WEALTH OF NATIONS

I use the internet most to get free access to articles, columns and publications that, otherwise, would be out of my reach. And I use social media to help me find them. I find that the International Spectator, Aeon Magazine, Quartz and the Atlantic Magazine are great sources for thought provoking information and by following them on Twitter I am always up to speed on what gets written there.One topic that intrigues me is the wealth of nations and what nations do to make their wealth work for them.

The International Spectator recently posted two informative statistics on that subject. In the first one it listed, based on 2014 data from Allianz, the ‘Total Wealth’ of 9 leading nations and this listing provides a good frame of reference for the relative strength of the USA as measured by wealth. The data put the total wealth of the USA at $48.2 Trillion or $151,114 per capita. The next wealthiest nation is Japan at $11.7 Trillion or $92,126 per capita. Here is the full list

COUNTRY	TOTAL WEALTH IN TRILLION DOLLARS	POPULATION IN MILLIONS	WEALTH PER CAPITA IN DOLLARS
USA	48.2	318.9	151,114
JAPAN	11.7	127	92,126
CHINA	10.5	1,357	7,737
UNITED KINGDOM	5.8	63.8	90,909
GERMANY	5.1	82.6	61,743
FRANCE	4.4	64.9	67,796
BRAZIL	1.1	200.4	5,489
INDIA	1.0	1,267.4	789
RUSSIA	0.5	142.1	3,518

The second statistic originates with Credit Suisse reporting on the number of millionaires in six leading countries. That list looks like this

COUNTRY	NUMBER OF MILLIONAIRES IN MM DOLLARS	POPULATION IN MILLIONS	MILLIONAIRES AS % OF POPULATION
USA	15.7	318.9	4.9
UNITED KINGDOM	2.4	63.8	3.7
JAPAN	2.1	127	1.65
FRANCE	1.8	64.9	2.77
GERMANY	1.5	82.6	1.81
CHINA	1.3	1,357	0.09

What do these numbers tell you? No two readers will draw the same conclusions from these two data sets, but a few observations jump out at us.

1.       Both in absolute terms and on a per capita basis, the USA is (still) far ahead of its nearest competitors when the yardstick is the financial wealth of nations.

2.       On a per capita basis, the USA, Japan and the United Kingdom are the wealthiest nations in the world, also confirmed by the largest number of millionaires.

3.       China’s wealth per capita is on par with Brazil, but far ahead of India and Russia.

4.       In Europe, the UK and France are the wealthiest nations, ahead of Germany.

The question is what we do with this wealth and how we protect it from eroding. National wealth is not unlike a person’s net worth. It consists of assets minus liabilities. Our assets do not grow unless we do something productive with what we have and we have been increasing our liabilities now for a while as evidenced by the growth in our national debt and by a large number of unfunded future obligations we have undertaken in the realm of pensions, entitlement programs and deferred maintenance of our civil and military infrastructure.

Sometimes I’m afraid that America will go the way of so many big lottery winners. The New York Daily News reported on the 12^th of January, 2016 that almost seventy percent of big lottery winners were broke within seven years of hitting it big. Just like these ill-fated lottery winners, America is more concerned with consuming than it is with saving and investing. And the wealth is incredibly unevenly divided. Thirty-five percent of private wealth in the USA is in the hands of the top one percent of households and seventy-six percent is in the hands of the top ten percent of American households. This is much worse than income inequality, where the top one percent of American households takes home about twenty percent of overall income.

This level of wealth inequality is bad from a socio-political perspective. It is one explanation for the high level of populist dissent evidenced in the current campaign for the 2016 presidential election. And it has led to a situation where a handful of very rich individuals has taken control of the funding of election campaigns that serve their, rather than the national, interest. It is equally bad from an economic perspective, because it sidelines all but a few Americans from risk taking by means of participation in the funding of research and innovation required for the generation of future wealth. It perpetuates the control that very few individuals have over the major economic decisions about allocation of resources and the types of investments America makes in its future.

America is still, by any measure, the wealthiest nation on earth. This wealth, if properly applied, should serve as a platform for continued global leadership. But just like the ill-fated lottery winners, America could lose it all if the wealth is not properly preserved, allocated and put to use for the benefit of all.