Half the world has 1% while 1% has half the world’s wealth

To say inequality is rampant on a global scale is to say the Sun is a tad warm. Forget pyramids; the global distribution of wealth is better represented by a needle reaching into the stratosphere.

Not simply an anecdote, the common saying that the rich get richer and the poor get poorer has been given fresh evidence from two studies by organizations not known for their sympathies toward the wretched of the Earth.

"The Bosses of the Senate" by Joseph Keppler

“The Bosses of the Senate” by Joseph Keppler

One, from one of the world’s biggest investment banks, Credit Suisse, reports that the world’s richest one percent possesses nearly half of the world’s wealth while half of humanity holds one percent. The other study, issued by the World Bank, estimates that 1.2 billion* people are in “extreme poverty” — defined as earnings of US$1.25 per day. What is perhaps most remarkable about the World Bank report is the minuscule redistribution that would be required to eradicate “extreme poverty.” The report, “State of the Poor,” says:

“Suppose that the real GDP growth for the developing world as a whole is 5 percent per year. If 10 percent of this GDP growth accrued to the 21 percent of the developing world’s population who are extremely poor, and this 10 percent was distributed in a way that the growth in income of each poor person was exactly his/her distance to the $1.25 line, extreme poverty would end in one year.” [page 6]

In other words, redistributing 10 percent of economic growth in poor countries themselves — before any assistance from the developed world — would be sufficient to lift all the world’s poorest people, at least to a less severe poverty.

Despite that suggestion by the authors of the World Bank report, the number of the world’s extremely poor increased by more than 100 million from 1981 to 2010, and their average income was stagnant. The report adds that more than one-third of the world’s extremely poor individuals are children younger than 13, and half of the children living in low-income countries are in extreme poverty.

Lucky births beget lucky births

On the other side of the scale, the wealth concentrated in the ultra-wealthy — naturally, a vastly smaller cohort — is difficult to comprehend, although it, like the vast numbers of the extremely poor, is an outgrowth of deepening inequality. The Credit Suisse study, “Global Wealth Report 2013,” concludes that not only is wealth stable through multiple generations but that the roster of wealthy countries is remarkably stable. On the first point, the report says:

“[T]en generations or more have to lapse before the wealth of an individual in North America is completely unrelated to the wealth of their ancestors. Our simulations for North America are therefore highly consistent with the relatively immobile outlook that emerges from the intergenerational evidence.” [page 34]

North America is the world region with the least mobility in terms of people moving up or down the ranks of wealth. Europe is the next least mobile region. Concomitantly, those two regions are home to three-quarters of the world’s millionaires. The Credit Suisse report, surprisingly direct in its conclusions considering that the ultra-wealthy are its clients, says:

“[C]hanges in the shares of wealth over time tend to be very modest, both within countries and worldwide. Thus the distribution of wealth is both highly unequal and relatively stable over time.” [page 26]

While austerity programs have flattened or reduced living standards for most of the world’s peoples, the super-wealthy have done just fine (the purpose of austerity). Virtually all of the past year’s increase in the value of the world’s assets are accounted for in North America and Europe, and that concentration is itself highly concentrated: The United States, which has 42 percent of the world’s millionaires, by itself accounted for US$8.1 trillion* of the world’s $11.3 trillion increase in wealth from 2012 to 2013.

What? Trillions of dollars in new wealth in just the past year? Still more incredibly, the aggregate wealth total of the U.S. is estimated to be more than 50 percent higher than it was in 2008, when the total bottomed out in the depths of the economic downturn. Wait a minute — wages have fallen and remain under pressure as unemployment remains high. More of us are struggling just to meet basic needs. Where are these fountains that spray gold high into the air?

The stronger take from the weaker

It’s the magic of the market at work. The tricks that make this magic work are multiple levels of exploitation. Worker productivity has increased, while wages are flat or slowly declining, around the world. Countries at the center of the global capitalist system extract wealth from the rest of the world, as their corporations plunder natural resources in one-sided deals and take advantage of low labor costs and non-existent environmental enforcement. James Petras estimates that the corporations of the United States and Europe extracted $950 billion from Latin America for the period 1975 to 2005.

