I mentioned to a friend once, who was complaining about his job where he made $200,000 a year and said he wasn’t making enough to live in Manhattan, that compared to the rest of the world he is obscenely rich. His response to me was “yeah but most of the world is in dire poverty”. I wouldn’t say the rest of the world is in dire poverty per se, but whether we are talking about the US in terms of per capita income, per capita GDP or any other measure of income, we are still incredibly rich compared to the rest of the world. We tend to forget about the inequality in the world because lately, people have been so focused on inequality here in the US. Sure, inequality in the US has political consequences and the notion that people with billions can bend the law to their advantage strikes at the core of what it is to live in a fair and democratic society.
There is a tendency whenever your income increases, to focus on those that make more than you, which may be one reason people say money never brings happiness. This means the more you earn, you tend not to look back, below or behind you to realize how fortunate you are. If we were to do this, we might be kind of embarrassed that we are complaining about inequality with an iphone in our pocket, clean water, 99% literacy and functioning basic and civil services when we see what other ordinary people have to deal with in their countries on a daily basis.
In fact, if you make over $32,400, you are in the top 1% of income earners in the world. There are a number of semi skilled trades that can get you to this point in the US. You wouldn’t even have to go to college. If you live in a place like New York or San Francisco, you can reach this income very easily and would even be considered “poor” or lower middle class by many in these places. Now, to be fair, this figure does not take the different price of goods in various places into account. In other countries, food, housing and many goods can be purchased much more cheaply so the comparison isn’t always fair for someone living in NYC or the US as a whole. We can see the disparity in the cost of living within the US as well. Housing, food and many other items are much more expensive in New York than they are in Mississippi and $32,400 would get you a lot further in Jackson than in Manhattan.
Websites like The Global Rich List can help to put our relative economic situation in perspective though. My friend made about $200,000 per year, this would put him in the top 0.4% of income earners globally. Global Rich List also gives you little tid bits to help put these figures in perspective. For example, my friend made about $104.17 an hour assuming an 8 hour work day (which is kind of a big assumption for a lawyer in NY and probably not realistic but let’s just maintain this for argument’s sake) that compares to the average laborer in Ghana who makes about 8 cents an hour. It goes into more examples like this; it would take the average laborer in Zimbabwe 196 years to make what he makes in a year, the average laborer in Ghana would have to work 7 hours for a can of coke that he would simply throw away etc.
Maybe Wealth Will Make the Difference
Income can be deceiving though, a lot of people tend to spend most of their income even if they make a lot of money, even a lawyer who makes $200,000 for example, can spend it all easily. So maybe if we look at wealth compared to the rest of the world the average person in the US will not be so rich compared to everyone else.
When you look for answers here though, it can be even more disheartening. As Joshua Kennon pointed out in this blog post from 2011 using the estate multiplier technique the top 1% in the US in terms of net worth may have lied around $1.5 million in 2009. As has been the case, if we assume this group has seen out sized gains since the crisis, we may take as a ballpark figure $2.5 million today in 2016 to get into the top 1% in terms of net worth in the US. According to an analysis of Federal Reserve data by the Economic Policy Institute, the wealthiest 1 percent of Americans control 35.6 percent of the total wealth of the country. However this is nothing compared to wealth inequality compared to the rest of the world.
A Credit Suisse report in 2015 estimated that in order to enter the global 1% in terms of net worth, one needed to have a net worth of $759,900. If you have over $100,000 in net worth, you are in the top 8% globally. About 3.4 billion people, over 70% of the global adult population have wealth of less than $10,000 and a further 1bn – a fifth of the world’s population – are in the $10,000-$100,000 range. Within that 1% figure of wealth globally, this group is estimated to control over 50% of global wealth. A much higher proportion than what the 1% in the US controls within the country. They even break it down with a wealth pyramid, seen here.
Looking Not Just Abroad but Back in Time
Why stop there though? Let’s look backwards in time as well as globally. We tend to think each generation should do a little better economically than before but have you ever given any thought to the fact that hundreds of years ago, almost everyone everywhere was in dire poverty except for a tiny elite? This was everywhere and for most of human history. Only recently has per capita income come up in aggregate for the general population of numerous countries. For most of our history we were just scrounging by barely earning a living. Just take a look at the estimated real GDP per capita since 1600 worldwide.
Technology has strongly influenced this amazing growth in living standards. By just stepping on a plane you are able to travel in a few hours more than all your ancestors have likely traveled in their entire lives. Think about that for a second, if that doesn’t give you pause then I don’t know what will.
