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Let’s start with some scary statistics. Here, wealth refers to a cumulative total of a household’s financial and real assets but doesn’t include debt.
Statistics from the 2018 Global Wealth Report by Credit Suisse indicate that 1% of the world’s wealthiest own 45% of the World’s wealth. The people in the 1% have estimated assets of more than $1 million.
Adults whose wealth is cumulative to less than $10,000 hold only 2% of the world’s wealth. These individuals make up 64% of the earth’s population. Yes, a whole 64%. Individuals worth $30 million and above are referred to as the ultra-high net worth individuals, which makes sense because $30 million is a lot of money.
These individuals, combined, own a chunk of the world’s wealth, at 11.3%. In terms of population, however, they are sorely lacking in numbers, at only 0.003%.
9 Richest Men In The World
Jeff Bezos, Bill Gates, Warren Buffet, Amancio Ortega, Mark Zuckerberg, Bernard Arnault, Carlos Slim, Larry Ellison, and Larry Page are the nine richest men in the world.
Their combined wealth, according to Forbes in January 2018 was 687.6 billion. This figure is equivalent to the total wealth of; get this, 4 billion of the poorest people in the world. This is to mean, in terms of wealth, if you put these 9 gentlemen on one side of the scale (or see-saw if you prefer), you would need a good 4 billion of the world’s poorest on the other side in order to balance it out.
These figures represent the staggering wealth inequality between the rich and the poor in the world at large, but what is more worrying is that these numbers keep growing each year.
The House of Commons in the UK estimated that by 2030, 1% of the wealthiest people in the world will own two-thirds of the world’s wealth.
Is there a way to minimize this?
These figures are actually concerning, and eventually, they would lead to a poorer world. What are the reasons for this inequality? What are the steps that can be taken to solve this problem?
America makes quite a significant portion of the worlds’ richest, and it is, therefore, no surprise that the wealth inequality here would be just as alarming. In 1982, the richest man on the Forbes 400 Richest in America was worth a paltry $2 billion.
In 2018, to make it to the Forbes 400, you had to be worth at least $2.1 billion. The richest man in America, who is the richest man in the world, is worth over $100 billion. Say hello to Jeff Bezos, the amazon co-founder. Now, let us move to households.
In the first quarter of 2017, the total net worth of US households together with non-profit organizations was $94.7 trillion. The assumption would be that when divided among the total number of households, each would get an equal share which translates to about $760,000. However, 50% of the total number of households during this quarter was worth only $11,000.
Similarly, 1% of this country’s richest hold 40% of the total wealth. On the other hand, 7% of the country’s wealth is held by almost 80% of the population.
You can clearly identify the trend in these figures. The rich are extremely rich and the poor extremely so as well: and it is a vicious circle that keeps spinning.
This widening gap could not have been as disturbing if we had more people on the rich side. Instead, you will identify that most people hold less than 10% of the world’s wealth.
There are many reasons leading to this phenomenon, but the main reason behind wealth inequality is income inequality. There are different sources of income for a person: wages and salaries, benefits such as tax credits and state pensions, profits through the difference between buying price and selling price of an item, dividends, rental income, and interest on capital.
Income inequality comes as a result of the market price of a certain skill. This price is usually determined through a comparison of the demand for the skill required and the number of people who are willing to offer it.
So, for example, if the market requires two bank tellers yet only one person is qualified for the job; he or she will get a really high income since his skill is heavily demanded. On the other hand, if 20 people were qualified for the job, its market price would go down because one way or the other, the job position is going to be filled.
We live at a time when most jobs have a low market price, but some exclusive ones have very few qualified persons. Therefore, the market price difference of the two is the first way through which wealth inequality begins.
Education is another main reason for the growing wealth inequality in the world today, America most especially. The level of education one gets is usually proportional to the skill he or she is likely to acquire.
As mentioned above, the more marketable the skill, the higher the market price for it. At the same time, even though education might be free for all, the quality of education is sometimes affected by the environment and neighborhood the school is located in.
Schools found in neighborhoods with a better socioeconomic class tend to produce students with a better chance of getting a highly marketable skill. Such schools are also most likely to foster intelligence, personal drive, and self-discipline, all characteristics needed to make wealth.
The resultant income inequality leads to a huge gap in wealth as well. The opposite is true for poorer neighborhoods. As has been seen in recent years, the growth of technology has greatly inspired an increase in the wealth gap between the rich and the poor.
First, a lot of people have been forced to leave the job market as their work is taken over by machines and other forms of technology. A phone operator working for a Telco company three decades ago probably lost his job to a computer.
It would not be surprising that in the next 40 years, domestic workers will lose their job to artificial intelligence. Similarly, the growth in technology has created tech billionaires, and the top 10 richest men list will show you that. The richest man in the world, Jeff Bezos made his wealth through Amazon.
Following him closely is Bill Gates, yet another man who made his fortune through Microsoft, which is a technological invention. These rich personalities are increasingly rich, as they offer a service most cannot find anywhere else. The richer they get, and as manual workers lose their jobs to technology, the wider the gap between the extremely rich and the extremely poor gets.
Another factor that increases this gap between the rich and poor is the tax systems in place. The tax code in most countries in the world is also unfair to the poor and can be easily manipulated by the rich. In the UK, over 10 million words are used in the tax code.
Do you think these words are to help the poor by ensuring that they keep more of their money, or to help the rich and their corporations evade taxes? It’s definitely debatable. The wealth gap between the poor and the rich is huge. It is caused by quite a number of factors, some beyond our control, some not so much.
Best way to deal with inequality
The best way to deal with this inequality is through investing in people. This means ensuring an equal and quality standard of education for every citizen and providing employment training that goes beyond what is taught in class.
Warren Buffet did not become the third richest man in the world by applying just what he learned in class: he went over and beyond in order to get the insight he needed to make the investments that made him as wealthy as he is today.
When education for all is at par, a standard minimum value is set, and from there, we can now fight wealth inequality plaguing the world.