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Richest 2% Own Half the World's Wealth
kop writes "The richest 2% of adults in the world own more than half of all household wealth, according to a new study by a United Nations research institute. Most previous studies of economic disparity have looked at income, whereas this one looks at wealth — assets minus debts. The survey is based on data for the year 2000. Many figures, especially for developing countries, have had to be estimated. Nonetheless, the authors say it is the most comprehensive study of personal wealth ever undertaken." The study itself is available from the World Institute for Development Economics Research.
Look at the duck world. Scrooge McDuck had enough money that he could swim in it!
My work here is dung.
It's not an Onion story?
-- www.globaltics.net
Political discussion for a new world
...just because an asset is owned by some over-rich guy, doesn't mean that it is unproductive. Tomorrow we could send Bill Gates the title deed to all farmland in the Midwest, and that land would still continue to grow wheat for everyone's Raisin Bran.
And even if we then sent Bill Gates the profits from all those boxes of Raisin Bran, Bill would only have a pile of cash. Cash is not an asset; it represents assets, which usually remain in production somewhere.
No matter how rich Bill Gates gets, he still consumes very little, perhaps a half-million dollars a year in food, real estate, clothing, maids, butlers, and the like. Everything else that he owns is (if he is an even half-wise investor) still producing something elsewhere.
FATMOUSE + YOU = FATMOUSE
between the current state and the feudal times.
It is possibly very hard to create such comparison given that probably the definition of wealth changed, the definition of feudal times is loose, the overall human population was much less and the world used to be much more fragmented back then. I think that 500 years is a nice round number, so a comparison between 1500 and 2000 could be made with some difficulty. Hard, but I don't think it's impossible.
Currently my gut feeling tells me that the "wealth" used to be even more centralized in those times, but we probably made some progress in social equality since then. I'd be interested to see in the amount of progress though.
It takes a man to suffer ignorance and smile
Be yourself no matter what they say
While it is pretty awful that 2% own 50%. The study reveals that 1% of the population owns 40% of the weatlth. Also the poorest 50% own 1% of the wealth.
More tax cuts for the rich!!!
then it must be fair. Well, either that, or bad laws can be passed.
Still, as long as the issue is `do I cough up for a PS3 or is the Wii good enough` and not `why do millions of people die from easily and cheaply preventable/treatable diseases/issues such as malnutrition, malaria and sleeping sickness` I don't see things changing.
You still think the `war on terror` is important? Perhaps if the number of deaths on 9/11 we repeated in every country, every day, otherwise no - statistically, not really. And yet, look at the ratio of money spent on that futile little endeavor to money spent on issues that affect millions daily.
The top 1% only required wealth of $500,000 which a USer making $40,000 annually should easily eclipse with a 5% 401(k) contribution (assuming you have an employer match) and an 8% return. I'd guess that almost all of the college graduates here are above the 10% level (don't forget the value of cars, computers, clothes, any retirement accounts and such).
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
Inequality and Risk
Mind the Gap
For the good of humanity we must take all that wealth and re-distribute it equitably! But before we do, we might want to check out some countries that have tried that. The results aren't pretty (for example Zimbabwe).
Seriously, the wealthy of the world can be divided into kleptocrats, heirs, and entrepreneurs. As far as I'm concerned, you can shoot the former. Certainly not the second, though you may debate the merits of inheritance tax (which I'm personally against). Mess with the third at the peril of your nations well being.
[Insert pithy quote here]
Hippy: "Like, you can't OWN property, man!"
Prof. Farnsworth: "I can. But that's because I'm not a penniless hippy!"
That's interesting. So convenient on your part. I would venture to say that if you made more money (I'm assuming you're not currently), somewhere in the $60k+ range, you wouldn't have this attitude. Would you like the government to give your money away forcefully to someone else just so that it's "fair?" Why should the government be in charge of this? And what's to stop them from becoming corrupt in this which is more than likely to happen? Power like this always corrupts...you place way too much faith in a system that doesn't work because people are people. Something like capitalism, although far from perfect, allows the greedy to get what they want and it gives a non-law regulated way for anyone to also work hard and earn their wage. Communism would only work in a perfect society. Your views are very dangerous and convenient.
