Distribution of Wealth

The Distribution of wealth is skewed like in no other time in human history. The numbers are mind boggling when you realise just how poor the poor people are and worse, how stinking rich the super rich are.

How Rich Are The Super Rich?

According to Oxfam, the world’s wealthiest people could eliminate extreme poverty if they gave up just one year of their profits.

“The top 100 billionaires added $240 billion to their wealth in 2012- enough to end world poverty four times over” Oxfam Argues in a recent report

I repeat: If the world’s 100 wealthiest people gave up just one year's worth of their profits they could eliminate poverty four times over! Not give up all their wealth, just 1 year’s profits could end poverty 4 times over!

This is a video that I came across which really got me thinking about the distribution of wealth in the world. I first watched this video a few weeks ago and have since watched it about 3 more times. The numbers still shock me.

I always knew the numbers were bad, but I really did not appreciate just how screwed up society had got that the top 1% of Americans had more than what 9 out of 10 Americans believe the entire top 20% should have in an ideal world!

Meanwhile, the bottom 40% have nearly none of the wealth.

In the United States, wealth is highly concentrated in a relatively few hands. As of 2010, the top 1% of households (the upper class) owned 35.4% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 53.5%, which means that just 20% of the people owned a remarkable 89%, leaving only 11% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.1%. Table 2 and Figure 1 present further details, drawn from the careful work of economist Edward N. Wolff at New York University (2012).

Have a look at this table which shows how financial wealth has been distributed in the United states from 1983 to 2010. This table excludes personal homes, in other words it is the sum of assets that people own but excluding personal real estate.

Financial (Non-Home) Wealth
Top 1 Percent Next 19 Percent Bottom 80 Percent
1983 42.9% 48.4% 8.7%
1989 46.9% 46.5% 6.6%
1992 45.6% 46.7% 7.7%
1995 47.2% 45.9% 7.0%
1998 47.3% 43.6% 9.1%
2001 39.7% 51.5% 8.7%
2004 42.2% 50.3% 7.5%
2007 42.7% 50.3% 7.0%
2010 42.1% 53.5% 4.7%

In 1983 the bottom 80% of the population in the united States owned just 8.7% of the country’s private wealth. Fast forward to 2010 and this same 80% only owns 4.7%. Within 1 generation, the top 20% have taken nearly half the wealth from the bottom 80%

Have a look at the following pie charts for a further breakdown of the distribution of wealth in the USA in 2010

A remarkable study (Norton & Ariely, 2010) reveals that most Americans have no idea that the distribution of wealth is as skewed as it is. When shown three charts representing possible wealth distributions, 9 out of 10 respondents thought that the American wealth distribution most resembled one in which the top 20% has about 60% of the wealth. In fact, of course, the top 20% control about 85% of the wealth. 

Even more striking, they did not come close on the amount of wealth held by the bottom 40% of the population. It's a number I haven't even mentioned so far, and it's shocking: the lowest two quin-tiles hold just 0.3% of the wealth in the United States. Most people in the survey guessed the figure to be between 8% and 10%. 

Those surveyed did have it about right for what the 20% in the middle have; it's at the top and the bottom that they don't have any idea of what's going on and to be fair, neither did I.

Financial Freedom and the Distribution of Wealth in your favour


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