Why the U.S.’s Share of Global Wealth Keeps Growing
(Bloomberg Opinion) -- There has been a lot of hand-wringing in recent years about the re-emergence of undemocratic regimes around the world and the collapse of the U.S.-led global order established after the Cold War. The data in the Global Wealth Reports, published annually by Credit Suisse, could provide a clue to some of the economic dynamics underlying these trends.
The reports track the wealth of households throughout the world, based on official data and sophisticated models. The quality of data differs dramatically by country, and it’s easy to quibble with the results for specific nations. For example, in my country of birth, Russia, Credit Suisse puts the nonfinancial wealth per adult at $8,840 in 2018. Russia, however, boasts a home ownership rate of 87.3 percent; $8,840 is only enough to buy 15.7 square meters of housing at the current average price, and the average Russian (adult or child) lives on 23 square meters, according to official statistics.
There are probably other discrepancies in the data, but, overall, Credit Suisse makes a solid effort to produce an arguably more relevant measure of well-being than per-capita economic output. All things considered, a leader interested in a country’s solid economic standing in the world, and in the stability of his or her rule, would probably prefer maximizing household wealth rather than gross domestic product.
So it seems the U.S.-led global order has been good for global wealth, which almost tripled to $317 trillion in 2018 in current dollars, from $117 trillion in 2000. And the combined share of North America, Europe and Asia-Pacific (excluding India and China), the wealthiest regions in 2000, has dropped from 92 percent to 78 percent. Most of the growth, however, occurred before 2007, and most of the regional redistribution has been thanks to China, which increased its share of global wealth to 16.4 percent today from 3.1 percent in 2000. In recent years, wealth growth has been less inclusive and has clearly favored the U.S.
According to the Credit Suisse reports for the last seven years, North America (that is, mostly the U.S.) has been the only region that hasn’t had an annual decrease in wealth and the only one that has consistently outperformed the global rate of wealth growth. China and Europe underperformed it for three years out of the seven, and other regions did even worse. Africa’s wealth grew slower than the world’s in six years out of the seven, and Latin America’s in each of the seven years.
Somehow, from a wealth perspective, the U.S.-led economic and political system appears to have stopped benefiting the world outside North America, even though is has continued to benefit the U.S. In effect, the rest of the world watches as wealth accrues to Americans first.
This, of course, is not necessarily unfair. The U.S. may well be a consistent winner thanks to superior policies and a more enterprising population. But it’s much easier for leaders -- and for voters where they matter -- to believe that the system is rigged in favor of the U.S. And the Credit Suisse data fit a common intuition in one country after another that’s been trying to break out of the U.S.-led system, from Latin America to China: The U.S. uses the power of the dollar, extraterritorial sanctions, even military force to maximize its wealth at others’ expense. This was provably wrong before the global financial crisis, it no longer is.
The correct U.S. reaction to this situation would be to spread some of that wealth through trade and investment; instead, President Donald Trump’s administration is focused on zero-sum “winning,” even though the U.S. has been ahead of the rest of the world in wealth accumulation since well before he took office.
Attempts to break the U.S.-led order may lead to the destruction of wealth rather than its fairer distribution. That, however, won’t deter leaders throughout the world from trying to go for a bigger share of the pie.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is a Bloomberg Opinion columnist covering European politics and business. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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