-> Sometimes, you just gotta break free from the shackles of proprietary code.
As I once learned a bit about the development of Japanese culture, the fact that they live on an island with very few natural resources that world considers to be useful or otherwise valuable, much of their cultural values developed around an appreciation for other things which I find not only admirable, but inspiring as well.
In my own life, I have learned to divest myself of debt financing and to save and survive with more focus on needs and less on wants. I definitely pay a lot less attention to pop culture marketting. Having grown up very poor as a child does make the adjustment easier and somewhat more natural for me, but I am definitely not an unhappy person.
Among the things that no longer hold any direct personal value for me are things like diamonds, gold or other things that do not directly enrich my life in any meaningful way. In short, I value the practical and all but ignore the impractical, useless shiny things in life. I doubt I'll see the world's culture shift in this direction within my lifetime, but if we were to simply stop valuing many of the things we currently value, much of the world's wealth would simply lose value.
But why don't they understand how money works?
Are they poor because they don't understand how money works, or do they not understand how money works because they are poor, and so have little access to MBA degrees and financial newspapers, and are forced to spend the majority of their income on living expenses (hence having little to save for long term schemes), and take lotteries because their 'nothing to lose' situation creates a risk-taker utility function, and have jobs that are unreliable and so will likely not give them a predictable future income - hence also forcing them to take loans?
The economic statistics we have suggest the latter - while income inequality is rising, social mobility is falling. Quite simply, a large number of people are poor because they are stuck in the low income trap inherited over several generations.
That has to be the most ignorant post I have ever read and I have read a few. Open your eyes to look beyond the realms of your own limited vision. Most poor people have no choice but to live hand to mouth. And I don't mean trailer-park-poor but living-on-a-handful-of-rice-a-day-if-your-lucky-po or. Do you invest half of that rice in bonds or stock? Ignorant bastard.
It was worth the karma loss.
The richest 2% pay considerably more than 2% of taxes, however. They are disproportionately heavily taxed. I believe in the US, for example, the richest 1% bear 18% of the total tax burden.
Do they have more than 18% of the income (including capital gains, interest etc) and/or own more than 18% of the assets?
This is to be expected. People work disproportionately as well. High intelligence is distributed in a very similar curve.
The real reason that it seems to be getting more and more exaggerated is because the overall wealth/economy of the nation has continued to grow. This means that more people are able to afford to survive, to get health care, to be in a place where they can fill out these census instead of working their arses off or just trying to stay warm. Think back to the 1900s, or even late 1800s. People that were just scraping by would often not even survive. But really that's all besides the point.
Who cares if we have ridiculously rich people? What does it matter? It doesn't stop you from achieving your goals, you have to work to get there and earn your way the same. Just because there are enormously wealthy people doesn't mean you're prevented from acquiring wealth yourself. in fact, it makes you all the more likely to be able to get rich. These people if they want to stay wealthy, or grow their funds, must use it in some way. Maybe just earning interest in a bank, maybe investing in startup companies. Either way that money becomes a tool banks/companies can use to generate more wealth, and you can get in on that.
Quit being so classist. Just because others have done well doesn't mean you can't, but you surely can't if all you do is gripe about how you deserve more money without doing anything to earn it.
...who bought all the PS3s!
----------------------------------- My Other Sig Is Hilarious -----------------------------------
This reminds me of a joke.
A very rich man is asked by a journalist how he made his first million dollar. The rich man answered that he started off with just a few pennies, put them in a phone box and made a phone call: "Dad, can you lend me a million dollar, please?".
I'll do it for cheesy poofs.
I find it rather fortunate, that we have this genius called Paris Hilton. She sure deserved her wealth with her superior intelligence and financial insight.
Real life is overrated.
Darwinism, or survival of the "fitest", does not care how much money you earn.
The definition of "fitness" is your ability to reproduce. Welfare mothers, NBA stars with 14 kids, are more fit than CEOs worth millions/billions with one,two, or especially no children, regardless of income.
