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Some Bad New ‘Good News’ on Wealth

The latest global wealth report out of the financial industry raises some fundamental questions about inequality and our global future.

Blogging Our Great Divide
September 22, 2016

by Sam Pizzigati

Is the world growing more unequal?

Anyone who follows the news would almost certainly answer “yes.” Alarming headlines about income and wealth inequality have become a global staple.

But actual global stats tell a somewhat different story. If we treated all the world’s people as a single society and tracked that society’s distribution of wealth over recent decades, we’d find a surprising reality: The overall worldwide distribution of wealth is growing more equal.

The latest confirmation of this statistical surprise came last week from the German financial industry giant Allianz.

Researchers at Allianz have been dividing the world into three wealth classes. At the bottom of this division, in the “low wealth class,” people hold less than 30 percent of the global wealth average.

In 2000, 80 percent of the world lived in the “low wealth” category. Last year, just 69 percent did.

Meanwhile, says Allianz, the global “middle class” — folks holding between 30 and 180 percent of the global wealth average, between $7,800 and $47,000 last year — is growing. This global middle class now makes up 20 percent of the world’s population, up from 10 percent at the start of the century, and holds 18 percent of the world’s wealth, almost triple its share in 2000.

To Allianz, that adds up to a global wealth distribution “getting more equal.”

But how could that be? We have, after all, popular movements worldwide — and even a popular Pope — decrying our global inequality at every opportunity. How could our global wealth gap be decreasing?

The answer in a word: China. The global “middle class” has over recent years expanded by 600 million people. China, Allianz reports, has supplied the “lion’s share” of that increase. The equality momentum has been “concentrated primarily in only one region — Asia — and within that region, mainly in only one country: China.”

China, to sum up the Allianz analysts, has been “the main pillar propping up the global middle class.”

So average folks in China should, stands to reason, be really pleased about how things are going economically in their country? Inequality ought to be the furthest thing from their minds, right?

In fact, no. Average folks in China think about inequality all the time — because they live within a nation growing more unequal. The new wealth the Chinese people are creating is going disproportionately to China’s rich.

The new Allianz Global Wealth Report labels this phenomenon the paradox of “inclusive inequality.” More and more people globally, the Allianz researchers explain, are gaining at least a modest level of personal wealth. But, at the same time, “the tip of the wealth pyramid is moving further and further away” from average people and “simultaneously getting smaller and smaller.”

Other respected researchers — like former World Bank lead economist Branko Milanovich — have insights that add some additional perspective to the new Allianz numbers. People in the new “global middle class,” notes Milanovich, remain “relatively poor by Western standards.” They make do on incomes that average between $5 and $15 dollars a day.

And average people in industrial nations accustomed to those “Western standards” are, at the same time, losing ground. They have not shared in the overall global gains in income and wealth. Only the wealthy in most Western societies have gained any significant ground.

So is the world getting less unequal? We have certainly seen, as Milanovich notes, “the first decline in global inequality since the Industrial Revolution.”

But this statistical phenomenon will always rate as an abstraction. People don’t experience life globally. They experience life in national settings that are becoming more unequal — and the new online universe makes it easier than ever before to compare their economic lot in life to the situation in other countries.

Allianz sees an “inclusive inequality” at work in the world. But more and more people globally are experiencing an “exclusive inequality.” They feel increasingly excluded from a “good life” only the affluent can afford to live — and excluded, as wealth and power concentrate, from the political decisions that impact how their live their lives.

That combination of daily experiences does not make for social progress.

“A world in which 1 percent of humanity controls as much wealth as the other 99 percent,” as President Obama told the U.N. General Assembly earlier this week, “will never be stable.”

Institute for Policy Studies associate fellow Sam Pizzigati co-edits His most recent book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900–1970. Follow him on Twitter @Too_Much_Online.

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