Although some crumbs have historically fallen to the working peoples of the North from imperialism, corporate globalization has dialectically begun to hurt those working peoples as more production is moved to developing countries with ever lower wages. The upward flow of money has accelerated, and the one-sidedness of this arrangement is illustrated by the fact that the Credit Suisse report lists Greece as one of the countries in the richest tier, those with per capita wealth of more than US$100,000. That is so despite 27.6 percent unemployment and an economy that has shrunk for 20 consecutive quarters and by more than 20 percent during that period.

That means that Greece has hideous inequality. But as skewed as wealth distribution is in Greece, a country in which its most lucrative industry, shipping, pays no taxes, it’s not close to being the most unequal. As measured by the gini coefficient, the standard economic metric of inequality, the United States has the worst inequality of any advanced capitalist country, and among the 34 countries of the Organisation for Economic Co-operation (the club of the world’s advanced capitalist countries and biggest developing countries), only Turkey, Mexico and Chile are worse.

Those at the very top hold truly enormous amounts of wealth — Forbes magazine, in its 2013 report on the world’s wealthiest people, report that Earth’s 1,426 billionaires collectively have a net worth of US$5.4 trillion. To put that figure in some perspective, there are only two countries in the world, the U.S. and China, that have a gross domestic product that is larger. Another comparison is this: Those 1,426 billionaires possess wealth that is more than double that of the bottom half of humanity — 3.6 billion humans.

When “markets” are allowed to dictate ever more social outcomes, this will be the result. Capitalism has evolved to the point where people exist to serve markets, not the other way around — and capitalist markets are the aggregate interests of the most powerful industrialists and financiers.

* One billion is 1,000 million throughout this article. One trillion is 1,000,000 million.

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21 comments on “Half the world has 1% while 1% has half the world’s wealth

  1. Hello,
    That 1,400 people have twice the wealth of 3.9 billion is obscene.
    Thank you,
    Jerry

  2. Alcuin says:

    I read somewhere, recently, that 110 men in Russia own 35% of that country’s wealth.

    I know that you are a follower of Wallerstein, so perhaps you haven’t read anything by Kees van der Pijl. I just finished Transnational Classes and International Relations and I highly recommend it. The title is not very descriptive to the “man-on-the-street”, but in his book, van der Pijl traces the growth of capitalism from 17th century England to the end of the 20th century. A tall order, to be sure, but he is interested in establishing a framework for understanding that growth, not a detailed description of it. He starts out by explaining commodification, socialization and capital; moves on to capital accumulation and class formation, and then goes into an explanation of what he calls the Lockean heartland vs. the Hobbesian contender. This struck a note with me, because I have been doing some reading regarding common field agriculture, which I stumbled across when I was looking at a 1920s map of St. Genevieve, Missouri. It turns out that the common fields shown on that map were a relict of the French establishment of St. Genevieve in 1750. Carl Ekberg, the expert on the subject, went into some detail in one of his books in explaining the different geographical patterns that French and Anglo-American mentaliés left on the landscape. England (and, by extension, the United States), of course, is the Lockean heartland and France is one of many Hobbesian contenders to the heartland.

    What I particularly liked about his book is that he covered the subjects of Freemasonry, the Bilderbergs, the Rothschilds, the Trilateral Commission and Davos and showed how all of those groups were a way for the capitalist class to coordinate their activities, more or less successfully. I have always steered clear of these topics, because they turn up so often on sites like Alex Jones’ Infowars site and other right-wing conspiracy blogs. van der Pijl acknowledges that and shows their real function.