Earning a degree from college does not make you more "fit". Having children makes you more fit.
Having an IQ of 150+ does not make you more "fit". Being "smart" enough to take birthcontrol to prevent unwanted pregnancies probably makes you more "unfit".
I only look human.
My mother is a halfling and my dad is an ogre, so that makes me an Ogreling
I heard a guest speaker on Minnesota Public Radio (NPR affiliate) say just a week or two ago that in America, even if you live at the poverty line of a household $9000 annualy, you are still in the top 12% of richest people in the world. I hope that puts some perspective here. That said, I bet at least a tenth of slashdot users qualify in the top 2%.
Do they use more than 18% of the expenditure of State?
If not, on what ethical basis do we justify taking from them what they or their parents have earned and spending it on ourselves?
The rich and powerful need the State more than anyone else. That's the big secret. The rich introduce the State as protection from the poor. It's not normally the poor and weak who create the State but the rich and powerful. See hundreds of years of history.
The best education consists in immunizing people against systematic attempts at education. - Paul Feyerabend
Do they use more than 18% of the expenditure of State?
If not, on what ethical basis do we justify taking from them what they or their parents have earned and spending it on ourselves?
Because the rich have more stake in the state keeping the status quo intact (i.e. enforcing property rights, repelling foreigh takeover) than the poor. Not to mention many often receive indirect benefits in the form of subisidies, etc. from the government.
Not in China. Peasants were free, and owned their own land which they could buy and sell as they pleased. It was also common for farmers to run their own small business in addition to farmer, most commonly selling the cloth that the farmer's wife weaved.
Another thing in China helped redistribute wealth. While in most places the eldest son inherited everything, in China, the property was divided equally amongst all the sons. This meant that "rich" families often became "ordinary" over a few generations unless they can produce one or two men of great ability every generation or so. In fact, this custom was deliberated introduced by the Chinese emperors to reduce the chance of feudalism.
Do they use more than 18% of the expenditure of State?
If not, on what ethical basis do we justify taking from them what they or their parents have earned and spending it on ourselves?
You're conflating an ethical issue with an economical issue. Just because a capitalist economy has happened to distribute wealth in such and such a manner does not imply that those who received the wealth that they did are somehow ethically justified in spending that wealth. For example, it may well be the case that the economy dictates that your average celebrity or pro-athlete earns 1000 times as much as they need to survive. This is a far cry from saying that these people are somehow morally entitled to spend all of this money in any way they so please, when people are dying every day because the economy gave them a smaller piece of the pie (in a typical Ottawa winter one homeless person dies of the cold per day, for example.) To sum up, just because money is distributed in a particular way does not mean you are ethically entitled to spending it. Ethical questions are an entirely different matter from the particular circumstances that arise from our economy.
Let me note that I can't really fault you for believing this, because it is incredibly commonplace to hear that kind of sentiment. But I am interested in knowing why it is that so many people believe that economic circumstances should dictate what is morally correct. In any other domain it is absurdly obvious that what is ethical is determined by considering the pain and pleasure of the people involved, or by considering other aspects of the human condition, or by adhering to certain ethical maxims. And yet, when the domain of discourse is money, people suddenly forget this -they implicitly introduce the premise that what is ethical is entirely governed by the economy. This sort of assertion would be laughable if made out loud, and yet it is the implicit foundation the very sentiment you expressed in your post.
You could say 2% make most of their financial gains from the work of half of the rest of us.
If you put it that way taxing them to a larger degree sounds almost fair, doesn't it?
I'm not sure what the point is you're getting at. You don't pay tax on the unrealized capital gains, but you'd pay tax on them when you tried to convert them back to cash.
So let's say I buy 100 shares of a stock at $1 a share; during the year, it increases in value to $100 a share. So my $100 investment is now worth $100,000. Aside from the dividends, I don't owe any taxes on the stock -- however, if I 'cash out,' and sell any of the shares, I'm immediately liable for capital gains taxes. It's not a free ride.
