The UBS Global Wealth Report reveals that wealth inequality is declining in Switzerland and Germany, while opportunities for economic advancement remain intact globally.
Switzerland, an island of prosperity: Wealth inequality has fallen in this country since 2008, and this without any help from Juso initiatives.
Calls for wealth redistribution are gaining momentum. In Switzerland, for example, the Young Socialists advocate for a national inheritance tax to make the wealthy pay. The prevailing narrative is that the rich in this country are becoming richer while everyone else is becoming poorer.
Juso rhetoric misses the mark – at least in this country
The rhetoric of class struggle may appear deceptively simple. However, when examining the data, it becomes clear that this rhetoric is fundamentally incorrect. New figures from the UBS Global Wealth Report show that the Gini coefficient, a common indicator of wealth inequality, has declined by 4.6 percent in Switzerland since the 2008 financial crisis. This decline has occurred without any implemented policies advocated by the Young Socialists.
Globally, a more complex picture emerges. According to the study authors, wealth inequality tends to increase in developing countries, while it tends to decrease in industrialized countries.
Opportunities for individuals to improve their financial standing remain strong: one in three individuals manages to move up to a higher wealth class within a decade. The chance of escaping the lowest wealth class over a thirty-year period is over 60 percent.
In Asia, prosperity is growing, but so is debt
The positive outlook is further supported by the fact that global wealth, measured in U.S. dollars, grew by 4.2 percent in 2023. This represents a return to normalcy following a decline in wealth the previous year.
Growth varied across different regions of the world. In Europe, the Middle East, and Africa, which UBS groups into a single category, wealth increased at the highest rate of 4.8 percent.
Wealth in North, Latin, and South America grew by an average of 3.6 percent in 2023.
In Asia, assets increased by 4.4 percent. However, UBS economists highlight a notable increase in debt as well. Since 2008, Asia’s debt burden has risen by 192 percent, a rate 20 times greater than the corresponding period in Europe, the Middle East, and Africa.
Switzerland remains the leader
A comparison of countries reveals significant differences in prosperity trends.
In Switzerland, average wealth grew by 3.4 percent in 2023 when measured in U.S. dollars. However, a different picture emerges when viewed in local currency: In Swiss francs, Swiss wealth decreased by almost 6 percent. This is mainly attributed to the franc’s sharp appreciation towards the end of the year, leading to a decline in the value of foreign currency investments.
In Germany, assets grew by 3.4 percent in dollar terms, but also experienced a slight decrease when measured in euros.
Turkey emerges as this year’s growth champion: Measured in local currency, average wealth increased by over 157 percent. However, this figure needs to be considered in light of the country’s high inflation. Due to the lira’s depreciation, many Turks have invested their savings in capital markets and assets such as real estate, resulting in a significant increase in their value and a nominal rise in wealth.
The disparities in wealth development across Europe since the 2008 financial crisis are striking. In Scandinavia and Central Europe, people are becoming wealthier, while Southern Europe lags behind. Italy, Spain, and Greece, along with Japan, are the only countries in the world where wealth, measured in U.S. dollars, has actually decreased since 2010.
However, in most countries, wealth growth slowed in the 2010s compared to the previous decade. The USA stands out as an exception: The tech boom in stock markets appears to have boosted the wealth of Americans.
With an average wealth exceeding 700,000 U.S. dollars per capita, Switzerland holds the top position on the wealth ranking, surpassing Luxembourg and Hong Kong. In the USA, average wealth stands at around 565,000 dollars, while in Germany it is 265,000 dollars per capita.
Many rich people live in the USA
The study also sheds light on the geographical distribution of wealth millionaires, a group estimated by UBS to include nearly 58 million individuals. Collectively, they own 47.5 percent of global wealth.
Over one-third of individuals with assets exceeding one million U.S. dollars reside in the United States.
The great wealth transfer is looming
The study also offers a glimpse into the future, suggesting that wealth distribution might undergo significant changes in the coming decades.
Firstly, the high concentration of wealth among older individuals means that an estimated $83 trillion will be inherited or gifted over the next twenty years. This figure roughly equates to the annual economic output of the entire world.
Secondly, UBS chief economist Paul Donovan points out that the global economy is undergoing profound structural changes. Such episodes typically witness significant shifts in asset structures.
«NZZ Live» event: Children and money: early financial fitness?
Navigating finances and developing financial skills at an early age hold significant importance in today’s world. How can financial literacy be promoted among children and young people from a young age?
Tuesday, 22 October 2024, 6.30 p.m., NZZ Foyer, Zurich, and online
Tickets and further information are available here.
The UBS Global Wealth Report reveals that wealth inequality is declining in Switzerland and Germany, while opportunities for economic advancement remain globally.
Switzerland, an island of prosperity: Wealth inequality has fallen in this country since 2008, and this without any help from Juso initiatives.
