 5%, or that GDP of some groups has risen by more while that of others has risen by less—or even declined.

Criticism

Public choice theory states that redistribution tends to benefit those with political clout to set spending priorities more than those in need, who lack real influence on government.

The socialist economists John Roemer and Pranab Bardhan criticize redistribution via taxation in the context of Nordic-style social democracy, reportedly highlighting its limited success at promoting relative egalitarianism and its lack of sustainability. They point out that social democracy requires a strong labor movement to sustain its heavy redistribution, and that it is unrealistic to expect such redistribution to be feasible in countries with weaker labor movements. They point out that, even in the Scandinavian countries, social democracy has been in decline since the labor movement weakened. Instead, Roemer and Bardhan argue that changing the patterns of enterprise ownership and market socialism, obviating the need for redistribution, would be more sustainable and effective at promoting egalitarianism.

Marxian economists argue that social democratic reforms – including policies to redistribute income – such as unemployment benefits and high taxes on profits and the wealthy create more contradictions in capitalism by further limiting the efficiency of the capitalist system via reducing incentives for capitalists to invest in further production. In the Marxist view, redistribution cannot resolve the fundamental issues of capitalism – only a transition to a socialist economy can. Income redistribution will lower poverty by reducing inequality, if done properly. But it may not accelerate growth in any major way, except perhaps by reducing social tensions arising from inequality and allowing poor people to devote more resources to human and physical asset accumulation. Directly investing in opportunities for poor people is essential. 

The distribution of income that emerges from competitive markets may be very unequal. However, under the conditions of the basic competitive model, a redistribution of wealth can move the economy to a more equal allocation that is also Pareto efficient.

Capital and Ideology

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Capital_and_Ideology

Capital and Ideology

Author	Thomas Piketty
Original title	Capital et Idéologie
Translator	Arthur Goldhammer (English)
Language	French
Subjects	Political economy, economic history, economic inequality, macroeconomics
Publisher	Éditions du Seuil Harvard University Press
Publication date	12 September 2019
Published in English	March 2020
Media type	Print (Hardback)
Pages	1150 pp.
ISBN	978-2-02-133804-1 (France)

Capital and Ideology (French: Capital et Idéologie) is a 2019 book by French economist Thomas Piketty. Capital and Ideology follows Piketty's 2013 book Capital in the Twenty-First Century, which focused on wealth and income inequality in Europe and the United States.

Described by Piketty as "in large part a sequel" to its predecessor, Capital and Ideology has a wider scope, and Piketty has expressed his preference for the 2019 book. In the book, Piketty outlines potential means of redistributing wealth, and explores historical and contemporary justifications for inequality. Paul Krugman wrote of the book, "In Marxian dogma, a society's class structure is determined by underlying, impersonal forces, technology and the modes of production that technology dictates. Piketty, however, sees inequality as a social phenomenon, driven by human institutions. Institutional change, in turn, reflects the ideology that dominates society: 'Inequality is neither economic nor technological; it is ideological and political.'" Methods for redistributing wealth proposed in the book include the "inheritance for all", a payment distributed to citizens by their country at the age of 25.

Reviews

Book Marks reports an overall reception of "Positive" based on two rave reviews, six positive reviews, and six lukewarm reviews. The book has received mixed reviews from economists, scholars and pundits. The book also generated attention because Piketty refused to censor parts of it, which led to it not being published in mainland China.

Robert Shortt of RTÉ.ie rated the book four stars out of five. He wrote, “Some of his conclusions [...] can at times sound simplistic, even glib", referring to Piketty's proposal that pooling sovereign debt in the Eurozone would reduce member states' debt interest payments and his criticism of the much greater spending on interest payments than on a program like Erasmus+. Shortt also said that the history "sometimes takes away from the very real and pertinent questions Piketty raises” about modern politics. However, Shortt said that Capital and Ideology still “goes a long way towards framing what is happening both here and abroad in a broad historical and political context.”

In Kirkus Reviews, the book was billed as a "deftly argued case for a new kind of socialism that, while sure to inspire controversy, bears widespread discussion." William Davies of The Guardian wrote that the book "is occasionally naive (it will bug the hell out of historians and anthropologists) but in a provocative fashion, as if to say: if inequality isn't justified, why not change it?" and that Piketty's policy recommendations "are not the most arresting features of the book." However, Davies also wrote, "Amid the distraction and perpetual outrage of our dysfunctional public sphere, this enlightenment confidence in empirics feels beamed in from another age. It also makes for a unique scholarly edifice, which will be impossible to ignore."

