Looking ahead it’s worth considering if Capitalist societies, can revert the pessimist outlook given by Thomas Piketty in his book “Capital in the Twenty-First Century”? He argues that as population growth slows, economic growth will stagnate with it, leading to increasing inequality. This, in turn, allows the wealthy to exact more control of democracy through monetary contributions.

We know that the concentration of wealth has increased in the last decades, especially in the years following the Great Recession (wealth from the top 0.01% of the population represented roughly 3% of total wealth in the 70’s, in 2014 it represented roughly 11% – with a highly positive slope). But is that level of concentration really affecting overall wealth? Is wealth concentration an inevitable result of wealth creation? And, more importantly, how is this concentration in the top 0.01%, 0.1% and 1%, affecting the wealth creation in the bottom 1%-10%? The answers to these sorts of questions are highly important if we are to transform the economic models of the future.

If wealth concentration is reducing the opportunities of the bottom percentile, then something must be done to improve wealth distribution. On the other hand, if concentration on the top is not affecting –cannibalizing- the wealth of the bottom percentile then policy makers and economist should focus more on the acceleration of wealth creation and not on its distribution.

In the near future, that is during the next 5 to 10 years, it will be very difficult to revert the trend of stagnant growth and high inequality that is seen in many of the richest economies. This will create increasing political tensions inside the economies where the problem of inequality is seen as an important issue.

Increased wealth, resulting in greater consumption, from the biggest countries in the world, namely China and India, will increase the cost of commodities. Depending on the duration of these increases, there will be an economic setback in some the most important commodity importers in the world (Europe and USA). Greater wealth, especially in China also means that there will be more national savings and thus more options to invest large amounts of money in strategic, state-owned projects all over the world. This process has already begun with the rate of infrastructure investment accelerating rapidly since 2008. China is investing heavily in strategic resources in Latin America and Africa (Energy, Mining, Steel, Public Infrastructure, Crude Oil and refinement, etc.). This will create new challenges in the international relationships, considering that the recent crisis has reduced the level of the same type of investments from European and North American companies.

  • Tim Jones

    Richest 1% to own more than rest of world, Oxfam says

    The wealthiest 1% will soon own more than the rest of the world’s population, according to a study by anti-poverty charity Oxfam.

    The charity’s research shows that the share of the world’s wealth owned by the richest 1% increased from 44% in 2009 to 48% last year.

    On current trends, Oxfam says it expects the wealthiest 1% to own more than 50% of the world’s wealth by 2016.

    The research coincides with the start of the World Economic Forum in Davos.

    The annual gathering attracts top political and business leaders from around the world.

    Oxfam’s executive director Winnie Byanyima, who will co-chair the Davos event, said she would use the charity’s high-profile role at the forum to demand urgent action to narrow the gap between rich and poor.

    In a statement ahead of the gathering, Ms Byanyima said the scale of global inequality was “simply staggering”.

    More on BBC – http://www.bbc.com/news/business-30875633

    • Tim Jones

      Figures in focus

      Oxfam based its prediction on data from the annual Credit Suisse Global Wealth datebook, which gives the distribution of global wealth going back to 2000. It uses the value of an individual’s financial and non-financial assets, mainly property and land, minus their debts to determine what individuals “own”.

      The data excludes wages or income.

      The BBC’s head of statistics, Anthony Reuben, said in order to be part of the wealthiest 1% of the world’s population, an individual would need to be worth just over half a million pounds.

      “So it is not necessarily talking about people who own yachts and ski chalets. Owning an average house in London (without a mortgage) would just about put you in the 1%. ”

      He also noted that Oxfam had chosen to use figures which showed the disparity between the 1% and the rest of the world in the worst light.

      “From 2000 until 2009, the proportion of wealth held by the wealthiest 1% fell every year. From 2010 until 2014 it rose every year. Oxfam has taken the figures since 2010 and used them to extrapolate what will happen in the coming years. Clearly, that is the methodology that will make inequality look the most severe,” he added.

      Rich getting richer

      Oxfam is calling on governments to adopt a seven-point plan to tackle inequality, including a clampdown on tax evasion by companies and the move towards a living wage for all workers.

      Oxfam made headlines at Davos last year with the revelation that the 85 richest people on the planet have the same wealth as the poorest 50% (3.5 billion people).

      It said that that comparison had now become even more stark, with the 80 richest people having the same wealth as the poorest 50%.

    • Tim Jones

      Analysis: Robert Peston, BBC Economics editor

      To be clear, Oxfam’s claim today that by 2016 the richest 1% could own as much or the same as the bottom 99% is not wildly implausible.

      There are all sorts of reasons why such increases in inequality are troubling, and not just for those at the bottom of the income and wealth pyramid.

      One is that aspirational people on lower incomes have massive incentives to take on too-great debts to support their living standards – which exacerbates the propensity of the economy to swing from boom to financial-crisis bust.

      Another is that the poor in aggregate spend more than the rich (there are only so many motor cars and yachts a billionaire can own, so much of the super-rich’s wealth sits idle. as it were), and therefore growth tends to be faster when income is more evenly distributed.

  • Patrick Harris

    Illustrative You Tube video comparing Perceived, Ideal and Actual wealth distribution in The USA – https://www.youtube.com/watch?v=Gk5OJBry2ss&feature=youtu.be. Thank you Jules Koster of de Baak in Noordwijk, the Netherlands for bringing it to our attention.

  • Digital Hutch

    Great, informative video.

  • Tim Jones

    Workshop feedback from Zurich: What is notable about the changes taking place in Europe regarding uneven wealth distribution and the fallout from the economic crisis is the fast rise of Podemos in Spain (http://podemos.info). This extreme left political group has grown massively over the past 10 months and now has over 25% of voter affiliation. Compared to Syriza in Greece, which took 3 years to get to the same point, Podemos (‘we can’ in Spanish) has embraced digital platforms and crowd funding to provide a collective opposition to the status quo, austerity and existing politics (La Casta). The key point made in the Zurich workshop was that this shows how the speed of development uncertain events and associated changes even in hard-hit Southern Europe is accelerating and so, as we look forward, we must be even more prepared to challenge many of our core assumptions. Thanks for good discussion and shared views.