The long-term consequences of geopolitical changes are likely to dampen the growth of emerging economies. Their successes in recent decades owed much to an increasing international division of labor amid far-reaching trade liberalization, aka hyper-globalization. The wind has changed, and not just since the Russian war of aggression on Ukraine. The three Ds of the global economy – deglobalization, digitalization and decarbonization – require a new business model. The times when countries came to growth and prosperity as the extended workbench of the advanced economies are over. The decisive – but often underestimated – players here are the consumers: Cheap mass goods are increasingly being displaced by sustainably produced goods. This transformation process will take several years and also offers opportunities for emerging economies, not least in the green transformation. But the immediate effects of production shifts, more (green) regulation and increasing political uncertainty are negative for now. It is therefore certainly no coincidence that there is currently renewed talk of the "Global South" – it is an expression of the growing unease that the win-win situation of the globalization years threatens to tip over into emerging zero-sum struggles between poorer and richer countries.
Distribution: No progress
The international perspective: convergence reloaded?
In total, emerging markets were able to achieve a growth advantage of 12.5pps.
But this transformation of the world economy will by no means be a linear process. In 2022, for example, advanced economies were more affected than the emerging countries, at least in terms of wealth development, partly because of the simultaneous turnaround in interest rates. As a result, after the growth of net financial assets between 2017 – the year in which the trade disputes between the US and China broke out openly – and 2021 was overall around 9pps higher in advanced economies than in emerging markets, the picture turned again in 2022 in favor of the latter. In total, emerging markets were able to achieve a growth advantage of 12.5pps. This has had a positive impact on the wealth gap between poorer and richer countries: The net financial assets ratio fell back from over 20 to 18, a value that had already been reached in 2016. However, it remains to be seen whether this will resume the long-term convergence process that stalled in 2017 – 20 years ago, average net financial assets per capita in advanced economies were 64 times greater than that of emerging markets (Figure 25).
Figure 25: Convergence reloaded?
Net financial assets per capita, ratio between advanced and emerging markets
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, WID, Allianz Research.
The weights have shifted accordingly.
Against this background, the number of members of the global middle wealth (MW) class has also risen again compared to last year's report to around just under 780mn. However, not too much attention should be paid to changes at the current margin as exchange rate developments can also play a role here, for example. More revealing is the long-term development: Since 2002, the MW class has increased by 58% in terms of numbers; the global high wealth (HW) class by as much as +63% (to 650mn). In contrast, the global low wealth (LW) class has increased by only +9% (to 4,150mn), with a general population growth of +19% in the group of countries examined here. The weights have shifted accordingly. The LW class now accounts for "only" 74% of the total population (after 81% in 2002), while the HW class accounts for 12% (8.5%) and MW class for 14% (10.5%). These figures underline the progress of the last decades: the world has become a little more "equal".
The classification in wealth classes is based on worldwide average net financial assets per capita, which stood at EUR31,860 in 2022. The global middle wealth class ("middle wealth", MW) includes all individuals with assets of between 30% and 180% of the global average. This means that for 2022, asset thresholds for the global middle wealth class are EUR9,600 and EUR57,400. The "low wealth" (LW) category, on the other hand, includes those individuals with net financial assets that are below a EUR9,600 threshold, while the term "high wealth" (HW) applies to those with net financial assets of more than EUR57,400 (for details on how the asset thresholds are set, see Appendix A).
The greatest wealth story on earth
Looking at the composition of the individual wealth classes, it becomes clear who was behind this development. At first glance, there seem to be hardly any shifts in the LW class (Figure 26). China's share has fallen slightly, while that of the rest of Asia (excluding Japan) has risen somewhat. The latter, however, is solely due to the strong population growth in this region; if one looks at the shares within the region, it becomes clear that the share of the LW class in the rest of Asia has fallen from over 96% to the current 90%; in China the decline was even 20pps, from 90% to 70%. In this respect, there are already indications here: China's development is also unique in the Asian context. In addition, there were almost no changes for Latin America and Eastern Europe – although here, too, the share of the LW class within the region declined slightly, by 3pps and 6pps, respectively. What is really interesting, however, are the (small) shifts in Western Europe and North America. Although their share has only risen by a few tenths of a percentage point, this masks dramatic developments, especially in Western Europe: The number of members of the LW class has risen from 105mn to 149mn; with it, the population share has also jumped from 27% to 35%. The development in North America is not quite as dramatic: an increase of 16mn to 109mn, but with a stable population share (29%). The Old Continent has become "poorer" on a global scale.
