The Ascent of Money

Growing inequality has been one of the most hotly debated topics in recent years. Thomas Piketty thrust it into the limelight with his book, ‘Capital in the 21st Century’, but a conversation with any average worker is enough to gauge the feeling of despair.

While the wages of top earners remained largely unscathed, for many, the weekly pay packet has stagnated at best in the wake of the global financial crisis. Few people needed to refer to indicators such as the Gini coefficient, a measure of inequality, to know their life was becoming more of a hardscrabble. Yet, the world as a whole is becoming more equal. Since the turn of the millennium, one feature has stood out in terms of global wealth generation – the rampant growth of the middle class. The eighth edition of the Allianz Global Wealth Report, which studies the asset and debt situation of households in more than 50 countries, shows that the number of people belonging to this group has more than doubled to over 1 billion today from around 450 million in 2000.

The global wealth middle class is defined as individuals with assets between 7,653 euros and 45,918 euros. “This jump is particularly remarkable given that the threshold for entry to the middle class moved significantly during this time,” note authors Kathrin Brandmeir, Michaela Grimm, Michael Heise and Arne Holzhausen in the report.

While someone with assets of over 3,600 euros could consider themselves as belonging to this class in 2000, the threshold today is more than twice as high. The increase is even more striking given that almost 150 million people rose from the global wealth middle class to join the ranks of the wealthy. So a total of 750 million people joined the global wealth middle class within just 16 years.

What seems like a good news story becomes more complicated when you go deeper into the numbers. Around 60 million people – primarily in the United States and Japan – have fallen from the high wealth class. In Europe, crisis-hit countries have also been affected, particularly Greece and Italy.

Of those moving up, over 80 percent are Chinese, which means the growth of the middle class reflects the economic rise of China and its strength in the years following the global financial crisis. Not only have 400 million Chinese citizens moved up to join the middle class since 2010, but more than 100 million managed to step up into the global wealth upper class.

The Chinese alone have caused the numbers in the wealthiest class to grow. While this group is more diversified now and includes more Koreans, Taiwanese and South Africans, for example, the growth in numbers would not have offset people tumbling from the class from advanced economies. Around 550 million people worldwide now belong to the global wealth upper class, about 130 million - or 30 percent - more than in 2000.

The Global Wealth Report notes that despite the growth of the global wealth middle class, the world still has a long way to go when it comes to a “fair” distribution of wealth.

If the population of countries is divided based on financial assets, the richest 10 percent together own 79 percent of net financial assets. Nevertheless, the concentration of wealth was still as high as 91 percent in 2000. “There should be no illusions about a ‘fair world’,” says Allianz Chief Economist Michael Heise. “In the top decile, average net per capita financial assets are above 200,000 euros; the richest 1 percent of the global population owns on average financial assets just over 900,000 euros. Poor and rich are still worlds apart.”

The number of people in the global wealth lower class is 3.5 billion; despite population growth, this number has been more or less stable over the last 16 years. Accordingly, its share in the population dropped from 80 percent in 2000 to 69 percent today..

The Allianz Global Wealth Report also notes that – beyond the global picture of a more equal world – wealth distribution within countries followed different paths. While emerging countries have tended to improve in recent decades, in industrialized nations it has tended to deteriorate.

“However, these trends have weakened since the financial crisis. In industrialized countries, the trend towards less equal distribution has since slowed significantly, not least in the U.S., although the latter remains one of the countries with very unequal distribution,” the authors write.

The Allianz Group is one of the world's leading insurers and asset managers with more than 86 million retail and corporate customers. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing over 650 billion euros on behalf of its insurance customers while our asset managers Allianz Global Investors and PIMCO manage an additional 1.3 trillion euros of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we hold a leading position in the Dow Jones Sustainability Index. In 2016, over 140,000 employees in more than 70 countries achieved total revenue of 122 billion euros and an operating profit of 11 billion euros for the group.

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Lorenz Weimann
Allianz SE
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