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On a Top-Heavy Planet, a Bit of a Nordic Puzzler

Research & Commentary
October 19, 2014


Income gaps and wealth concentration go hand in hand, new global stats make clear. With one exception.

By Sam Pizzigati

The latest Credit Suisse Research Institute Global Wealth Report remains the financial industry's statistical gold standard

The latest Credit Suisse Research Institute Global Wealth Report remains the financial industry’s statistical gold standard

The latest annual Global Wealth Report from the Credit Suisse Research Institute has everything you would expect from a report on global wealth. And one thing you wouldn’t: a mystery.

The media coverage of the new Credit Suisse report hasn’t focused much at all on that mystery. Reporters have zeroed in instead on the report’s host of startling stats on global wealth distribution.

The top attention-grabbing stat in the new Credit Suisse study? The richest 1 percent of the world’s adults now hold nearly half the world’s wealth, 48.2 percent to be exact.

Entering this global top 1 percent takes a personal net worth of at least $798,000. A net worth of anything over $77,000, adds the fifth annual Credit Suisse Global Wealth Report, suffices for entry into the world’s top 10 percent.

Adults in this richest 10 percent hold an amazing 87 percent of the wealth in the world. The bottom half of the world’s people hold less than 1 percent.

The authors of this new Credit Suisse study — a group that includes the highly respected wealth researchers Anthony Shorrocks and Jim Davies — don’t limit their stats to global breakdowns. They also explore and contrast distributions of wealth by nation. And that’s where the mystery begins.

Credit Suisse’s investigators start their nation-by-nation analysis with the United States, the most unequal of the world’s major developed powers.[pullquote]Credit Suisse places the top 1 percent’s wealth share in the United States at 38.4 percent.[/pullquote]

In the United States, they calculate, the richest 10 percent of adults hold 74.6 percent of national wealth, a share well above the 48.5 percent of national wealth the richest 10 percent of adults holds in Japan. Credit Suisse places the top 1 percent’s wealth share in the United States at 38.4 percent, over double the 17.9 percent wealth share for Japan’s top 1 percent.

These contrasts in wealth concentration shouldn’t surprise anyone. The United States, after all, has a much more unequal distribution of income than Japan. American top 1 percenters take in 22.5 percent of U.S. income. The comparable top 1 percent income share in Japan: only 10.4 percent.

In other words, America’s top 1 percent is annually adding to its net worth a much higher share of national income than Japan’s top 1 percent. Given this dynamic, how could a great deal more wealth not sit in the pockets of America’s 1 percent? Nations with narrower income divides, common sense tells us, are always going to have narrower wealth divides.

Or will they? Consider Sweden.

This Nordic nation today sports an income distribution even more equal than Japan’s. At last count, says the World Top Incomes Database, Sweden’s top 1 percenters were pulling in only 8.7 percent of their nation’s income.

Yet the new Credit Suisse Global Wealth Report calculates that Sweden’s 1 percenters hold 30.8 percent of their nation’s wealth, a figure closer to the 38.4 percent share for the U.S. top 1 percent than the 17.9 percent top 1 percent share in Japan.[pullquote]Sweden’s most affluent 10 percent hold a hefty 68.6 percent share of their nation’s personal net worth.[/pullquote]

And Sweden’s most affluent 10 percent hold a hefty 68.6 percent share of their nation’s personal net worth, a figure much closer to the 74.6 percent of national wealth that the top 10 percent hold in the United States than the 48.5 percent share of national wealth the top 10 percent hold in Japan.

Even more puzzling: Sweden doesn’t stand alone by these yardsticks. Norway and Denmark show much the same pattern. These two Nordic nations also have income distributions as or more equal than Japan. But the most affluent 10 percents of Norway and Denmark hold a share of national wealth much more in the neighborhood of the United States than Japan.

In Norway, Credit Suisse reports, the top decile of adults hold 65.8 percent of national personal wealth. In Denmark, 67.5 percent.

Most developed nations, to be sure, do follow the Japanese pattern. More equal distributions of income do go hand in hand, almost all across the world, with more equal distributions of wealth.

France, for instance, has a more equal distribution of income than the United States and, the new Credit Suisse figures make plain, a more equal distribution of wealth. In France, the top 10 percent hold just 53.1 percent of national wealth, a share significantly below the 74.6 percent U.S. figure.

So why don’t the Nordic nations follow this pattern? Why doesn’t their wealth inequality profile more closely track their income inequality profile? How can the Nordic nations have such egalitarian distributions of income side by side with much more top-heavy distributions of personal wealth?[pullquote]A higher wealth concentration can sometimes result from egalitarian public policies.[/pullquote]

The authors of the new Credit Suisse Global Wealth Report both acknowledge this mystery and suggest a solution for it. A higher wealth concentration, they note, can sometimes result from “benign” egalitarian public policies.

Strong social safety nets, the new Credit Suisse Global Wealth Report goes on to explain, “can greatly reduce the need for personal financial assets.”

What does that mean? If you live in a society that provides everyone with everything from inexpensive — or free — higher education and health care to decent unemployment benefits to robust systems of public housing and pensions, you don’t need to sock away money for a rainy day fund. You can live decently in the present — and still enjoy financial security for your family.

This dynamic, the Credit Suisse researchers observe, offers “one explanation for the high level of wealth inequality we identify in Denmark, Norway, and Sweden.” The “top groups” in the Nordic nations, their report notes, “accumulate for business and investment purposes, while the middle and lower classes have no pressing need for personal saving.”

Another part of the explanation: The “top groups” in the Nordic nations do not include significant concentrations of super-sized fortunes. Wealth within the Nordic wealthiest 10 percent concentrates much more at the bottom of that top 10 percent than the top, partly because tax rates on high incomes remain steeper in the Nordic nations than in the United States.

The new Credit Suisse numbers help illustrate this difference in the make-up of wealth at the Nordic and U.S. economic summits. The United States, the Credit Suisse data show, has 28 times more adults with a net worth of between $1 million and $5 million than Sweden. But the United States has 49 times more adults than Sweden with personal net worths over $10 million.

[toomuch_promo]The United States, overall, has more personal fortunes worth over $10 million than the entire rest of the world combined.

And that, in turn, leaves readers of the new Credit Suisse Global Wealth Report with an even greater mystery: Why do Americans tolerate an inequality so stark?

Sam Pizzigati edits Too Much, the Institute for Policy Studies online weekly on excess and inequality. His latest book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class (Seven Stories Press).

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