The IRS doesn't try to tax investments as they go up and down, because to do so would be ridiculously complicated (and, as other people have pointed out, would probably lead to people claiming negative tax liability on losses). Instead they look only at the value when you bought in to the investment, and when you cash out, and then tax the difference between the two.
E.g., if my 100 shares ran up to $100 a share but then sunk back to $50 before I could sell them, the capital gain I get taxed on is $49 a share, not $99. Taxing me on $99 wouldn't make any sense, because I never really had that much money, except theoretically.
So while Bill Gates has a lot of money in MSFT, it's only wealth insofar as Microsoft's stock is considered rather stable. If Microsoft were to tank tomorrow, much of that apparent wealth would evaporate. Any time he actually sells stock in order to use any of that wealth, he gets hit with taxes. So really, he has a constant 'potential tax liability' on his 'potential wealth' of about 28% -- because if he wanted to cash out tomorrow, that's what the IRS would be coming after him for. (Well, probably slightly less than 28%, I think the first few thousand bucks get taxed at a lower rate and it goes up from there to 28% which is the cap.)
Actually taxing people on unrealized capital gains would be effectively a tax on savings. It would be a giant mess and have vast consequences -- basically it would mean that just having money sitting around in an investment would make it "shrink." It would lead to lack of savings and probably not hurt the very rich nearly as much as it would hurt the middle class. Not to mention that taxing unrealized capital gains would also involve taxing real property -- it would basically be a federal property tax. That's going to hurt homeowners everywhere; it's a total non-starter.
There are a lot of problems with the current tax code, but the fact that it doesn't go after unrealized capital gains is not one of them.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
"The rich get richer" is basically a result of something sometimes called the "risk free asset" by modern portfolio theory aka "risk free rate of return" -- generally the interest rate the government pays to borrow money. In classical economics its called "economic rent" or "Ricardian rent" (after the classical economist Ricardo). It results from systemic growth in the economy -- growth that increases the value of assets that do not increase with increasing demand, such as land. If you shove more people onto the Earth, you get higher land prices but you don't get more land. (BTW: This is the real reason guys like Gates, Bush and Kennedy are for immigration liberalization.) In a natural setting, this corrects itself through die-offs and/or fighting over the land -- or whatever the monopoly at issue happens to be (it could be a monopoly on, say, the right to make copies of an operating system that everyone happens to have standardized on, which is what made the present day's richest man). Governments protect wealth holders from this natural redistribution by taxing things to pay for police, courts, military, and other things that protect nonsubsistence property rights. When this service is paid for by taxing things other than those property rights, you have a subsidy of nonsubsistence property rights.
If you don't tax away all monopoly profits and redistribute it evenly to everyone, then you end up with a class of people who have an incentive to load up the economy with more people, whether through immigration or birth rates, in order to increase the demand for their property. This class can be the private owners of the monopolized rental properties or it can be public officials that reserve to themselves and their special interests the economic rent derived from taxation.
Think of it as signal processing where you don't subtract out the DC component of the signal before integrating. You end up overflowing your accumulators and losing the information you were trying to extract.
The only exception you might make is for intellectual property representing genuine invention of technological utility, and subsistence property rights since people will generally fight to the death to retain their subsistence.
That's why "the money quote" from my white paper says:
Seastead this.
The problem is real in terms of percentile, and any other conclusion is either based on intentional deception or ignorance of the issue.
Here is a chart that says it all - the rich are getting richer as a percent of total wealth and that's bad for America.
Last time it was this bad we had a great depression.
If you don't like your 100k income in SF try making 15k there cleaning up after the 100k club. The so-called middle class has a very poor picture of how normal people actually live. You can live very very well on 100k in SF if you don't buy a lot of over priced crap.
Promote efficiency in the upper income brackets; tax 'em.
Free market economies do not "just happen" to distribute wealth. It goes to those who work, in proportion to how hard they work and how skilled they are.