If I have $500 or so dollars, right now I can easily hop on a plane and fly across the country to California. As the map below shows though, 200 years ago this was not the case. The lines on the map below represent the travel time it would take starting out from New York City in 1800. It would take 3 weeks to get to parts of Georgia and a month to get to New Orleans. If not many people cannot take off a month today despite all our advances in productivity and income to go travel, how do you think it might have been for people at this time? This explains why most people at that time had not been more than a few tens of miles from where they were born in their lifetime, excluding the immigrants that probably made the once in a lifetime journey on a ship to get to the U.S.
Let’s Look More Recently
This is not fair you may say, it’s obvious that we as a whole are richer than we were 200 years ago. No one is asking to go back to the days when there was no electricity, cars or indoor plumbing. However there seems to have been some nostalgia for a fantasy bygone era that probably never existed.
Our memory tends to be selective, I see the discussion today about bringing the USA back like thinking of an ex girlfriend long after you have broken up. As time heals the wounds, we tend to downplay all the bad memories and focus on the good ones more. Replay these in your mind enough times and getting back with your ex starts to sound like a god idea. If any of us have taken it a step further and act on that, many times those bad memories quickly show themselves again and you go running for the hills like you did the first time.
As Joshua Kennon pointed out in this epic rant:
This isn’t 18th century Colonial America where wealth took the form of land and inherited slaves. Almost all of it is some guy who started a plumbing supply business, or a software developer, or an author, or an executive, or a real estate developer. They actually think they’re living in some sort of dystopian hell. Which baffles me. Even among the bottom 20%, if you look at standards of living – home sizes, comforts such as heating and air conditioning, access to food and water, entertainment such as Internet, television, iPads, and smart phones, access to limitless, free information for self-education, record low interest rates, the longest peacetime expansion in global history, fewer rapes, murders, assaults, and thefts than at almost any time in the past, longer life expectancy, more free time per week; all of it – and they talk about these halcyon days of yesteryear. Yet give them 30 days as a lower middle class person in the 1970’s and they’d be begging to come back to the present because, despite the decline in real wages for that demographic, they still experience a far higher absolute standard of living. It’s just that everyone else has gotten so much richer…..
….The world they think existed didn’t exist. Mortgage rates were double-digits, gas shortages led to fuel lines at the pump, inflation raged out of control, we lived under the threat of nuclear annihilation, blacks, gays, Jews, and women were largely given the short end of the stick (if they weren’t getting beat by the stick), the stock market suffered a series of horrific declines, most of the world’s population was living at starvation levels by Western standards. The same folks who complain about today would have been doing just as bad, if not worse, 30 or 40 years ago. They believe the nonsense they spout which makes no sense to me since you can see the numbers. Life is infinitely easier today for a larger number of people.
As I pointed out in my post about the cost of college its easy to forget that almost one third of all adults in the US have completed 4 years of college or more, which was about 5% of the adult population in 1940. Do we really want to go back to a time when only a small elite had any higher education? Real GDP per capita as I pointed out in another post here was $17,306 in 1960 and stands at $51,486 in 2015. As a whole we are 3 times richer than out grandparents were.
Programs like the Great Society (by the way, designed by one of our few contemporary presidents who actually grew up poor, Lyndon Johnson) were designed to eliminate deep poverty and racial injustice, we often forget that we are only one or 2 generations removed from the beginning of these programs.
The 70’s weren’t much better, one of the media’s favorite gauges of our collective suffering at the time the “Misery Index” has fallen out of fashion because well, we really don’t have that much misery to speak of. The 70’s saw period of high unemployment and inflation meaning, not only could you easily lose your job, any savings you had were being quickly wiped out once you were unemployed. Inflation has always been toughest on the poor because they don’t have the means to protect themselves against it as well as the rich do. However, with the opposite problem now (low unemployment and low inflation) the media has found it is inequality that is the source of our new misery.
The uncomfortable truth is that we have never as a group of people been so well off and it is time to start looking at ourselves as a great resource and stop making excuses for why we are stuck in the situation each of us may be in.The information provided by www.cashchronicles.com is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs. www.cashchronicles.com does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any tax or investment decision without first consulting his or her own financial advisor or accountant and conducting his or her own research and due diligence. To the maximum extent permitted by law, www.cashchronicles.com disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. Content contained on or made available through the website is not intended to and does not constitute legal advice or investment advice and no attorney-client relationship is formed. Your use of the information on the website or materials linked from the Web is at your own risk.