Posts Tagged ‘wealth’


Chris Rock may be right. Still, Americans are well aware that economic inequality in their country is obscene, even though they often underestimate the growing gap between the poor and the rich.

But it’s Frank Rich, who conducted the interview with the American comedian, who made the more perceptive observation:

For all the current conversation about income inequality, class is still sort of the elephant in the room.

All the experts agree—from Thomas Piketty and the other members of the World Inequality Lab team to John C. Weicher of the conservative Hudson Institute—that inequality in the United States, especially the unequal distribution of wealth, has been worsening for decades now. Both before and after the crash of 2007-08. And there’s no sign that things are going to get better anytime soon, unless radical changes are made.

But, as it turns out, even the experts underestimate the degree of inequality in the United States. The usual numbers that are produced and disseminated indicate that, in 2014 (the last year for which data are available), the top 1 percent of Americans owned one third (35 percent) of total household wealth while the bottom 90 percent had less than half (45.3 percent) of the wealth.

According to my calculations, illustrated in the chart at the top of the post, the situation in the United States is much worse. In 2014, the top 1 percent (red line) owned almost two thirds of the financial or business wealth, while the bottom 90 percent (blue line) had only six percent. That represents an enormous change from the already-unequal situation in 1978, when the shares were much closer (28.6 percent for the top 1 percent and 23.2 percent for the bottom 90 percent).

Why the large difference between my numbers and theirs? It all depends on how wealth is defined. Both the World Inequality Lab and the Federal Reserve (in the Survey of Consumer Finances) include housing and retirement pensions in household wealth—and those two categories comprise most of the so-called wealth of most Americans. They just don’t own much in the way of financial or business wealth. They live in their houses and they retire based on contributions from their wages and salaries over the course of their work lives. They produce but don’t take home any of the surplus; therefore, they just don’t have the ability to amass any real wealth.

For the small group at the top, things are quite different. They do get a cut of the surplus, which they use, not only to purchase housing and put aside in their pensions, but to accumulate real wealth, for themselves and their families. If we take out housing and pensions and calculate just the shares of financial or business wealth—and, thus, equities, fixed-income claims, and business assets—the degree of inequality is much, much worse.

Yes, rich people in the United States are very rich—even more than either regular Americans or the experts believe.

But that’s not the real elephant in the room. The big issue that everyone is aware of, but nobody wants to talk about, is class. And that’s the reason there should be, if not riots, at least a sustained political movement to transform the existing economic and social structures in the United States.


According to Oxfam’s analysis of data produced by Credit Suisse (which I analyzed in a different manner late last year), 42 billionaires now own the same wealth as the bottom half—3.7 billion people—of the world’s population.

Together, those 3.7 billion people own only one half of one percent (0.53 percent) of the world’s wealth, a figure that rises to just about one percent (0.96 percent) when net debt is excluded.

In 2017, 42 billionaires on the Forbes billionaires list had a cumulative net worth of $1,498 billion—more than the wealth of the bottom 50 percent. When debt is excluded, that figure rises to 128 billionaires, who had a net worth of $2,694 billion.

Over the last decade, ordinary workers have seen their incomes rise by an average of just 2 percent a year, while billionaire wealth has been rising by 13 percent a year—nearly six times faster.

Without a fundamental change in economic institutions, the arc of capitalist history will continue to bend toward greater inequality.


The United States, as I have shown over the past week (e.g., here, here, and here), has an obscenely unequal distribution of wealth.

As illustrated in the chart above, the members of the bottom 90 percent own only 27.8 percent of total household wealth, while the bulk of the wealth is held by the top 10 percent: 43.9 percent by the top 10 to 1 percent, 18.2 percent by the top 1 to 0.1 percent, 9.4 percent by the top 0.1 to 0.01 percent, and finally 9.7 percent by the top 0.01 percent.

How do we put that grotesque level of inequality into perspective? One way is by taking a historical perspective; the other is by looking across the world today.