Figure 26: The sun sets in the West
Global low wealth class, members by region in %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, World Inequality Database, Allianz Research.
The changes in the global MW class are immediately apparent (Figure 27). Every third member of this class now comes from China, and every fourth from the rest of Asia (excluding Japan). At the beginning of the millennium, the two regions together accounted for only one-third of this wealth class. Nothing illustrates the rise of Asia, and China in particular, more clearly than these figures. Mirroring this, the shares of the other regions have declined sharply, primarily due to the rapid growth of this wealth class – but not only that. In North and South America, there was also an absolute decline, albeit in favor of the global HW class in each case; in the other regions, however, the figures remained largely stable.
Figure 27: The sun rises in the East
Global middle wealth class, members by region in %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, World Inequality Database, Allianz Research.
While wealth growth there also radiates to the middle, it seems to be concentrated more at the top of the distribution pyramid in the two other emerging regions.
The development of the HW class is less clear-cut than it might appear at first glance. However, this does not apply to China, which has made a huge step forward: Many Chinese have made it into this class, and more than a fifth of its members are now recruited from China; 20 years ago, China played virtually no role in this wealth class. But already with North America, things are not so clear-cut. The region's share has declined (though North America still accounts for the largest contingent), but this is solely because in other regions of the world, such as China, the numbers have risen even faster. In fact, more North Americans belong to this wealth class today (just under 220mn) than 20 years ago (just under 160mn); their population share has also risen by 9pps to 58%. So while the LW class has remained stable and the MW class has shrunk, the HW class has grown – a sign of the increasing polarization in North America. A similar development can be observed in Latin America: The HW class is growing in number and share at the expense of the MW class. However, at least in the south of the double continent, the LW class has also shrunk (slightly) in share. Western Europe stands in contrast. Here, the members of the HW class have declined both in numbers (from 149mn to 132mn) and in population share (from 38% to 31%). As a result, the Old Continent now accounts for fewer members of the global HW class than China. The other big "loser" is Japan, where the number of members of the HW class is also shrinking. As in Western Europe, the LW class has grown, while the MW class has remained largely stable: those who have dropped out of the HW class are making up for the bloodletting in the MW class. A word about Eastern Europe: Here, the development is similar to the one that took place in Latin America, albeit in a weakened form. Above all, the number of members of the HW class increased, but at least not at the expense of the MW class. But especially in comparison to Asia, a striking difference can be observed: While wealth growth there also radiates to the middle, it seems to be concentrated more at the top of the distribution pyramid in the two other emerging regions.
Figure 28: Cloudy
Global high wealth class, members by region in %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, World Inequality Database, Allianz Research.
The bottom line: The major shifts on the world wealth map reflect China's incredible upswing above all. In the rest of Asia and even more so in Latin America and Eastern Europe, the development – the rise of numerous households into the MW class and HW class – was much slower.
As a result of this high global wealth concentration, there is also a large gap between the global median and the global average of net financial assets.
The growing divide
The concentration of financial assets on a global scale remains extremely high. This becomes clear when the total population of the countries we analyze is broken down by population decile on the basis of net financial assets.
This shows that the richest 10% of the world's population – around 560mn people in the countries under consideration with an average net financial assets of around EUR270,000 – together own 85% of total net financial assets in 2022. At least the share has fallen over time; two decades ago, it still stood at 91%.
At the other end of the spectrum, among the bottom half of the population, some 2.8bn people, less than 1% remains. The latter figure should be interpreted with caution, however, as the people with the lowest wealth include many indebted people from the richest countries; the "poorest" decile of the world's population has negative net financial assets, but high debt does not necessarily equate to poverty. The Scandinavian countries are a good example of this. Households in Denmark and Sweden are among the most indebted in the world but this high debt is generally offset by tangible assets, especially real estate. A happy homeowner in Denmark should not be confused with a penniless day laborer in India.
As a result of this high global wealth concentration, there is also a large gap between the global median and the global average of net financial assets. While the median of net financial assets in 2022 was EUR1,920 per capita, the average was more than 16 times higher (EUR31,860). This ratio, too, has improved over time (Figure 29). However, in absolute terms, the gulf is only growing. While in 2002 median and mean were “separated” by roughly EUR10,000, today, the figure is twice as high. Another example of the growing wealth gap: Whereas in 2002 belonging to the richest global decile required net financial assets of at least EUR53,000, this threshold has moved significantly up over the years: in 2022, at least EUR150,000 were necessary for entry to the club of the richest 10%.