The narrative of increasing wealth inequality and a decline in opportunity for the average person is a common one, particularly in countries like Switzerland. This narrative has fueled calls for redistribution policies, such as the Young Socialists’ proposal for a national inheritance tax. However, the UBS Global Wealth Report paints a more nuanced picture, challenging this popular notion.
Juso Rhetoric Misses the Mark
While the rhetoric of class struggle may seem simple and appealing, the data tells a different story. The UBS Global Wealth Report reveals that Switzerland’s Gini coefficient, a measure of wealth inequality, has actually declined by 4.6 percent since the 2008 financial crisis. This contradicts the widespread belief that the rich are getting richer while everyone else is falling behind.
Globally, the picture is more complex. The report indicates that wealth inequality tends to increase in developing countries but decreases in industrialized nations. This suggests that developed economies are making progress in addressing wealth disparity, although more efforts are needed in developing regions.
Furthermore, the report highlights that opportunities for economic advancement remain intact for individuals. One in three people manages to climb into a higher wealth class within a decade. The chances of escaping the lowest wealth class over a thirty-year period are over 60 percent. This suggests that economic mobility is still possible, even if it may take time and effort.
Asia: Growth and Debt
The UBS Global Wealth Report paints a positive picture of global wealth, with total wealth growing by 4.2 percent in 2023, marking a return to normality following a contraction the previous year.
Growth varied across regions:
- Europe, the Middle East, and Africa experienced the highest wealth increase at 4.8 percent.
- North, Latin, and South America saw an average increase of 3.6 percent.
- Asia recorded a 4.4 percent growth rate in assets.
However, the report notes that Asian countries are also experiencing a rise in debt. Since 2008, Asia’s debt burden has increased by 192 percent, significantly more than the 20-fold increase seen in Europe, the Middle East, and Africa during the same period. This highlights the need for careful management of debt levels to ensure future economic stability.
Switzerland Remains the Leader
A deeper examination of individual countries reveals significant differences in wealth trends.
In Switzerland, average wealth rose by 3.4 percent in 2023 when measured in US dollars. However, in Swiss francs, wealth decreased by almost 6 percent due to the franc’s sharp appreciation towards the end of the year. This highlights the impact of currency fluctuations on wealth variations.
Germany also experienced a 3.4 percent increase in wealth in dollar terms but a slight dip into negative territory when measured in euros, signaling a similar dynamic influenced by currency fluctuations.
Turkey emerged as a growth standout, experiencing a staggering over 157 percent increase in average wealth measured in local currency. However, it’s crucial to consider Turkey’s high inflation in this context. The depreciating lira pushed many Turkish individuals to seek refuge in capital markets and hard asset classes like real estate, leading to a surge in their value and, therefore, a nominal wealth increase.
Since the 2008 financial crisis, Europe has seen a stark contrast in wealth development. Scandinavia and Central Europe have witnessed rising wealth, while Southern Europe has lagged behind. Italy, Spain, Greece, and Japan are the only countries worldwide where wealth, measured in US dollars, has actually decreased since 2010. This underlines the persistence of economic disparities among regions.
Most countries witnessed a slowdown in wealth growth during the 2010s compared to the previous decade. A notable exception is the United States, where the tech boom fueled stock market growth and potentially boosted the wealth of American citizens.
With an average wealth per capita exceeding $700,000, Switzerland maintains its position at the top of the wealth table, followed by Luxembourg and Hong Kong. The US holds an average wealth of around $565,000, while Germany stands at $265,000 per capita.
The United States: Home to a Large Share of Millionaires
The UBS Global Wealth Report also sheds light on the geographic distribution of wealth millionaires, a group estimated to consist of nearly 58 million people globally. Together, they hold a substantial 47.5 percent of global wealth.
Over a third of all individuals whose assets exceed $1 million reside in the United States, highlighting its status as a significant hub for high net-worth individuals.
The Looming Great Wealth Transfer
The report ventures into the future, predicting significant potential changes in wealth distribution over the coming decades.
The report highlights the “great wealth transfer,” where an estimated $83 trillion in wealth will be inherited or donated over the next twenty years. This staggering amount, roughly equivalent to the world’s annual economic output, suggests substantial shifts in wealth ownership are anticipated.
UBS chief economist Paul Donovan emphasizes the ongoing structural transformations in the global economy, which are expected to lead to substantial changes in asset structures. This points to a dynamic environment where wealth distribution patterns may undergo significant adjustments.
«NZZ Live» event: Children and money: early financial fitness?
Dealing with money and developing financial skills at an early age are very important in today’s world. How can financial literacy be promoted in children and young people at an early age?
Tuesday, 22 October 2024, 6.30 p.m., NZZ Foyer, Zurich, and online
Tickets and further information can be found here.