Capital in the Twenty-First Century (76 page)

FIGURE 12.1.
   The world’s billionaires according to
Forbes,
1987–2013

Between 1987 and 2013, the number of
$
billionaires rose according to Forbes from 140 to 1,400, and their total wealth rose
from 300 to 5,400 billion dollars.

Sources and series: see
piketty.pse.ens.fr/capital21c
.

The only way to make sense of these wealth rankings is to examine the evolution of
the amount of wealth owned by a fixed percentage of the world’s population, say the
richest twenty-millionth of the adult population of the planet: roughly 150 people
out of 3 billion adults in the late 1980s and 225 people out of 4.5 billion in the
early 2010s. We then find that the average wealth of this group has increased from
just over
$
1.5 billion in 1987 to nearly
$
15 billion in 2013, for an average growth rate of 6.4 percent above inflation.
²
If we now consider the one-hundred-millionth wealthiest part of the world’s population,
or about 30 people out of 3 billion in the late 1980s and 45 out of 4.5 billion in
the early 2010s, we find that their average wealth increased from just over
$
3 billion to almost
$
35 billion, for an even higher growth rate of 6.8 percent above inflation. For the
sake of comparison, average global wealth per capita increased by 2.1 percent a year,
and average global income by 1.4 percent a year, as indicated in
Table 12.1
.
³

FIGURE 12.2.
   Billionaires as a fraction of global population and wealth, 1987–2013

Between 1987 and 2013, the number of billionaires per 100 million adults rose from
five to thirty, and their share in aggregate private wealth rose from 0.4 percent
to 1.5 percent.

Sources and series: see
piketty.pse.ens.fr/capital21c
.

To sum up: since the 1980s, global wealth has increased on average a little faster
than income (this is the upward trend in the capital/income ratio examined in
Part Two
), and the largest fortunes grew much more rapidly than average wealth. This is the
new fact that the
Forbes
rankings help us bring to light, assuming that they are reliable.

Note that the precise conclusions depend quite heavily on the years chosen for consideration.
For example, if we look at the period 1990–2010 instead of 1987–2013, the real rate
of growth of the largest fortunes drops to 4 percent a year instead of 6 or 7.
⁴
This is because 1990 marked a peak in global stock and real estate prices, while
2010 was a fairly low point for both (see
Figure 12.2
). Nevertheless, no matter what years we choose, the structural rate of growth of
the largest fortunes seems always to be greater than the average growth of the average
fortune (roughly at least twice as great). If we look at the evolution of the shares
of the various millionths of large fortunes in global wealth, we find increases by
more than a factor of 3 in less than thirty years (see
Figure 12.3
). To be sure, the amounts remain relatively small when expressed as a proportion
of global wealth, but the rate of divergence is nevertheless spectacular. If such
an evolution were to continue indefinitely, the share of these extremely tiny groups
could reach quite substantial levels by the end of the twenty-first century.
⁵

FIGURE 12.3.
   The share of top wealth fractiles in world wealth, 1987–2013

Between 1987 and 2013, the share of the top 1/20 million fractile rose from 0.3 percent
to 0.9 percent of world wealth, and the share of the top 1/100 million fractile rose
from 0.1 percent to 0.4 percent.

Sources and series: see
piketty.pse.ens.fr/capital21c
.

Can this conclusion perhaps be extended to broader segments of the global wealth distribution,
in which case the divergence would occur much more rapidly? The first problem with
the
Forbes
and other magazine rankings is that they list too few people to be truly significant
in macroeconomic terms. Regardless of the rapid rates of divergence and the extreme
size of certain individual fortunes, the data pertain to only a few hundred or at
most a few thousand individuals, who at the present time represent only a little over
1 percent of global wealth.
⁶
This leaves out nearly 99 percent of global capital, which is unfortunate.
⁷

To proceed further and estimate the shares of the top decile, centile, and thousandth
of the global wealth hierarchy, we need to use fiscal and statistical sources of the
type I relied on in
Chapter 10
. There I showed that inequality of wealth has been trending upward in all the rich
countries since 1980–1990, so it would not be surprising to discover that the same
was true at the global level. Unfortunately, the available sources are marred by numerous
approximations. (We may be underestimating the upward trend in the rich countries,
and the statistics from many of the emerging countries are so inadequate, in part
owing to the absence of any system of progressive taxation worthy of the name, that
one hesitates to use them.) Hence it is quite difficult at present to arrive at anything
close to a precise estimate of the evolving shares of the top decile, centile, and
thousandth in global wealth.

