{"id":65497,"date":"2015-10-26T12:00:17","date_gmt":"2015-10-26T12:00:17","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=65497"},"modified":"2015-10-25T11:56:27","modified_gmt":"2015-10-25T11:56:27","slug":"credit-suisse-wealth-report-there-are-more-poor-people-in-america-than-in-china","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2015\/10\/credit-suisse-wealth-report-there-are-more-poor-people-in-america-than-in-china\/","title":{"rendered":"Credit Suisse Wealth Report: There Are More Poor People in America Than in China"},"content":{"rendered":"

14 Oct 2015 – <\/em>This is a wonderfully counter intuitive finding from the new Credit Suisse Wealth Report. There\u2019re more poor people in America than there are in China. No, really, this is true, when measuring by wealth. We\u2019ve not got the detailed number of the United States alone as they\u2019re offering the information by region. But Canada\u2019s population size means that we don\u2019t have to worry about that very much (sorry, Canadians). To a reasonable level of accuracy there\u2019s no one in China in the bottom 10% of the world\u2019s population by wealth. And yet there\u2019s some 10% of those global poor in North America, and another 20% or so in Europe<\/a>. So, yes, it really is true that there\u2019re more poor people in America (and Europe) than there are in China.<\/p>\n

Which, when you think about it, is really very odd indeed. Because China has more people than those two other regions put together and it\u2019s also much poorer than those two regions put together. So, we really would think that there\u2019re more poor people in China than there are in the United States. So what\u2019s causing this? Inequality? The impositions of the capitalist plutocracy? Something that Bernie or Hillary can sort out for us?<\/p>\n

No, it\u2019s that the US and Europe have developed financial and banking systems, in a manner which most of the rest of the world doesn\u2019t really, at least not yet. Here\u2019s the fun chart<\/a>:<\/p>\n

\"As<\/a><\/p>\n

As you can see, America (again, this is the US plus Canada) has some 10% of the poorest people in the world and also some 30% of the richest.Europe has (by eye) perhaps 20% of the world\u2019s poorest people and 35% of the richest (there\u2019s more people in Europe). And China has pretty much none of the world\u2019s poorest people and say 7 or 8% of the world\u2019s richest.<\/p>\n

Yet we know very well that America and Europe are very much richer than China. So, what\u2019s going on? Is it all just that the wealth is being taken by the plutocrats in our deeply unfair and unequal societies? No, it isn\u2019t. Because we\u2019ve got to understand what this number actually is. It is wealth, not income. And it is also net wealth, that is the value of all assets minus the value of all debts. As the report makes clear:<\/p>\n

\u201cTo determine how global wealth is distributed
\nacross households and individuals \u2013 rather than
\nregions or countries \u2013 we combine our data on the
\nlevel of household wealth across countries with
\ninformation on the pattern of wealth distribution
\nwithin countries. Once debts have been subtracted,
\na person needs only USD 3,210 to be among the
\nwealthiest half of world citizens in mid-2015.
\nHowever, USD\u00a068,800 is required to be a member
\nof the top 10% of global wealth holders, and
\nUSD 759,900 to belong to the top 1%. While the
\nbottom half of adults collectively own less than 1%
\nof total wealth, the richest decile holds 87.7% of
\nassets, and the top percentile alone accounts for
\nhalf of total household wealth.\u201d<\/em><\/p>\n

So, you need $3,000 or so to be in the top half of the world\u2019s wealthy people. And $70,000 or so to be in the top 10%. In pretty much all of Europe and America this means that anyone who has paid off their mortgage is in the top 10%. And anyone with a reasonable private pension would be too.<\/p>\n

So, how do we end up with all those poor people, poor in wealth that is, in those rich countries? Because of this<\/a>:<\/p>\n

\u201cIf you\u2019ve no debts and have $10 in your pocket you have more wealth than 25% of Americans. More than that 25% of Americans have collectively that is.\u201d<\/em><\/p>\n

It is possible to have negative wealth. To have debts that are greater than your assets. But this is only possible in a reasonably advanced society, where there\u2019s a financial and banking system that will lend to people without assets. And that\u2019s what that negative wealth is. Part of the financial life cycle rather than evidence of great poverty. For example, that newly minted Harvard graduate, carrying perhaps $150k of debt and now coining it on Wall Street<\/a> as a junior analyst would be counted, in this wealth measurement, as being in those poorest 10% of the world. Those poor people in India and Africa aren\u2019t poor in this same manner. They\u2019re the people standing there with their labour and the clothes on their back and nothing else. But the people in the rich countries who are in that bottom 10 and 20% of the world\u2019s wealth distribution are simply people with more debt than assets. And the reason there\u2019re no Chinese in there is because the Chinese financial system doesn\u2019t work that way. Mortgages, student loans and so on pretty much don\u2019t exist: so there\u2019s no one with negative wealth.<\/p>\n

Which is how we get to those numbers. And then we have to acknowledge that these numbers are all entirely wrong. Not because Credit Suisse has made a mistake: they are following the accepted definitions all the way through. It\u2019s that those accepted definitions themselves are wrong. Because we only count financial wealth and we only count some kinds of it. Housing wealth (equity, so house value minus any mortgage), financial assets (stocks and bonds etc), other assets (furniture etc) and private<\/em> pension savings. We are not including, for example, any valuation of future Social Security<\/a> benefits. Nor any value of human capital: that Harvard degree (if it was in, say, puppetry) might not be worth what was paid for it but it\u2019s worth something. Nor what is the greatest source of wealth for everyone in the developed countries: that happenstance that we were born into developed countries. Countries where if we go broke the children will still get educated, we\u2019ll still get medical care, food, shelter and all the rest: the value, in short, of being a citizen of a country with a developed welfare state.<\/p>\n

_______________________________<\/p>\n

Tim Worstall<\/em> – I have opinions about economics, finance and public policy. I’m a Fellow at the Adam Smith Institute in London, a writer here and there on this and that and strangely, one of the global experts on the metal scandium, one of the rare earths. An odd thing to be but someone does have to be such and in this flavour of our universe I am. I have written for <\/em>The Times, Daily Telegraph, Express, Independent, City AM, Wall Street Journal, Philadelphia Inquirer and online for the <\/em>ASI, IEA, Social Affairs Unit, Spectator, The Guardian, The Register and <\/em>Techcentralstation. I’ve also ghosted pieces for several UK politicians in many of the UK papers, including the <\/em>Daily Sport.<\/em><\/p>\n

Go to Original \u2013 forbes.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

This is a wonderfully counter intuitive finding from the new Credit Suisse Wealth Report. There\u2019re more poor people in America than there are in China. No, really, this is true, when measuring by wealth.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48],"tags":[],"class_list":["post-65497","post","type-post","status-publish","format-standard","hentry","category-in-focus"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/65497","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=65497"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/65497\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=65497"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=65497"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=65497"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}