/ 21 October 2011

The global who owns what

It may be leaderless and its goals yet to be articulated, but this has not stopped the Occupy movement from proliferating across the globe, some 80 countries now having had protests against the global order.

Initially bemused by the fact that the movement has been unable to set out its goals and aspirations, I have come to think that this might be its real strength: we are deeply unhappy with the edifice you have created; what are you going to do about it?

Watching the protests on television and reading about them on the web, I wondered whether this was a new phase of capitalism in which technology has rendered increasing numbers of people redundant.

Tech lets you tweet the revolution and tech companies coin it even as they eat your job.

Apple’s latest iPhone, released a few days back, is a sell-out, reaching four times the selling price on the black market, and Apple this week reported profits up 85% on last year.

Not only tech is doing well. In the United Kingdom dividend payments were up by 16% on last year, forecast to total £67-billion this year. Companies are sitting on mountains of cash because they are reluctant to spend in these stressed economic times.

The bottom 99% — the people who make the top 1% stinking rich — have embarked on protests globally. We even had 150 or so people pitch up at Sandton last weekend as part of Occupy JSE.

The publication of Credit Suisse’s second annual Global Wealth Report is thus timely. Its findings confirm what the 99% are saying. The richest 10% own 84% of the world’s wealth, with the top 1% alone accounting for 44% of global assets.

If your aim is to reach these lofty heights, by the way, you should aim to be one of the 2 700 UHNW (ultra-high net-worth) individuals who have assets in excess of $500-million.

Focussing on wealth
Though we are used to reading stories and reports on how indebted the world is, Credit Suisse focuses on wealth: financial assets plus real assets such as housing, minus debt.

It estimates total global wealth at $230-trillion at mid-year. “Since last year’s inaugural report, global wealth has increased to $230-trillion from $195-trillion in 2010, led by growing wealth in South Africa, India, Australia, Chile and Singapore,” the report says.

“Looking ahead, we expect to see total world wealth to increase by 50% to $345-trillion by end-2016.

“China should add a total of $18-trillion to the stock of global wealth in the next five years, with total [Chinese] household wealth reaching almost $39-trillion in 2016,” it says.

“The United States should remain the top of the wealth league though, with $81-trillion by 2016.”

We suffer an avalanche of news reports that tell us how indebted the US is. The Credit Suisse report refreshingly gives us both sides of the American household balance sheet. Average debt per adult, at $59 000, is “not extreme by international standards”. This compares with financial assets of $200 000 and real assets of $100 000, giving an average net worth of some $250 000.

“Compared with the wealth distribution of the rest of the world, the US distribution has a high proportion of the population with wealth above $100 000,” the Global Wealth Report says.

“The US has by far the greatest number of members of the global top 1% wealth group, accounting for 41% of those with wealth exceeding $10-million and 32% of the world’s billionaires.”

It says that average debt has risen by 80% between 2000 and 2007 and has since roughly levelled out at $9 070 per adult.

If this sounds like a big number, consider that the assets these adults own have consistently been about five times their debts. Average net worth per American is currently about $50 000.

Wealth distribution
Averages, though, mask highly unequal wealth distribution.

“To count among the wealthiest half of the world an adult only needs $4 200 in assets, once debt has been subtracted,” the report says.

“However, each adult requires at least $82 000 to belong to the top 10% of global wealth and more than $712 000 to be a member of the top 1%.”

Is the world becoming more or less equal? The report says that the bottom half of the global population owns barely 1% of global wealth.

“Wealth in the bottom of the pyramid is currently limited, but growing quickly,” it says.

Examples include India, which has quadrupled its wealth since 2000, and Indonesia and Latin America, which have also seen dramatic growth.

Australia is singled out as a country that does well in both the wealth and equality stakes.

More millionaires on the cards for SA
The Global Wealth Report predicts that South Africa will produce more millionaires than 20 other emerging economies by 2016.

It says the country has 71 000 dollar millionaires and 116 000 people who are part of the global top 1%. It also predicts that the number of South African dollar millionaires will increase by 242% to 243 000 by 2016. This is the highest predicted increase in any of the 21 emerging economies that it lists.

The report says that “in many respects, South Africa is the model for growth for many other African economies. Its household wealth has grown vigorously over the last decade or so, quadrupling in value from $8 400 in 2000 to $34 000 in mid-2011.

“Unusually for a still developing country, household wealth is largely comprised of financial assets, which contribute more than 75% to the portfolio. This reflects a vigorous stock market and sophisticated life insurance and pension industries, which are key aspects of the strong modern sector of the economy.”

The report says average real assets of $9 300 are not much above the average level of debt at $5 900, in part the result of relatively low-real estate prices.

Credit Suisse has its own methodology underpinning its report, so its figures are not directly comparable with other available data. Reserve Bank figures for 2009 released earlier this year show South African households have a combined net worth of R5.5-trillion.

Assets include residential property (R1.6-trillion), pensions and insurances (R1.8-trillion), bonds and shares (R2.1-trillion), bank deposits (R520-billion) and other assets (R640-billion). Liabilities include mortgage loans (R753-billion) and other debt (R429-billion).

The Global Wealth Report says that, as in Indonesia, the distribution of wealth in South Africa is roughly similar to the world as a whole, “except that somewhat fewer individuals have wealth above $100 000 and correspondingly more are in the second-highest wealth group”.