Where did all the wealth go?

Business Mirror - - OPINION - John Man­gun E-mail me at man­gun@gmail.com. Visit my web site at www.man­gunon­mar­kets.com. Fol­low me on Twit­ter @man­gunon­mar­kets. PSE stock-mar­ket in­for­ma­tion and tech­ni­cal anal­y­sis tools pro­vided by the COL Fi­nan­cial Group Inc.

NA­TIONAL pol­i­tics ev­ery­where is all non­sense to the ex­tent that it is all about power and money. The re­al­ity is that the far­ther you go up the “food chain” in a na­tion’s political sys­tem, amaz­ingly your wealth in­creases along with your power.

The best lead­ers are usu­ally those in small com­mu­ni­ties. The tribal elders on some Pa­cific Ocean is­land are more re­spon­sive to the needs of the peo­ple as are small-town may­ors. The closer the lead­ers are to the peo­ple, the bet­ter the job they tend to do.

If you live in a com­mu­nity that has a home­own­ers’ as­so­ci­a­tion, you can see this prin­ci­ple at work.

As political sys­tems have be­come more cor­rupted over the last 100 years, so have eco­nomic sys­tems. That is not to say that the sys­tem was much bet­ter when peo­ple were re­liev­ing them­selves be­hind the near­est tree, but now, vir­tu­ally, all peo­ple on the planet live un­der a sim­i­lar sys­tem.

If you con­sider in­come in­equal­ity as mea­sured by the “Gini co­ef­fi­cient,” there is lit­tle dif­fer­ence be­tween “wealthy” na­tions and the “poor.” The Gini is nearly the same be­tween the US, with a per-capita GDP at $53,000, and China, with a per-capita GDP of $6,800.

Wealth in­equal­ity is even more in­ter­est­ing. A Gini model co­ef­fi­cient ap­plied to wealth shows al­most the same wealth in­equal­ity in the US (85 per­cent) as in the Philip­pines (82.7 per­cent), and a lower score in­di­cates lower in­equal­ity. Dur­ing the pe­riod 2010 to 2015, the Philip­pines had a much higher eco­nomic growth with per- capita GDP grow­ing by 17.5 per­cent ver­sus 13

Be­tween 2005 and 2010, fi­nan­cial wealth (cash, in­sur­ance and stocks) for the av­er­age Filipino in­creased sig­nif­i­cantly, while the non­fi­nan­cial wealth in­creased by only 25 per­cent. How­ever, be­tween 2010 and 2015, non­fi­nan­cial (houses, con­dos, cars and busi­ness in­vest­ment) wealth in­creased 375 per­cent more than fi­nan­cial wealth.

per­cent in the pre­vi­ous five years.

How­ever, from 2005 to 2010, real an­nual per- capita wealth- growth rate was 7.5 per­cent, ac­cord­ing to the Credit Suisse Re­search In­sti­tute’s Global Wealth Date­book 2015. Be­tween 2010 and 2015, the wealth-growth rate was less than 4 per­cent.

Where did all the wealth go even with high eco­nomic growth? It was not all be­cause the very rich got richer. Com­pared with 2010, the num­ber of Filipinos in the top 10 per­cent of global wealth hold­ings in­creased by 75 per­cent. But the key is ex­am­in­ing the kind of wealth we have.

Be­tween 2005 and 2010, fi­nan­cial wealth (cash, in­sur­ance and stocks) for the av­er­age Filipino in­creased sig­nif­i­cantly, while the non­fi­nan­cial wealth in­creased by only 25 per­cent. How­ever, be­tween 2010 and 2015, non­fi­nan­cial ( houses, con­dos, cars and busi­ness in­vest­ment) wealth in­creased 375 per­cent more than fi­nan­cial wealth.

Eco­nomic wealth in­creases be­tween 2005 and 2010 put more money in the hands of the av­er­age Filipino. Then, that in­crease in “cash” cre­ated higher eco­nomic growth be­tween 2010 and 2015, be­cause Filipinos in­creased their buy­ing ac­tiv­i­ties of goods.

The Ar­royo ad­min­is­tra­tion should have thanked Filipinos for work­ing hard to in­crease their wealth (up 7.5 per­cent). The Aquino ad­min­is­tra­tion should thank Filipinos for spend­ing to cre­ate a 6.2-per­cent av­er­age eco­nomic growth from 2010 to 2015.

Why do we need politi­cians again?

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