For some years now, a number of international financial institutions have attempted
to respond to growing social demand for information on these issues by trying to extend
the magazine rankings and publishing “global wealth reports” that include more than
just billionaires. In particular, since 2010, Crédit Suisse, one of the leading Swiss
banks, has published an ambitious annual report on the global distribution of wealth
covering the entire population of the planet.
⁸
Other banks, brokerages, and insurance companies (Merrill Lynch, Allianz, etc.) have
specialized in the study of the world’s millionaires (the famous HNWI, or “high net
worth individuals”). Every institution wants its own report, preferably on glossy
paper. It is of course ironic to see institutions that make much of their money by
managing fortunes filling the role of government statistical agencies by seeking to
produce objective information about the global distribution of wealth. It is also
important to note that these reports must often rely on heroic hypotheses and approximations,
not all of them convincing, in order to arrive at anything like a “global” view of
wealth. In any case, they rarely cover anything more than the past few years, a decade
at most, and are unfortunately useless for studying long-term evolutions or even reliably
detecting trends in global inequality, given the extremely piecemeal nature of the
data used.
⁹

Like the
Forbes
and similar rankings, these reports have, if nothing else, the merit of existing,
and the absence of anything better points up the failure of national and international
agencies—and most economists—to play the role they ought to be playing. Democratic
transparency requires it: in the absence of reliable information about the global
distribution of wealth, it is possible to say anything and everything and to feed
fantasies of all kinds. Imperfect as they are, and until better information comes
along, these reports can at least impose some discipline on public debate.
¹⁰

If we adopt the same global approach as these reports and compare the various available
estimates, we come to the following approximate conclusion: global inequality of wealth
in the early 2010s appears to be comparable in magnitude to that observed in Europe
in 1900–1910. The top thousandth seems to own nearly 20 percent of total global wealth
today, the top centile about 50 percent, and the top decile somewhere between 80 and
90 percent. The bottom half of the global wealth distribution undoubtedly owns that
less than 5 percent of total global wealth.

Concretely, the wealthiest 0.1 percent of people on the planet, some 4.5 million out
of an adult population of 4.5 billion, apparently possess fortunes on the order of
10 million euros on average, or nearly 200 times average global wealth of 60,000 euros
per adult, amounting in aggregate to nearly 20 percent of total global wealth. The
wealthiest 1 percent—45 million people out of 4.5 billion—have about 3 million euros
apiece on average (broadly speaking, this group consists of those individuals whose
personal fortunes exceed 1 million euros). This is about 50 times the size of the
average global fortune, or 50 percent of total global wealth in aggregate.

Bear in mind that these estimates are highly uncertain (including the figures given
for total and average global wealth). Even more than most of the statistics cited
in this book, these numbers should be taken simply as orders of magnitude, useful
only for focusing one’s thoughts.
¹¹

Note, too, that this very high concentration of wealth, significantly higher than
is observed within countries, stems in large part from international inequalities.
The average global fortune is barely 60,000 euros per adult, so that many people in
the developed countries, including members of the “patrimonial middle class,” seem
quite wealthy in terms of the global wealth hierarchy. For the same reason, it is
by no means certain that inequalities of wealth are actually increasing at the global
level: as the poorer countries catch up with the richer ones, catch-up effects may
for the moment outweigh the forces of divergence. The available data do not allow
for a clear answer at this point.
¹²

The information at our disposal suggests, however, that the forces of divergence at
the top of the global wealth hierarchy are already very powerful. This is true not
only for the billion-dollar fortunes in the
Forbes
ranking but probably also for smaller fortunes of 10–100 million euros. This is a
much larger group of people: the top thousandth (a group of 4.5 million individuals
with an average fortune of 10 million euros) owns about 20 percent of global wealth,
which is much more than the 1.5 percent owned by the
Forbes
billionaires.
¹³
It is therefore essential to understand the magnitude of the divergence mechanism
acting on this group, which depends in particular on unequal returns to capital in
portfolios of this size. This will determine whether divergence at the top is sufficiently
powerful to overcome the force of international catch-up. Is the divergence process
occurring solely among billionaires, or is it also affecting the groups immediately
below?