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Why we could be in a ‘lost decade’ of global wealth growth

Three year old Saria Amaya (L) waits with her mother after receiving shoes and school supplies during a charity event to help more than 4,000 underprivileged children at the Fred Jordan Mission in the Skid Row area of Los Angeles on October 2, 2014.
Mark Ralston | AFP | Getty Images
Three year old Saria Amaya (L) waits with her mother after receiving shoes and school supplies during a charity event to help more than 4,000 underprivileged children at the Fred Jordan Mission in the Skid Row area of Los Angeles on October 2, 2014.

Concerns that we are in a "lost decade" for global wealth growth have been given further credence by the latest "Global Wealth Report" released by the Credit Suisse Research Institute on Tuesday.

According to the researchers, "In recent years, there has been a growing sense that the economic recovery is shallow, and has not reached all layers of society. Evidence from our global wealth database supports this view."

"While exchange rate movements sometimes obscure trends, wealth per adult and median wealth have grown well below their potential during the last nine years, compounding fears that we are in the midst of a lost decade for global wealth growth," the paper continues.

The 1.4 percent rise in global wealth over the 12 month period to June 30 has only kept in line with population growth, meaning that for the first time since 2008 the wealth per adult measure has remained flat, according to the research.

Credit Suisse Research Institute

The paper burrows down into country level data which show that exchange rate fluctuations were the biggest drivers of changes in wealth for different nations over the period. Most notably, the 15 percent plunge in the British pound driven by the U.K.'s decision to quit the European Union translated to a $1.5 trillion loss for the U.K.. Meanwhile Japan's 19 percent jump - which added $3.9 trillion to its wealth pile - was exactly aligned with gains in the yen as the Japanese currency bounced back from earlier weakness as its central bank was increasingly seen as running out of tools with which to force its depreciation.

The data also reveal that the issue of income inequality, a growing sense and awareness of which is seen as a key factor in the advance of anti-establishment populism in recent years, is worsening.

In 2000, the top 1 percent owned 49.6 percent of all household wealth, dropping to 45.4 percent in 2009. This figure has since clambered back up to reach 50.8 percent in 2016. Trends for the wealthiest top 5 percent and 10 percent of people show a similar trajectory with the wealthiest decile now owning 89.1 percent of all global assets.

At the other end of the scale, the poorest 20 percent of people – numbering around one billion – are mostly found in developing markets, with Africa, India and Asia-Pacific accounting for 72 percent of these, as well as 70 percent of the bottom half of the world's population.

However, demonstrating evidence of a trend which will resonate with those interpreting Donald Trump's election victory, the vote for the U.K. to leave the EU and the rise of far-right parties in certain European countries as a cry of protest from citizens who believe globalization has served to worsen their lives, the research shows a rising occurrence of low wealth in high income countries.

According to the Research Institute, "Members of the bottom billion were once predominantly poor people in developing countries, but a significant and growing number are now found in the richest countries. Furthermore, the net worth of those in the bottom billion is increasingly likely to be negative, as credit easing generates larger personal debts."

Exacerbating inequality concerns, the number of global millionaires is shown to have leaped by 155 percent – or 20 million individuals – since 2000, while the ranks of ultra-high net worth individuals have swelled by 216 percent over this time frame, making this group by far the fastest-growing section of wealth holders.

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