As it turns out, Nature (unfortunately behind a paywall) has just published a study in which the authors attempt to estimate the degree of wealth inequality in ancient societies for which we do not have written records.* What they did is collect data from 63 archaeological sites or groups of sites, used the distribution of house sizes as a proxy for wealth, and assigned Gini coefficients to each society.**

What they are able to show is that wealth disparities generally increased with the domestication of plants and animals and with increased sociopolitical scale. The basic idea is that wealth disparities cannot accumulate within lineages until mechanisms for the transmission of wealth across generations become common, as is much more likely within sedentary societies. Thus, less wealth is typically transmitted across generations in hunter-gatherer and horticultural societies than in agricultural or pastoral societies.


As is clear from the chart above, there were huge differences in the responses of societies to these factors in the New World (North America and Mesoamerica) and the Old World (Euroasia) after the end of the Neolithic period. Much to the researchers’ surprise, inequality kept rising in the Old World while it hit a plateau in the New World. They argue that the generally higher wealth disparities identified in post-Neolithic Eurasia were initially due to the greater availability of large mammals that could be domesticated, because they allowed more productive agricultural extensification, and also eventually led to the development of a mounted warrior elite able to expand polities to sizes that were not possible in North America and Mesoamerica before the arrival of Europeans.

These processes increased inequality by operating on both ends of the wealth distribution, increasing the holdings of the rich while decreasing those of the poor.

The authors note that the highest modeled wealth Gini coefficients in their Old World sample (0.48 at around ad 1, 0.60 at around ∆6,000 in the chart above) are similar to contemporary values for the Slovak Republic (0.45) and Spain (0.58), although much lower than for China (0.73) or the United States in 2000 (0.80).

Thus, the authors conclude,

Even given the possibility that the Gini coefficients constructed here may underestimate true household wealth disparities, it is safe to say that the degree of wealth inequality experienced by many households today is considerably higher than has been the norm over the last ten millennia.

How right they are!


According to the latest Credit Suisse Research Institute’s Global Wealth Report, the members of the global top 1 percent now own more than half (50.1 percent) of all household wealth in the world.

In terms of wealth bands, the United States has by far the greatest number of millionaires: 15.4 million, an increase of 1.1 million adults over 2016. For 2017, that amounts to 43 percent of the world total. (Japan holds second place, with only 7 percent of the world’s millionaires, a decline of 338 from 2016 to 2017.)

top pyramid
Much the same degree of concentration also occurs at the top of the pyramid. According to the Credit Suisse calculations, 148,200 adults worldwide can be classed as ultra-high net worth individuals, with a net worth above US$50 million—an increase of 13 percent (19,600 adults) during the past year.

Once again, the United States dominates the regional rankings, with 75,000 ultra-high net worth residents (51 percent), with China occupying second place with 18,100 ultra-high net worth individuals (up 3,000 on the year).

The authors of the report are clear: since the crash of 2007-08, top wealth holders benefited in particular and, across all regions, wealth inequality has risen, as median wealth declined. And their projections for 2022 suggest “more pessimistic scenarios for the immediate years ahead.”

Yes, indeed, the arc of recent capitalist history appears to be following that of millenia of prehistory, which bends toward greater inequality.


*The archaeological contexts sampled from the Old World range from around 11,000 to about 2,000 years ago (plus one recent set of !Kung San encampments), and in the Americas, from around 3,000 to about 300 years ago.

**The Gini coefficient (named after the Italian statistician Corrado Gini) is a measure of statistical dispersion intended to represent the distribution of income or wealth among the members of a group (e.g., a nation). Inequality on the Gini scale is measured between 0, where everybody is equal, and 1, where all the income or wealth is captured by a single person. I have expressed my own reservations about comparing Gini coefficients across countries or regions here.

Chart of the day

Posted: 17 November 2017 in Uncategorized
Tags: , , ,


On Wednesday, I referred to the wealth pyramid in the United States. But I didn’t really represent that pyramid in the chart I provided.

Here it is, above, with the wealth share of the bottom 50 percent (in red), the middle 40 percent (in blue), and the top 10 percent (in green)—a wealth pyramid for each year, from 1962 to 2014.


Or, here’s another, if you prefer a three-dimensional version of the latest year for which data are available. In 2014, the wealth share of the top 10 percent was 73 percent, while the middle 40 percent had 27 percent of net personal wealth. And the bottom 50 percent? It was exactly zero.