Figure 29: An improvement, sort of
Net financial assets per capita, ratio between mean and median global values
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, WID, Allianz Research.
On average, people in this decile are over-indebted so the decline in their "net financial assets" means nothing other than rising debt.
These huge absolute differences are the main reasons for the different growth rates per decile (Figure 30). Average net wealth per capita shows the lowest growth rates in the two richest deciles, while it grew much faster in the lowest deciles – where net financial assets amount to only a trickle to what is owned by the richer deciles. Therefore, even with high growth differentials, a more equal distribution of wealth at the global level remains a distant dream. A word about the first decile with the lowest net financial assets. Its negative growth rate has a simple reason: On average, people in this decile are over-indebted so the decline in their "net financial assets" means nothing other than rising debt.
Figure 30: High growth to nowhere
Growth of average net financial assets per capita per decile, 2022/2002 in %
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, WID, Allianz Research.
The national perspective:
No progress
The last two decades saw a world rife with crises, from the GFC and the euro crisis to Covid-19 and the ongoing cost-of-living crisis. What were the effects of these events – and the ensuing policy counter-measures – on national wealth distribution?
There are several concepts for measuring national inequality; the best-known measure is certainly the Gini coefficient (see appendix). In the following, three other indicators will be examined in more detail that are more closely related to the situation of the middle class:
The ratio of the mean to the median (mean/median) – a large difference between these two values indicates a strong "distortion" of the distribution in the higher wealth segments.
The ratio of 90th percentile to median (p90/p50) – a large difference between these two values indicates the long way ahead for households in the middle to move up into the group of the wealthiest 10%.
The share of net financial assets of the top 10% – the higher this share, the greater the gap between the wealthiest 10% and the rest of society.
Mean/median comparison
In 2022, the ratio of the mean to the median ranged from 1.8 (Slovakia) to 11.4 (South Africa). For the majority of the countries examined here, however, the values ranged between 2 and 3.5, i.e. the mean value of net financial assets was two to three times higher than the median value. This is also true, for example, of France (2.6) Italy (2.8) and Germany (2.9). Apart from South Africa, there are only a handful of countries where this ratio indicates (extremely) high inequality, e.g. the US (3.9), Russia (4.3), Mexico (6.3) or Brazil (6.6). In addition to the absolute level of this indicator, the changes over the last few years are of interest (Figure 31). What is striking at first glance is that for the vast majority of countries this indicator has hardly moved in the last 20 years; this is also indicated by the unweighted average: it rose only minimally from 3.1 (2002) to 3.2 (2022).
Figure 31: Not much change I
Ratio between mean and median net financial assets, change in points
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, World Inequality Database, Allianz Research.
Ultimately, there are only five countries in which the ratio has improved significantly
Nevertheless, some interesting observations can be made at the country level. Ultimately, there are only five countries in which the ratio has improved significantly (change greater than 1). In all five, however, the value at the end of 2022 was still significantly above average, especially in South Africa (11.4), Peru (5.6) and Türkiye(3.6). In other words, improvements have been made from the starting point of a very strong inequality of distribution; these countries are still far from an "equitable" distribution. In South Africa, moreover, the improvement was concentrated solely in the second decade, when South Africa slid into a deep economic crisis; for Türkiye, the exact opposite is true.
Something similar can be said about the countries at the opposite end of the range. Again, there are only very few countries (four) with a significant deterioration. However, here too the starting point was an already significantly skewed distribution; this is especially true for Brazil, Mexico and Russia. The exception is China, where at the beginning of the millennium the ratio of mean to median was still 1.9; in the meantime it has risen to 3.3, slightly above the average. The rapid wealth accumulation in China was accompanied by an increasing uneven wealth distribution. This also applies to a lesser extent to India, where the value has deteriorated by 0.8 points. A word about the US: Over the entire period, the development was unspectacular – but two completely different phases can be distinguished. In the first decade, the 2000s, wealth inequality increased sharply; in the second decade, the 2010s, it decreased again. The latter is probably mainly due to the recovery of the real estate markets and a robust labor market. A similar dichotomy can also be observed in other countries such as Ireland, Chile and Mexico.
