Rising wealth inequality a bad sign for society
The global economy is experiencing a period of astonishing economic alteration. The sweeping changes of the fourth industrial revolution represent the most dramatic structural upheaval in over 250 years. Revolutions, it turns out, are revolutionary per se – social as well as economic relationships will be challenged by this process. At the same time, the economic needs of humanity have evolved from the crude pursuit of material possessions represented by output economics. The society has advanced to impact economics, adding broader demands for a sustainable and more equitable future to traditional material demands. Properly mobilizing private wealth is critical in this period of change. Whether as a source of investment or philanthropy, private wealth will shape the tech-driven change even as it caters to the funding needs. According to Credit Suisse Global Wealth projections, global wealth will reach $629 trillion by 2027. Growth by middle-income countries will be the primary driver of global trends. The wealth per adult is likely to be around $110,270 in 2027 and the number of millionaires will stand at 86 million while the number of ultra-high-net-worth individuals (UHNWIs) may touch the 372,000 figure.
Regionally, the loss of global wealth is heavily concentrated in wealthier regions like North America and Europe, which together shed $ 10.9 trillion. Asia Pacific recorded losses of $ 2.1 trillion, while Latin America is the outlier with a total wealth increase of $ 2.4 trillion, helped by an average six per cent currency appreciation against the US dollar. Heading the list of losses in country terms in 2022 is the United States, followed by Japan, China, Canada and Australia. The largest wealth increases at the other end were in Russia, Mexico, India and Brazil. Along with the decline in aggregate wealth, overall wealth inequality also fell in 2022, with the wealth share of the global top one per cent falling to 44.5%. The number of millionaires worldwide fell by 3.5 million during 2022 to 59.4 million people before taking into account 4.4 million “inflation millionaires” who would no longer qualify if the millionaire threshold were adjusted for inflation in 2022.
Aggregate global wealth totalled $454.4 trillion at the end of the year, down $ 11.3 trillion. Wealth per adult fell by 3.6% to reach $ 84,718 by the year-end. These losses are exaggerated because they refer to US dollars at current exchange rates and depreciation was widespread during 2022. If exchange rates had remained the same as in 2021, the total wealth would have grown by 3.4% and wealth per adult by 2.2%. The actions undertaken by governments and central banks in 2020 to offset the macroeconomic repercussions of Covid-19 resulted in share price rises and increasing wealth inequality. Share prices rose at an even faster pace in 2021, but this was balanced by strong growth in non-financial assets, so that the overall impact on wealth inequality was broadly neutral. Since the end of 2021, many advanced nations have experienced significant reductions in financial wealth and this led to widespread falls in wealth inequality in 2022. For the world as a whole, these annual shifts have roughly cancelled out, leaving global wealth inequality back at the level prevailing when the pandemic began, which, for most inequality indicators, was the lowest level recorded this century. Rising wealth inequality is a bad sign for society at large.