The latest household wealth survey has just been released by the last European institution which still enjoys some shred of credibility, the European Central Bank. As you might expect, the results are not too pretty.
The claims of the populist parties are at least partly true— the gap between the poor and the rich is not in fact closing anymore. Instead it is actually worsening, even in Europe, a continent long proud of its social justice and better income and assets equality.
The survey released last Friday showed that fully 10 percent of eurozone regional households now account for over half of the continental wealth. Practically all families were poorer in 2014 than 2010, a shocking result five years after the end of the financial crisis. Even the eurozone median household net wealth has decreased significantly by around 10 percent to 104,100 euros from 2010. Now the wealthiest 10 percent control an average of 496,000 euros while the poorest five percent show a negative net worth. The Gini coefficient, long a statistical standard for inequality, increased from 68 to 68.5.
Those workers which are self employed prove to be the wealthiest on average, as in the U.S. They possess median net assets amounting to 256,100 euros. Homeowners without a mortgage have 226,700 euros while those with a mortgage still boast 144,300 euros. Those renting are poorest, with an 8,900 euros net worth.
This matters because the populists have seized upon it. They claim the wealth gap divide is worsening on the continent. Now the European Central Bank reluctantly agrees with them.
The U.S. has long held the dubious honor of being the developed nation with the greatest wealth disparity. A year earlier than the European data, the richest Americans controlled 51 percent of all national wealth, on par with the European situation. This has changed over the last hundred years. This chart demonstrates how radically it has evolved since the 1980s:
In the 1920s, the share of wealthy-controlled American assets peaked before the Great Depression. From this point on, it cratered by over half throughout the subsequent three decades. The 20th century proved to be the greatest wealth equalizer both the U.S. and rest of world ever imagined, as this chart below shows:
But now, these positive trends from the 20th century have been all but completely erased. The richest American households now control nearly as much of the national wealth as they did in the roaring twenties.
The 21st century has been brutal to the average middle class American and family. From 2000 to 2011, the average net worth of the majority of American households plummeted. It was only the top 40 percent of American households that saw a gain to average net worth during those 10 years, as this chart plainly shows:
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The wealthy have more than simply a greater share of the national economic pie than the rest of us. The majority of their wealth is derived from a more profitable source of assets. The top one percent of American households control almost half of all the national stakes in mutual funds and stocks. Contrast this with the bottom 90 percent of Americans who see the majority of their net worth come from their primary homes. This real estate asset is precisely what took such a brutal hit since the turn of the century.
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