P90/p50 comparison
This ratio is naturally much higher than the mean/median ratio, ranging from 5.8 (Slovakia) to 53.8 (South Africa). For most countries, the value in 2022 was between 7 and 13; i.e. a household in the middle of the distribution would have to increase its net financial assets roughly tenfold to reach the threshold of the richest 10%. This is similar to the situation in France (9.8), Italy (10.4) and Germany (11.0). By and large, it is the same countries – apart from South Africa – that show a high level of inequality according to this indicator (including Brazil, Mexico, Russia, the US). The development over time also confirms the picture provided by the mean-median comparison: hardly any change for the vast majority of the countries examined; the unweighted mean, for example, has only increased slightly from 12.2 (2002) to 12.6 (2022) (Figure 32). The picture is also almost identical at the country level. In China, for example, the factor has climbed by 7 points to 13.0, i.e. from a clearly below-average to a slightly above-average value.
Figure 32: Not much change II
Ratio between p90 and p50 (median) values, change in points
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, World Inequality Database, Allianz Research
Share Top10
Finally, let's take a look at the share of the wealthiest 10% in total net financial assets. Here the range is from 47.9% (Netherlands) to 84.6% (South Africa). Essentially, the values mirror the previous analysis; for example, Slovakia has the second lowest value (49.7%), while Mexico (78.8%) and Brazil (79.9%) again have very high values. The unweighted average is 62%; slightly below this level are the large European countries Italy (56.2%), France (59.5%) and Germany (59.6%). In contrast to the two previous ratios, however, the share of the top 10 has developed quite dynamically in recent decades – in both directions (Figure 33). This is less evident in the overall aggregate – the unweighted average has risen by less than 2pps – than primarily at the country level.
Figure 33: Movement at the top
Share of top 10 in total net financial assets, change in pp
Sources: Eurostat, national central banks, financial supervisory authorities, financial associations and statistical offices, IMF, Refinitiv Eikon, World Inequality Database, Allianz Research.
And the challenge is not getting any smaller. In the past decade, monetary and fiscal policy could operate almost unconstrained; the next few years promise much more difficult conditions to initiate a turnaround in wealth distribution.
The first thing that stands out is that South Africa is no longer at the "top". Over the entire period, the share of the top 10 has risen minimally by just under 1pp – again with two very different halves: significantly more inequality in the 2000s, then the trend reversed in the 2010s. Türkiye is now at the top – i.e. it is the country where the share of the top 10 has fallen the most; at 68.0%, however, its share is still above average. What is interesting is comparing with South Africa: While in Türkiye it was rather the boom years (first decade of the millennium) that improved the distribution situation, in South Africa it is exactly the opposite. In distribution issues, every country is unhappy in its own way; there seem to be no generally valid patterns and thus no patent remedies that are effective everywhere.
This becomes equally clear when looking at the other end of the development: the countries where the share of the top 10 has increased the most. Here China and Greece are at the top, for very different reasons. In China (+18.9pps to 68.0%) it was mainly the "wild" 2000s of unbridled growth, when the private sector was still hardly subject to restrictions, that caused inequality to rise. In the last ten years, on the other hand, there have hardly been any more shifts (as with the other two key metrics). Overall, however, the deterioration with regard to the top 10 is much greater than for the two metrics that focus more on the situation in the middle of the distribution. The growing inequality in the Middle Kingdom seems to be mainly a consequence of fast rising wealth at the very top of the distribution pyramid. In Greece (+11.4pps to 60.8%), the greater wealth concentration is likely to mainly be a consequence of the euro crisis; this is supported by the deterioration mainly in the second decade. Without question, Greece was the country most affected by the crisis, with absolute wealth losses – which obviously mainly hit the middle of society. Malta and Slovenia also underwent similar developments, although in both countries the share of the top 10 is still well below average at 53.8% and 57.2%, respectively. Countries where wealth concentration has increased significantly also include the usual suspects such as Russia, Brazil, Mexico, India and the US: despite strong overall wealth growth, the richest country in the world (in terms of net financial assets) has not been able to improve its very unequal distribution situation; over the last decade it has only been possible to avoid a further deterioration.
This is then also the general conclusion of the analysis of the national distribution situation. There have been improvements only in a few countries, and if so, mainly in those with previously (and still today) very unequal distribution; examples are South Africa and Türkiye. In contrast, distribution has (further) deteriorated in many large emerging countries; examples are Brazil, Mexico, Russia, but also India and China. In most cases, this was driven by outrageous wealth growth at the very top. Even more worrying, however, is the development in the advanced economies. High inequality has been seen as one of the great social challenges for years – but nothing has been done about it. Stagnation – even if it stops a previous downward trend – is not improvement. Cementing a distribution situation that is perceived as unjust is a creeping social poison. And the challenge is not getting any smaller. In the past decade, monetary and fiscal policy could operate almost unconstrained; the next few years promise much more difficult conditions to initiate a turnaround in wealth distribution.