Marshall Steinbaum of Boston Review stated that in comparison to Capital in the Twenty-First Century the work "loses much of the economic theory, but it gains a vast wealth of historical, sociological, and political detail". He wrote that the book "systematically demolishes [the] self-serving conceit" of the economy as a natural force uninfluenced by ideas on how it should work. While Steinbaum said that Piketty's narrative that left-wing parties became parties of the educated rather than the working class is flawed "because the working class is getting more educated", Steinbaum lauded Piketty's engagement with political science, writing, "Few economists are as methodologically curious and versatile, much less as adept."

Geoff Mann praised Capital and Ideology in London Review of Books. He disputed Piketty's claim that social democracy in the 20th century was intended to transcend private property and capitalism. However, Mann said that the book "proves conclusively that [the idea that economic growth will fix the inequality problem] was an illusion", and concluded, "Whether or not his revolution without revolutionaries can get us where we need to go, his analysis of how we got here demands our attention." The Hindu's G. Sampath wrote, "Contradicting the claims of Hayekian market fundamentalists, Piketty shows, through page after page of charts, graphs and histograms, how unfettered capitalism in 19th century Europe led to levels of inequality not seen anywhere except in quasi-slave societies. [...] The singular value of this book may well be its power to revive research and activism that re-embed economic problems in a social and civic substrate."

The New Republic's Robin Kaiser-Schatzlein argued, "Piketty's own imagination of new worlds is grounded in a rigorous and detailed analysis of the institutions that have existed in the real world. [...] He is uncovering ideas that have worked before. They could work again." In The Washington Post, James Kwak approved of Piketty's explanation for the rise of far-right politics and wrote that "as long as the Democratic Party muddles along with the same old ideology of market-driven growth and supposed equality of opportunity, our political system will remain defined by two parties dominated by competing segments of the economic elite."

Ryan Cooper of The Week praised the book. Cooper said that Piketty sometimes "struggles with organizing his titanic collection of arguments and evidence", but found convincing Piketty's discussion of the rightward shift in 21st century politics and dubbed Capital and Ideology "a fascinating, essential study both of where we came from and of two possible paths forward: how we might create a better future for all human society, and the dark possibilities should we fail. [...] on his key point of the brute necessity of a reborn international left, Piketty is inarguably correct.” Keith Johnson of Foreign Policy wrote, "The reams of economic data he unearths are eye-opening; many of his proposed solutions seem eye-rolling in the current climate. [...] Piketty's latest effort is a very welcome, very controversial, and, in another time and place, possibly even constructive contribution."

Conversely, a reviewer in The Economist said that Piketty "draws on an impressive range of historical statistics" and that, compared to most post-Marxist critiques, Capital and Ideology is "readable. The prose is pithy and light on theory." But the reviewer described the economist's account of ideology by elites throughout history as lesser than accounts by thinkers like Theodor W. Adorno and Michel Foucault because Piketty "flits between case studies" and suggests that "elites are only ever self-serving"; the reviewer also said that he insufficiently deals with concerns that "sky-high wealth taxes would play havoc with incentives, reducing investment and entrepreneurship [...] it is hard not to conclude that, deep down, Mr Piketty believes the worth of a society is measured by its Gini coefficient alone."

The Guardian's Paul Mason said that Piketty's discussions of history and ideologies show ignorance of the "methodological debates that rage" in the field of history. The journalist also argued that "Piketty's solutions [for the rise of nativism and xenophobia] are perfunctory [...] a survey of 'red wall' seats found they [...] reject attempts to take money from the modestly well-off and even from billionaires“. Summing up Piketty's central idea as taxing capitalism out of existence, Mason concluded, "My objection is not that it is too radical but, lacking any explanation of which social forces might enact it, not radical enough."

Paul Collier of New Statesman wrote, "There is much of value here and many of its ideas are insightful. But in the end, if this becomes the agenda of the left, it will exchange one cul-de-sac for another." Collier claims that Piketty "conflates opposition to open borders with hatred of immigrants". Collier also said the northern working class in the U.K. would likely prefer a tax on the capital appreciation of the ABs who own London property to Piketty's recommendations, and that "it is ethically better that you should save to help your children rather than lavish consumption on yourself now".