Now that is a real wealth pyramid!

wealth shares

Yesterday, I looked at the enormous wealth of U.S. billionaires and the growing gap between them and the rest of the American people.

Today, I want to examine what’s happened in recent years at the bottom of the wealth pyramid.

We know that, for decades, the share of net personal wealth owned by the bottom 90 percent has been declining. It peaked at 38.5 percent in the mid-1980s and, by 2014, it had fallen to 27 percent—more or less where it started in the early 1960s.

As is clear from the chart above, most of the change occurred for the middle 40 percent (the blue area), since the bottom 50 percent in the United States has owned very little personal wealth. Its share (the red area), which reached a peak in 1987 (2.4 percent), has since fallen below zero (-0.1 percent, in 2014).

Clearly, the small and declining share of wealth owned by the vast majority of Americans challenges the fundamental presumptions and promises of the country and its economic institutions—that American workers should and would share in the nation’s growing wealth. They haven’t and, if current trends continue, they won’t.

In fact, as it turns out, there is only one dimension of American society where wealth inequality is actually decreasing: the racial wealth gap among low-income households. And that’s only because, since the onset of the Second Great Depression, the median net worth of low-income whites has been cut by nearly half—while the median net worth of low-income blacks and Hispanics has remained relatively stable.

According to an analysis conducted by the Pew Research Center of the data contained in the most recent Survey of Consumer Finances by the Board of Governors of the Federal Reserve System, there is a large gap between the median net worth of white families ($171 thousand) and both black ($17.6 thousand) and Hispanic ($20.7 thousand) families—a gap that increased between 2013 and 2016. The white-black gap grew from $132,800 to $153,500 while the white-Hispanic gap increased from $132,200 to $150,300.


The gap between whites and both blacks and Hispanics also increased for middle-income Americans (those with incomes between two-thirds and twice the national median size-adjusted income). Thus, for example, white households in the middle-income tier had a median net worth of $154,400 in 2016, compared with $38,300 for middle-income blacks and $46,000 for middle-income Hispanics.

But for low-income Americans (those with size-adjusted household incomes less than two-thirds the median), the racial gap, while still large, has shrunk considerably since 2007, the year the most recent crash began. In that year, the white-black gap was 5 to 1 and the white-Hispanic gap almost 10 to 1. In 2016, those wealth gaps had fallen to less than 3 to 1 and 5 to 1, respectively.

As is clear from the chart above, the major reason for the decline in the racial wealth gap is the fact that the median wealth of low-income whites fell by more than half between 2007 and 2013, while the median wealth of both blacks and Hispanics decreased by much less (around 19 percent).

The cause of both the racial gaps and the decline in white wealth has to do with homeownership, the only major form of wealth held by low-income Americans. In 2007, 56 percent of low-income whites were homeowners, compared with 32 percent each for low-income blacks and Hispanics. The homeownership rate among low-income whites has trended downward since then, falling to 49 percent by 2016, but the rate for blacks and Hispanics is largely unchanged. The decline in low-income white wealth was caused by the crash of the housing market, leading to a fall in housing prices and a decline in the rate of homeownership.

Economically, then, the crash and the uneven recovery moved low-income Americans—white, black, and Hispanic—much closer together at the bottom of the U.S. wealth pyramid. Politically, those changes created losses and resentments that affected the outcome of the presidential election of 2016, which in turn have made it difficult to challenge the conditions and consequences of the Second Gilded Age.


Wealth inequality in the United States has reached such extreme levels it is almost impossible to put it into perspective.

But the folks at the Institute for Policy Studies (pdf) have found a novel way, by comparing the fortunes of the 400 wealthiest Americans to the meager assets of everyone else.


Here’s what they found:

  • The three wealthiest people in the United States—Bill Gates, Jeff Bezos, and Warren Buffett—now own more wealth than the entire bottom half of the American population combined, a total of 160 million people or 63 million households.
  • America’s top 25 billionaires—a group the size of a major league baseball team’s active roster—together hold $1 trillion in wealth. These 25 have as much wealth as 56 percent of the population, a total 178 million people or 70 million households.
  • The billionaires who make up the full Forbes 400 list now own more wealth than the bottom 64 percent of the U.S. population, an estimated 80 million households or 204 million people—more people than the populations of Canada and Mexico combined.


