On November 6, business daily „Vedomosti“ published a review of the most recent Global Wealth Report produced by Credit Suisse. Combining the report with their own data, authors Sergei Guriev (professor of economics at the Yale University and the Russian School of Economics) and Oleg Tsyvinskiy (dean of the Russian School of Economics) stress that the top one percent of the richest individuals in Russia own 71 percent of all private assets in the country. According to this indicator, Russia is the absolute world leader among the large countries – India and Indonesia follow as distant second and third, with their top one percent of the wealthiest individuals owning 49 and 46 percent of private assets, respectively. It is interesting to notice that in the United States, where the issue of income taxation for the highest income individuals was extensively debated during the presidential campaign battle, the top one percent of the wealthiest individuals own 37 percent of private assets in the country, or just over a half of the respective percentage in Russia. It would be interesting to compare the “price of inequality” in the United States – where it is argued that the wealth of the top one percent is crucial for venture capital formation and new business development – and that in Russia, with a quite different entrepreneurial mentality.
When the wealth concentration indicator is expanded to include the wealthiest five percent of the population, Russia still remains the absolute leader, with its top five percent of the wealthiest owning 82.5 percent of the private assets in the country. The top 10 percent of the wealthiest individuals control 87.6 percent of the private assets in Russia, which means that the lower half of the group adds a mere 5.1 percent to its overall wealth. Even more specifically, according to Guriev and Tsyvinskiy, the 96 Russian billionaires control 30 percent of all private assets in the country. This specific indicator is as much as 15 times higher than the world average, where the billionaires control only two percent of total private assets. In the United States, all of the billionaires in the country – more than 400 of them – control only seven percent of total private assets.
Another interesting indicator is that the income inequality in Russia is nowhere near as high as the wealth inequality in the country. Authors state that the average income in Russia is twice as high as in China, while the average wealth is lower. One of the reasons for this might be that the Russians tend to spend rather than save – perhaps due to a relatively high inflation, macroeconomic instability or unwillingness to save for their retirement or education of children.
It should be noted that Credit Suisse’s analysts developed their report using a combination of statistical information and estimates – household polls, Forbes magazine billionaire lists, Pareto distribution law. Guriev and Tsyvinskiy note that Forbes underestimates the number of super-wealthy Russians, as its statistics do not include Russian government officials, some of which are suspected to own significant assets. Authors argue that the existence of “shadow millionaires” in the Russian government will prevent the introduction of taxes that would reduce wealth distribution inequalities. Furthermore, the authors argue that the corruption in the government ranks is one of the primary reasons for wealth inequality in the country and that it will be impossible to create a society of equal opportunities until the corruption problem is resolved.
The article is available here: http://www.vedomosti.ru/opinion/news/5739241/pervaya_sredi_neravnyh
The Global Wealth Report can be viewed here: https://infocus.credit-suisse.com/data/_product_documents/_shop/368327/2012_global_wealth_report.pdf