    It’s a fascinating subject and one that I continue to pursue. van der Pijl ends his book with a plea for the cadres (in essence, the capitalist managerial class) to address the plight of the working class. If not, he warns, “the suicidal drive of liberalism” will not be reversed. Next up may be van der Pijl’s Nomads, Empires and States

    • The figure you quote about Russia may well be correct. During the 1990s, seven oligarchs controlled close to 50 percent of Russia’s economy. They bankrolled Boris Yeltsin, who in turn saw to it that almost the entire Russia economy was privatized in a manner that enabled them to grab much of it. They were among the first class of Russian billionaires.

      I haven’t read Kees van der Pijl, so will refrain from commenting on his work. But the book you summarize sounds quite interesting. Organizations like the Trilateral Commission or Davos are simply clubs where the most powerful industrialists and financiers get together to coordinate the work necessary to keep the capitalist system operating to their benefit. That they are secret societies that manipulate the world at will is laughable nonsense.

      Capitalism is highly unstable, and its booms and busts can’t be controlled. Big capitalists may be at the top of the pyramid and they may be able to rig economics to their private benefit, but they are still riding the tiger. None of them are guaranteed to remain on top, nor are their descendants. A class sits atop all of us, but the members of that class will always be in a certain amount of flux because their system is unstable. We can only understand the workings of capitalism through studying it as a system (and that includes its long history of development), not by imagining a handful of families who have pulled wires behind a curtain for centuries. The latter is mythology.

      • Alcuin says:

        You might want to read the Wikipedia entry on Kees van der Pijl. I found him in one of the footnotes in the Nafeez Ahmed article that I referred to previously. In retrospect, Ahmed gets a little close to the edge of the cliff in a few spots, but his conclusion, at the end of the essay, mirrors van der Pijl. Ahmed cites van der Pijl’s 1984 book, The Making of an Atlantic Ruling Class, as well as the 1998 <Transnational Classes and International Relations, but he doesn’t spend a lot of time on them. It is only when you read van der Pijl that so much crystallizes: he does not subscribe to the realist school of International Relations, which says that states are the prime actors. He claims, instead, that capital is the prime actor and that it uses states as a tool. This is known as the Amsterdam School of global political economy. Ahmed, in his essay, explains how capital uses terror, among other tactics, to get its way. It’s all rooted in capital. Fascinating subject!

        • Sounds fascinating, indeed. The thesis of capital as the prime actor, using the state as a tool, has plenty of support. One need only look at the history of U.S. foreign interventions. And not only the U.S.

      • Alcuin says:

        “It is accordingly that with the demise of the Hobbesian contender state of the Cold War, the central US role in the global political economy can no longer derive part of its international and transnational legitimacy from its critical geopolitical role in defending the interests of ‘the West’”

        From the Journal of International Relations and Development.

        Interesting thought – I hadn’t previously thought that a non-state actor could be a “Hobbesian contender state”.

  3. Congratulations on an articulate and comprehensive expose of what we really mean when we talk about the 1%. I’m not sure how many people understand all this. I’ve been doing some interesting reading about the 18th century Enclosure Act (when all our European ancestors were thrown of their communal lands to enable large scale sheep production). This is the point at which massive wealth inequality first became apparent, and it’s only become steadily worse.

    Early this summer I read Henry George’s 1879 Progress and Poverty for the first time. He proposes re-establishing the universal human right to land through a Land Value Tax. Popular support for an LVT seems to be growing with the failure of the economy to recover after the 2008 crash. We even have our own Facebook page now: https://www.facebook.com/groups/landvaluetax/

    • The enclosure of the commons took place in two parts. The second on the time frame you noted, but the first enclosure came in the 16th century when English feudal lords began throwing peasants off their land. The rise of Flemish wool manufacturing and a corresponding rise in the price of wool in England induced the wholesale removal of peasants from the land. The Lords wanted to transform arable land into sheep meadows, and began razing peasant cottages.

      Forced off the land they had farmed and barred from the cleared land on which they grazed cattle and from forests in which they foraged, peasants could either become beggars, risking draconian punishment for doing so, or become laborers in the new factories. This was the beginnings of capitalism, and force was an instrumental part of it. In our own times, public space is being privatized, affordable housing is torn down to build luxury condominiums and militarized police enforce the rule of the privileged. Another taking of the commons.

