Credit Suisse Global Economic Report: Shrinking middle class a worldwide trend contributing to social instability

The annual Credit Suisse Global Economic Report, which is the most comprehensive and up-to-date source of information on global household wealth, has been released. Unlike other studies, this report measures and analyzes trends in wealth across nations from the very base of the “wealth pyramid” to ultra-high net worth individuals. The methodology is robust, established over many years of analysis, and completely transparent with regard to the underlying sources and their quality. This year for the first time, the report focuses primarily on wealth inequality and the trend toward increasing amounts of wealth being held by fewer households. This world-wide trend is resulting in a shrinking middle class in almost every nation and is contributing to social instability in both developing and Western societies.

Here are a few of the findings:

• Total global wealth has grown to a new record, last year rising by 8.3%, to reach usD 263 trillion – more than twice the usD 117 trillion recorded for the year 2000.
• With an 11.4% year-on-year increase, wealth creation was particularly strong in North America, where it now stands at usD 91 trillion, or 34.7% of total wealth
• Europe made the second largest contribution, with wealth increasing 10.6% to usD 85.2 trillion.
• In both North America and Europe, capital markets were a key source of wealth growth: equity market capitalization grew by 22.6% in the United States,
• China accounts for the largest portion of newly created wealth among emerging markets with India making the second largest contribution. Emerging economies are expected to gain an increasing share of the world’s wealth.
• Wealth inequality and the changing distribution of wealth are now serious problems with the top one percent of households accounting for half of all assets in the world.
• Worldwide wealth inequality is at a level “possibly not seen for almost a century.”
• The data reveal a declining middle class worldwide.
• The poorest half of the world’s population owns just one percent of its assets.
• The number of “ultra-wealthy” people continues to climb, particularly in the United States.
• More global wealth is coming from investments—which the majority of people do not have. The concentration of wealth in fewer and fewer hands is a disturbing trend which is contributing to social unrest in both developing and Western countries.

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This summary was compiled by Michael Simms.

A worker produces toys at a factory in northern China. [Photo: Time Magazine]