Daily Management Review

Number of Middle-Class People Exceeded 1 Billion For the First Time


The gross value of financial assets of the world's population in 2014 increased by 7.1% and reached a new record - 135.7 trillion euros against 126.8 trillion euros a year earlier, while the number of people, belonging to the middle class in terms of welfare, has surpassed 1 billion. It is noted in the annual Global Wealth Report of the insurance company Allianz, which studies the well-being of households in 53 countries worldwide.

Strong growth in the gross value of financial assets, observed in previous years, is still observed, albeit slightly slowing the pace, the report says.

Financial liabilities of the population have been increasing slower than assets - by 4.3% to 35.2 trillion euros. Nevertheless, the debt of the world population has reached its highest level since the financial crisis began.

For the first time, three important stages in the dynamics of financial assets were covered last year.

In particular, there was set a record for net value of global financial assets (gross assets minus liabilities), the volume of which has overcome a mark of 100 trillion euros. Regarding 2013, the index increased by 8.1%.

The second milestone was the fact that the volume of private capital of China's population exceeded the rate of Japan.

The third record is the number of people, belonging to the middle class in terms of welfare, surpassed the barrier of 1 billion. Since 2000, nearly 600 million people have moved from the category of people with low income to middle class.

However, this dynamic is concentrated in a single region, or, to be precise, in one country - China, according to the survey. Currently, Asians make about two-thirds of the middle class and 85% of them are natives of China. At the same time, 40 million Eastern Europeans belong to the class as well.

All the more greatly, rise of the financial assets of the population is provided by increasing people’s activity towards savings, and Asian and American stock markets continue to develop under favorable conditions.

All this has led to the fact that the total gross value of global financial assets reached a new record volume - about 136 trillion euros. This indicator is higher than all sovereign debts and the value of global companies whose shares are publicly traded.

- Many experts will interpret these figures as evidence of the so-called savings excess - says the chief economist at Allianz Michael Heise. - But this is a wrong view. On the background of low interest rates, too many people still have not saved enough money for their retirement. Politicians should not attempt limit the accumulation, they must find new ways to stimulate private investment. We have no shortage of investment opportunities as great challenges are waiting ahead: climate change, poverty and migration, the digital revolution, outdated infrastructure - these are just some of them."

As before, the rate of increase varies greatly depending on the region.

The unprecedented growth’s champion is Asia (excluding Japan), where the net value of financial assets increased by 18.2% in 2014. The main driving force behind this trend - a dramatic (and sometimes unstable) increase in assets invested in securities, particularly in China.

On the other hand, rise in the other two developing regions - Eastern Europe and Latin America - was not as significant and amounted to respectively 8.6% and 4.2%.

For Eastern Europe, this means a slowdown in the increase of 3 percentage points compared with 2013 year. However, the dynamics within the region was also not homogeneous. While some countries, in particular Turkey, moved forward, others - Russia, Ukraine and Romania - have suffered from severe recession.

For the first time since the financial crisis, growth higher than in North America was recorded in the euro area - 6.2% and 5.3%, respectively. Such an achievement is obliged, mainly, to strict payment discipline: in many European countries, population’s debt reduction continued in 2014, according to the survey.

Switzerland has been recognized the country with the highest amount of net financial assets per capita, just like a year earlier, according to the report. Welfare of an average Swiss amounted to 157.446 th. euro.

The United States are in second place, where each inhabitant has an average of 138.714 th. euro.

At the same time, United Kingdom (86.233 th. eu.) moved to third place, displacing Belgium (84.771 th. eu.) to the fourth position.

The index’s top ten in descending order also includes Sweden, the Netherlands, Canada, Japan, Singapore and Taiwan.

The level of well-being differs not only from country to country, but also within states. In order to show how welfare is distributed on a national level, Allianz first calculated Gini coefficient for each country, basing on the average value of net financial assets of 10% of the most affluent and 10% least well-off populations in the past (the period around the 2000s) and today moment.

The number of countries where this ratio improved (i.e. shows a more even distribution of wealth) is approximately equal to the number of countries where it has deteriorated, according to the report.

In general, the structure of the distribution of wealth in Eastern Europe is a bit more egalitarian than in other countries. The regional average Gini coefficient is 60.7, against the world average of 63.8.

The same situation is observed in the developed countries, most of them show an increase in the inequality of distribution, sometimes quite substantial.

This is especially true for the US, where the separation more pronounced than in any other country during the analyzed period. The United States has the highest Gini coefficient in the world - 80.6.

- The situation in the US is a cause for concern - believes M.Hayze. - According to our estimates, change of the Gini coefficient in other countries has not been as dramatic. As usual, the US - rather the exception to the rule, in comparison with other countries with market economies. This is often overlooked due to the dominance of Anglo-Saxon economists in the public debate, and as a result, the situation in the USA is regarded as common to the whole world. But fortunately, it is not so."

Global Wealth Report’s overview is based on data from 53 countries, which account for almost 91% of world GDP and 69% of the world population.

Allianz distributes the population of all countries into three categories in terms of welfare.

Middle class includes citizens, the cost of net financial assets ranging from 6.1 th. eu. to 36.7 th. eu. Low incomes are those, whose incomes is less than 6.1 th. eu., and those who own net financial assets worth more than 36.7 th. eu. are considered high incomes.

According to the report, the size of the population with low income has remained relatively stable in recent years, hovering around 3.5 billion people, or about 71% of the total population.

source: dw.de