    • Alcuin says:

      You might be interested in reading the blog of Jason W. Moore. From his website:

      “Jason W. Moore (PhD Geography, University of California, Berkeley, 2007; M.A., World History, University of California, Santa Cruz, 1997; B.A. Political Science and Sociology, University of Oregon, 1994) is assistant professor in the Department of Historical, Religious, and Philosophical Studies at Umeå University, and coordinator of the World-Ecology Research Network. He writes frequently on the history of capitalism in Europe, Latin America, and the United States, from the long sixteenth century to the neoliberal era.”

  4. […] Click here to view original web page at systemicdisorder.wordpress.com […]

  5. Jeff Nguyen says:

    Man, I wish you had been my economics teacher in high school. I wouldn’t have had so much unlearning to do later in life.

    • Alcuin says:

      Ha, ha, ha!! If pigs could fly. Do you think what you are learning now was ever taught in any public or private school? Schools are the means that capitalists use to reproduce themselves by instilling an ideology that justifies capitalism. It’s up to the few contrarians out there to figure things out for themselves later in life. I was in my 40s before I graduated from college and Marx was never mentioned. Imagine that …

      • Jeff Nguyen says:

        Guilty as charged. I’m a public school teacher…first grade. I’m amazed at how many of my colleagues still teach Columbus like he was a hero or reenact Plymouth Rock at thanksgiving.

        Teachers of all people should be the most educated about what’s going on. In Spain, Greece and Mexico the teachers have hit the streets en masse to protest austerity. In America, barely a whimper with the exception of the CTU strike in Chicago and the Madison sit-ins.

        • Alcuin says:

          My sincere sympathies. You have to be very, very careful of what you say to the children. They’ll run home and say, “Mommy, mommy, my teacher said that Columbus was a bad man!” And then you’ll lose your job. I have a good friend who is an art teacher and she has a tough time, too.

        • Jeff, I’m glad you are a teacher, even with whatever constraints within which you have to work.

          Alcuin, I’m not surprised you did not encounter Marx in your college courses. I didn’t, either, and I understand that economics majors aren’t exposed to Marx! He seems like he has had some influence on the world …

  6. Alcuin says:

    A very insightful article from Jason W. Moore: Wall Street is a Way of Organizing Nature.

  7. In 2007, the six heirs of Sam Walton owned more wealth than the bottom 30% of Americans. Since then, their share of the nation’s wealth has reputedly grown to match that of the bottom 42% of their “fellow citizens.” The United States always held itself up as an example for the rest of the world to follow; the Russians have simply taken us up on that offer.

    Facts such as these are surely a remarkable testament to the efficacy of the socialization process referred to by previous commenters. But one does have to wonder where the limit might be (assuming that the people are privy to the information in the first place). At what point will a people conditioned to believe that capitalism made America the most wonderful country ever to have blessed the surface of the Earth finally recognize that they have been had? Can they continue to be bought off with cheap hamburgers and computer-generated movies? And when the country collapses, will they attempt to rebuild it along the only lines they have ever known?

    • I sincerely hope United Statesians will realize they have been had sooner rather than later. Perhaps the rest of the world will go forward and leave the U.S. behind, but that would be dangerous. A declining empire looking for revenge on “foreigners” (because nothing could ever be wrong at home) while maintaining its national hubris and bristling with weapons? Better we work to convince our fellow countrymen and women that a better world is possible, and then dismantle those weapons.

  8. Danielle H. says:

    You need to find ways to starve the beasts. Connect the dots and boycott them. Learn from South Africa’s Apartheid and its demise. It will be hard work but I am buying mostly from small, medium and local businesses whenever I can substitute… I haven’t eaten at a McDonalds in 11 years, no Coke drinks for 8 years, no Evian water for 7 years, nothing from Amazon for 5 years…And have never shopped at Walmart!

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