Cole Stangler of The Nation discussed how Piketty differs from Marx and Engels, in that Piketty views major transformations in economics as shaped by various factors (like religious beliefs, sense of national belonging, and crises) whereas Marx and Engels famously described the history of all society as a history mainly of class struggle. Stangler wrote that while some might find nuanced Piketty's lack of identification of a central force and his unpacking of each major transformation "on its own terms, insisting on a multitude of alternative paths that might have been followed at any given moment [...] others may be put off by its unwillingness to dig in and take sides." Stangler also argued against the privileging of ideological struggle over class struggle by arguing that some groups are selfish and "simply aren't interested in a good-faith debate [...] one can't help but wonder if [Piketty] underplays the extent to which individuals' access to and relationship with wealth [...] influences how they look at the world and engage in politics."

Tyler Cowen's words were mostly unfavorable. While he argued that there is a "considerable sum of useful and valuable material" and praised as "carefully done" Piketty's history of wealth and property accumulation, Cowen dismissed his commentary on recent events as "distorted and unreliable. There is massive distrust of the wealthy in this book, and virtually no distrust of concentrated state power." Cowen suggested that the high innovation of the United States and that, according to him, real wages are higher in the United States than in Western Europe stand as evidence against Piketty's worldview. Till Breyer and Felix Kersting reported in Critical Inquiry that his "concrete historical analysis seems to run somewhat counter to” his view of ideas as autonomous, and actually supports the view that crises and struggles are needed for changes in ideological structures.

In Financial Times, Raghuram Rajan wrote that Capital and Ideology "reflects a prodigious amount of scholarship" but would not persuade those who disagreed. Rajan said that studies had debunked Piketty's implicit assumption that today's rich are largely the "idle rich"; that the high growth from 1950 to 1980 was dependent on a number of factors that are unlikely to be repeated; that "we never actually ran the high-tax experiment" because tax loopholes were abundant in that period; and that other factors besides tax policy determine inequality. Rajan also argued, of the author's vision of participatory socialism, that "it is unclear what would offer a countervailing balance to an overpowerful state [...] Most people will have little sense of control over their futures." Rajan said, "Inequality is a real problem today, but it is the inequality of opportunity, of access to capabilities, of place, not just of incomes and wealth."

Economic historian Harold James wrote that "Piketty largely leaves war and war finance out of his account, and his extensive discussion of property and the French Revolution amazingly omits the assignat inflation. Piketty begins with an appeal to social scientists that they learn more history, but choosing which bits of history to include and which to exclude is always likely to be a matter for contestation."

Leonid Bershidsky of Bloomberg said, in response to the high proposed taxes, that "Piketty's book doesn't do a good job of explaining how an inevitable collapse in property prices will affect the tax base and investment — or, indeed, in what form assets will be parceled out if the rich can't sell 90% of their assets immediately." Bershidsky also wrote, "I'm pretty sure Piketty overestimates the role inequality has played in the recent rise of [political forces that want to focus on identity and tradition rather than any economic vision]." Ingrid Harvold Kvangraven, however, wrote that the book is too tepid, stating that Piketty ignores "key Marxist insights about dynamics such as the profit motive, unequal access to and ability to develop technology, and labour-squeezing cost-cutting."

In Paul Krugman's unfavorable review, he praised the Pikettian method of using "a combination of extrapolation and guesswork to produce quantitative estimates for eras that predate modern data collection" as applied "to very good effect" in Capital and Ideology. But he also questions whether Piketty knows enough to have constructed valid claims about the dozens of societies he discusses, as well as whether all of the case studies strengthen Piketty's core argument that rising inequality throughout history is fundamentally due to ideology and politics rather than economics and technology (with Krugman noting Evsey Domar's claims on the reasons for serfdom in Russia). Krugman also argued that the white working class in the U.S. would probably not support Piketty's policies. Despite saying that "the book does advance at least the outline of a grand theory of inequality, which might be described as Marx on his head", Krugman concluded by asserting that he was unsure what the book's central message was.

Ewan McGaughey in Oeconomia described Capital and Ideology as "an encyclopaedic, data driven, and intensely rewarding work, spanning the world's modern history and contemporary politics", but sought to emphasise that "inequality of economic power is even more extreme than inequality of wealth and income". On top of the lack of workplace democracy on which Piketty focuses, there is also a need to democratise capital, by ensuring the true investors in pensions or mutual funds can control votes taken by asset managers or banks. Largely agreeing with Piketty, he argued that "the legal construction of markets can go very far to pre-empt unjustified inequality, before redistributive taxation", but stressed that the meaning of a just society goes further than a fair distribution of wealth, and ensures everyone can develop their potential to the fullest. "Perhaps the greatest achievement of Piketty's work", he concludes "could be to bring economics firmly back to the values in the Universal Declaration of Human Rights."