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Thu October 10, 2013
If You Think Wealth Disparity Is Bad Here, Look At Russia
You've seen the headlines:
But while income inequality in this country may be growing, the U.S. has nothing on Russia, according to a new report by investment bank Credit Suisse.
Russia, the bank says, has the highest rate of inequality in the world – barring some small Caribbean islands.
Just how bad is it? Thirty-five percent of household wealth in the country is in the hands of 110 people (Yes, that's right — 110.).
There's more: There's one Russian billionaire for every $11 billion in household wealth in the country. Worldwide, that number is one for every $170 billion in household wealth.
What's more troubling, the report says, is that when exchange rates are factored in, the average wealth of Russians has been falling since 2007, or just before the global economic crisis began.
All but one of the 26 Russian billionaires named in 2005 remained on the list in 2010 – a higher survival rate, the report said, than most other economies.
"The number of Russian billionaires more than doubled from 2005 to 2010, so the high survival rate likely reflects low downward structural mobility in the upper wealth tail, as well as higher than average wealth among world billionaires and – quite possibly – state protection of billionaire interests leading to lower exchange mobility at the top end than seen in other countries," the report said.
Here's more from the report:
"At the time of transition there were hopes that Russia would convert to a high skilled, high income economy with strong social protection programs inherited from Soviet Union days. This is almost a parody of what happened in practice. Efforts were made at the outset to distribute state assets equitably: most of the housing stock was given away to residents and shares in Gazprom were allocated to Russian citizens. But other choice assets in resource-rich companies went to the chosen few, and subsequent developments in a nation notorious for weak institutions have reinforced the importance of political connections rather than entrepreneurial talent."
How Does The U.S. Compare?
The U.S. has recovered from the global financial crisis, the report says.
Americans account for 42 percent of the world's billionaires. Looking five years ahead, the report forecasts that the U.S. still will have the highest aggregate wealth globally in 2018, with total net worth approaching $100 trillion.
Credit Suisse did not directly address wealth inequality in the U.S., but recent data from the Internal Revenue Service showed that the gap between the richest 1 percent and the rest of the population is the widest since the 1920s.
The Associated Press noted that the wealthiest Americans earned more than 19 percent of all household income last year. The AP reports:
"Economists point to several reasons for widening income inequality. In some industries, U.S. workers now compete with low-wage labor in China and other developing countries. Clerical and call-center jobs have been outsourced to countries such as India and the Philippines.
"Increasingly, technology is replacing workers in performing routine tasks. And union power has dwindled. ... The changes have reduced costs for many employers. That is one reason corporate profits hit a record this year as a share of U.S. economic output, even though economic growth is sluggish and unemployment remains at a high 7.2 percent."