I'd like to believe that, sir, I really would. Except I know that free markets are not really as free as we'd like to believe. By and large, the extremely rich maintain and increase their wealth through a number of mechanisms. They have connections. They know politicians, and other heads of industry. They enact protectionist laws. The reason lawyers and doctors make so much money is that they have erected barriers to entry to their professions. To practice law, one must attend an expensive law school before being allowed to take the bar. Along with the needless complexity of the court system dictates that leagal endeavors will be very expensive. The medical profession is very similar. While I don't dispute that quality surgery is likely to be expensive, day to day medical care should not be. Doctors, however, stand as the gateway between the people and most medications. I suffer from excema. About once a year, I need a new tube of cream to treat the occasional outbreak. The tube costs $4.15, but I have to pay for a $200 doctor visit before I can get one.
And of course, the rich generally begin life with a great deal of wealth. They have access to better nutrition and schools. They inherit the business connections of their fathers. They attain positions of power not through merit, but as an accident of birth. Which also implies that my own child is just that much more unlikely to attain those positions of power. There are a lot of policy changes that can be made to rectifiy this sort of situation. Eliminate protectionist laws. Reinstate the estate tax. Actually, just treat it as any other taxable gift, because that's what an inheritance is: A gift you make when you die. Eliminate incentives for the poor to remain poor. There are far too many of them to list here. Just a few ideas anyway. I don't mind the rich getting rich on their own merit. But for every James Sinegal (Costco founder) out there, there are 100 asshats riding on daddy's (or grandpa's) coattails.
No, that would be really dumb. It would further discourage people from saving money, and push everyone even further down the road towards paycheck-to-paycheck living. (Or worse, to debt-maintained living -- unless you want to tax debt?)
Now I agree that it's rather bizarre that we don't just tax capital gains as income; actually it's bizarre that we don't just tax all income as income, and do away with all the little niggling special categories -- if it was someone else's money and now it's yours, that's income, tax it at the same rate.
People shouldn't be taxed on money that's sitting around and not doing anything, or on the principal value of property. If an investment makes money, then they should get taxed on it -- immediately in the case of dividends, or when they cash-out in the case of capital gains. But taxing "wealth" in the form of unrealized capital gains would result in people's retirement/college/savings funds just magically shrinking, year after year. It would basically be telling people: "use it or lose it."
That's not a smart road to go down, because when you discourage people from saving, you're just going to end up having to bail them out later, when they're 65 and broke because they didn't bother to save money for retirement. (I suppose you could pull a Logan's Run and kill them, but I'm going to make some assumptions here.) Rather than letting individuals run their own lives, you're heading down the road to a centrally planned economy, where because nobody can afford it on their own anymore, they have no choice but to depend on the government for everything.
Furthermore, you'd also discourage property ownership (which is one of the keys to social stability), and instead favor people who maintain a low "wealth" by constantly matching their stream of income to their stream of expenses, even when it's obviously not sustainable. Anyone who wants to could probably zero out their 'wealth' by just spending more on services and other items with little residual value. As long as they stay employed, they can maintain a high quality of life -- but the second that they have a gap in their income stream, because they don't have any savings, they fall flat. And then it's back to the government for a bailout.
Wealth-based tax schemes lead directly to heavy government dependency by the entire populace, and encourage personal finance schemes that aren't sustainable or productive in the long term. You might think that it's eliminating one form of classism, but instead you'd just replace it with the classism of a Politburo: a small number of bureaucrats managing all of society's savings and wealth. No thanks.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
This is a great point, one that is essential for understanding the relative advantages of capitalism over communism or socialism. It's not so much that the richest 1% own the majority of capital, it is that they control it. It's not ownership the way we normally think of it with respect to personal property, because there are practical limitations on how they can use it. Bill Gates can't just liquidate his stock and take the cash; partway through the process the resulting market crash would wipe out his wealth. What he can do, though, is choose where it will work in the economy.
As the capital he controls is worked through the economy, it creates growth. His appreciation and return is a small tax on that growth, however like taxes it is quickly reinvested as new capital. The rich capitalists compete with the government in directing the economy. This creates the competitive tension between elitist business and populist government that drives the improvement of both.
Build a man a fire, he's warm for one night. Set him on fire, and he's warm for the rest of his life.