The annual World Wealth Report from Capgemini, which is a worldwide census of millionaires, was released this week. The report does not take inflation into account, using the threshold of $1 Million each year. It also calculates net worth excluding primary residence, which can be misleading, as an American who withdraws $300,000 in home equity from his primary residence would be recorded as immediately seeing a $300,000 jump in net worth by merely this transferral of funds. However, the report still has many useful data points that present interesting trends.
Those with a net worth greater than $1 million increased 6.5% in 2005 to reach 8.7 million in number. Among these, those with a net worth of $30 million or greater increased at an even faster rate - 10% - to reach 85,600.
The variations in regional growth rates of millionaires match the performances of those particular economies closely. Within the global average millionaire growth rate of 6.5%, the United States was very close to the mean at 6.7%. Europe lagged by growing at only 4.5% and is rapidly shrinking its share of the world's millionaires, just as its share of world GDP simultaneously shrinks. At the other end of the scale, the surge in India is remarkable. The 19.3% growth of Indian millionaires in 2005 follows a 14% increase in 2004, for a two-year increase of 36%. South Korea, already as prosperous many European nations, saw a 21.3% increase in millionaires.
The aggregate wealth of millionaires reached $33.3 trillion in 2005, an 8.5% increase from 2004, which itself was an 8.1% increase over 2003. That the trendline of annual asset growth appears to be above 8% shows us how economic growth is exponential and accelerating, as such rapid annual increases in wealth would have been unheard of just 50 years ago, let alone 200 years ago.
Making some modest assumptions for continued acceleration of exponential growth, we can expect the world to contain 18 million millionaires by 2015 and perhaps over 40 million by 2025. It is true that inflation should be considered as a factor, but the continuance of technology diffusion to the mass market should also be considered. In other words, many items available to even lower income people today, such as email, cellular phones, realistic video games, Yahoo! Maps, iPods, and Wikipedia, were not available to even the wealthiest person just 30 years ago. Similarly, even the wealthiest people today do not have many luxuries that the average person will have in 2015 and 2025.
As millionaire status becomes something achieved by an increasingly larger share of the population, the psychology of wealth will continue to transform the culture of broader society as well. More people moving up Maslow's hierarchy of needs will make a big difference on crime rates, the variety of recreational activities available, and even the frequency of warfare.
There is much to look forward to.