Here’s another way: the average wealth of the top 10 billionaires (from the Forbes 2017 list) is $61 billion. In 2014 (the last year for which data are available), the average wealth for the United States as a whole (the blue line in the chart above) was only $297 thousand, while the average wealth owned by the middle 40 percent (the green line) was even less, $202 thousand. As for the top 1 percent, their average wealth (the red line) was $1.15 million—clearly far more than most other Americans but not even close to the extraordinary level of wealth that has been accumulated by the tiny group at the very top.

As the authors of the report explain,

The elite ranks of our billionaire class continue to pull apart from the rest of us. We have not witnessed such extreme levels of concentrated wealth and power since the first Gilded Age a century ago. Such staggering levels of wealth inequality threaten our democracy, compound racial and class divisions, undermine social cohesion, and destabilize our economy.

The problem is, while mainstream economists look the other way, politicians in Washington continue to allow the Monopoly men to pass Go, collect their additional billions in wealth, and win the game.


*”Monopoly men” are not just men: there are 50 women on the 2017 Forbes 400 list, who are worth a combined $305 billion. (An additional five women who built and share fortunes with their husbands also made the list.) They include Alice Walton (with a net worth of $38.2 billion), Jacqueline Mars ($25.5 billion), Laurene Powell Jobs ($19.4 billion), Abigail Johnson ($16 billion), and Blair Parry-Okeden ($12 billion).


The release of the so-called Paradise Papers confirms, with additional names and more salacious details, what we already knew from the Panama Papers and other sources: the world’s wealthy increasingly use offshore tax havens to engage in conspicuous tax evasion.

That’s on top of their participation in conspicuous consumption, conspicuous philanthropy, and conspicuous productivity.

According to Annette Alstadsæter, Niels Johannesen, and Gabriel Zucman, in a study published before the release of the Paradise Papers, the equivalent of 10 percent of world GDP is held in tax havens globally—and that’s only counting bank deposits, not the portfolios of equities, bonds, and mutual fund shares that wealthy individuals entrust to offshore banks.

And, as it turns out, offshore wealth is extremely concentrated: the top 0.1 percent of richest households own about 80 percent of it, while the top 0.01 percent own about 50 percent of offshore wealth.

So, how does it work? There is a great deal of evidence that the vast majority of offshore wealth, both legal and illegal, is not reported on tax returns. That’s because offshore wealth is done “by combining trusts, foundations, and holding companies, so as to disconnect assets from their beneficial owners.” Thus, tax authorities won’t be able to observe or collect taxes on either the wealth or investment income earned or reported offshore, except in rare circumstances (e.g., a taxable and properly declared inter-generational transfer of assets).

That means the tax burden is shifted onto the rest of us who don’t hold offshore wealth and aren’t able to—or choose not to—engage in conspicuous tax evasion.

wealth-no offshore

Not surprisingly, accounting for offshore assets increases the top 0.01 percent wealth share substantially. However, the magnitude of the effect varies a lot across countries.


In Scandinavia (Norway, Sweden, and Denmark, the blue lines in the charts above), which does not use tax havens extensively, the top 0.01 percent wealth share rises from about 4 percent to around 5 percent. Offshore holdings have a much larger effect on wealth inequality in Europe (the United Kingdom, France, and Spain, the red lines), where by the estimates of Alstadsæter et al. 30-40 percent of the wealth of the 0.01 percent of richest households is held abroad.

In the United States (the green lines in the charts), offshore wealth also increases inequality but the effect is much more muted than in Europe. That’s only because the U.S. top wealth share is already very high—9.9 percent, without offshore wealth in 2010, compared to 11.1 percent when offshore wealth is included.

Clearly, the world’s wealthiest individuals—including those who call Scandinavia, Europe, and the United States home—have plenty of opportunities via their offshore paradises to engage in conspicuous tax evasion.