Credit Suisse just released its annual global wealth report and, as usual, it’s crammed full of interesting facts.
Data on income is much easier to come by than data on wealth, and Credit Suisse’s study is one of the few major efforts to track the distribution of private wealth.
This year the investment bank looked at the persistent and worrying decline in the proportion of wealth owned by the middle class in different regions of the world.
And everywhere you look, it’s declining.
It’s true in Asia and Europe, where the middle-class wealth share started off high in 2000, and it’s true of places like India and North America, where is was already much lower.
The effect seems pretty constant across developing and developed economies:
Only a handful of countries bucked the trend, and they’re not all exactly shining examples of economic success:
In every region during 2000 — 2015, the rise in the aggregate wealth of the middle class was less than that at higher wealth levels and this was true of most countries, the exceptions being Colombia, Greece, Mexico and Poland where the split was roughly 60:40 in favour of the core middle class.
Looking at the graph, it seems like there are two rough sections. Between 2000 and 2008, there seems to have been a little bit of slippage, but middle-class wealth levels were comparably stable. Since then, there’s been a more obvious decline. Here’s another snippet from the report:
From 2008 onward, wealth growth has not allowed middle-class numbers to keep pace with population growth in the developing world. Furthermore, the distribution of wealth gains has shifted in favour of those at higher wealth levels. These two factors have combined to produce a decline in the share of middle-class wealth in every region since 2007 and a decline in all regions except China for the entire 2000 — 2015 period.
The percentage decline since 2008 lies in a narrow range (9% — 13%) for most regions, but is higher in Latin America (16%) and highest of all in North America (17%). This pattern is repeated in most countries and provides support for the claim that the middle classes have been squeezed in recent years.
This gives us an idea of what is happening on a statistical level. Though middle-class wealth has grown in total in most if not all of these regions, the share of the wealth has declined.
To adjust for the different income and wealth levels around the world, there’s no single definition of “middle class,” but rather a big range. Just $US13,662 in assets will get you into the middle class in India, but you’d need at least $US50,000 to be considered for the category in the United States.
So the middle class isn’t the same size around the world, either. 42.4% of Germans are counted as middle class, against just 5% of Egyptians. But there are common themes — they’re substantially more likely to own property, and to be able to weather economic misfortune, with a cushion of wealth to fall back on.
In the advanced economies, there’s one thing warping the shares a little. For the US, anyone with above $US500,000 in wealth is considered too fortunate to be middle-class, a level which some people might dispute. That means anyone whose net wealth has crept above that point is not counted in any middle-class statistics. It’s not a small share in some nations. In Italy, for example, 8.6% of people are considered to be “above middle class.”
But it does mean that the wealth of the people leaving that category to climb upwards is significantly more than those moving into the middle class bracket at the other end.
It doesn’t seem like the decline in the middle class share can be down to domestic policy changes, unless those policies are so universal that they have impacted on every country in the world. Though it’s common to see specific governments blamed for changes in the distribution of income or wealth, when it’s happening all around the world, you have to wonder to what extent they’re in control.
It seems likely that there’s some much more systemic change to the global economy that’s giving a particular advantage to the slivers of the population with so much asset wealth that they’re no longer described as middle class.
The declining presence of the middle class in terms of the world’s wealth is something that’s likely to spark concern across the political spectrum — not just from leftists, who might fear the growing influence of the super-wealthy top sliver, but the right-wing advocates of a property-owning democracy. The idea of giving most ordinary families a political and economic stake in society certainly seems less meaningful if that stake is getting smaller and smaller.
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