NEW YORK • It is an excellent time to be rich, especially in the United States. Around the world, the number of millionaires and billionaires is surging right along with the value of their holdings.
Even as economic growth has slowed, the rich have managed to gain a larger slice of the world's wealth. Globally, almost 18 million households control more than US$1 million (S$1.4 million) in wealth each, according to a new report from the Boston Consulting Group (BCG). These rich folk represent just 1 per cent of the world's population, but they hold 45 per cent of the world's US$166.5 trillion in wealth. They will control more than half the world's wealth by 2021, BCG said.
While global inequality is accelerating, in the US, it has gone into overdrive. The share of income going to the top 1 per cent in the US has more than doubled in the last 35 years, after dropping in the decades after World War II (when the rich were taxed at high double-digit rates). The tide shifted in the 1980s under Republican president Ronald Reagan, a decade when "trickle-down economics" saw tax rates for the rich fall, union membership shrink and stock markets spike. Now, those policies and their progeny have helped put 63 per cent of America's private wealth in the hands of US millionaires and billionaires, BCG said. By 2021, their share of the nation's wealth will rise to an estimated 70 per cent.
The world's wealth "gained momentum" last year, up 5.3 per cent globally. BCG expects growth to accelerate to about 6 per cent annually for the next five years.
Where is all this wealth coming from? Globally, about half of new wealth comes from existing financial assets - rising stock prices or yields on bonds and bank deposits - held mainly by the already rich.
The rest of the world's new wealth comes from what BCG calls "new wealth creation", from people saving money they have earned through labour or entrepreneurship.
In the US, the creation of "new" wealth is a minor factor, making up just 28 per cent of the nation's wealth increase last year. It is even lower in Japan, at 21 per cent. In the rest of the Asia-Pacific, meanwhile, two-thirds of the rise is driven by new wealth creation.
There are now about seven million Americans with more than US$1 million, and BCG expects 10.4 million millionaires and billionaires in the US by 2021.
Millionaires are far rarer in the rest of the world than in the US, where 5.7 per cent of all households own more than US$1 million in assets.
The only countries with a higher concentration of millionaires are smaller nations such as Bahrain, Liechtenstein and Switzerland, most with a reputations as havens for the wealthy.
China has the second most millionaires and billionaires, at 2.1 million, though its population is four times that of the US.