Why wealth matters: 10 years of change
According to this year's Credit Suisse Global wealth report, global household wealth continues to rise. Today, at USD 360 trillion, it is 70% higher than a decade ago.
Credit Suisse has closely analyzed and tracked global wealth data for the last decade. Looking at household wealth across geographies and wealth bands allows us to assess the vibrancy of countries and the health of the global economy. It can tell us how the balance of world wealth is changing. And if we slice wealth data in other ways, we can understand the situation of some key subgroups: millionaires, women, and the millennials.
The rise of the emerging markets
In fact, we have seen many essential changes since we started to track the data. For example, if we look at household wealth data for North America, Europe, and Asia-Pacific (excluding China and India) over time, we can see that their share of global wealth has fallen from 92% to 75% since the year 2000. Here the data reveals the extent of the huge rebalancing of wealth creation toward emerging economies such as China and India.
Financial crisis marked a turning point
The early 2000s marked a golden age of wealth creation with wealth increasing significantly in every region of the world. People in emerging market economies were responsible for driving a significant amount of the growth in global wealth, a trend that was also more socially inclusive, as all levels of the wealth pyramid shared in the rewards.
Then the global financial crisis hit, marking a turning point in the history of wealth creation. Since 2008, emerging economies including China have accounted for two thirds of the real wealth gain. The "new world" is taking over as the engine of global advancement, while the influence of the "old world" is waning. This trend seems to have become embedded over the last decade, and will shape the image of global household wealth in the coming years.
Wealth triggers entrepreneurism
Why does household wealth matter? Wealth correlates strongly with the prospects and opportunities in a country. It allows citizens to move up Maslow's pyramid of needs. Once the basics such as shelter and food are covered, people can strive for more abstract goals and self-fulfillment, for example entrepreneurial activities. Here, wealth can be used directly or as collateral for loans.
This may be harder in countries with lower wealth levels: Business opportunities may be fewer and there could be limited access to the investment capital a young company needs in order to grow. A good indication of whether a country offers a favorable environment for entrepreneurship is the number of millionaires in its population. The US, for example, tops the chart with the creation of 675,000 millionaires last year – more than half of the global increase.
Wealth is vital for economy and individuals
Technically speaking, wealth can be measured by your net worth, calculated by adding the value of your financial assets (like your stock portfolio) to your real assets (like the home you own) and subtracting your debt (credit cards and car finance, for example). Wealth can also act as a shock absorber, cushioning the blow of sudden ill health, the loss of a job, or even a natural disaster. Without it, people can find themselves literally at the mercy of the elements.