In the 18th century, Scottish philosopher Adam Smith, knows as the father of political economy, defined wealth as "the annual produce of land and labor of the society." Wealth can be defined as an accumulation of assets, resources or material possessions. In economical terms, wealth is the net worth of a person, a family, a company or a country. Everything that an individual owns, including property, business, stocks, bonds, market funds and life insurance among others, constitute a person's assets.
By subtracting debts - mortgage and bank loans, for example - what is left is a person's actual wealth. It is not the same as income because wealth is another dimension of wellbeing. If two people get the same income they would not necessarily be equally wealthy, because one person may spend the money more wisely and invest it, while the other may just waste money. Wealth can be amassed and should the need arise may be turned into direct source of finance - for example, in the case of unemployment or an economic crisis. Life insurance can also be considered a part of wealth and in case of an accident it can provide security for the family.
In the times before money existed, people would exchange one thing for another and those who had a home, land, crops, cattle or other valuable possessions were not only considered wealthy but also had power and respect. In modern times, the situation is similar with wealthy people being seen as powerful and influential, as they can contribute to various political parties of other organizations, thus creating lobbies for their interests.
Wealth is a key factor for inequality. The simplest way to measure wealth inequality is to examine what share of the total wealth is owned by the richest households. In 2004, the top 10 richest households in the United States held more than 71 percent of the total wealth; leaving less than 30 percent of it to be distributed among the rest of the population. There has been a tendency towards a growing inequality, not just in the United States but worldwide.
Economists are usually interested in the term Top 1 percent share as the clearest measure of inequality. In 2007, the Top 1 percent owned approximately 35 percent of the net wealth in the United States. Experts have noticed another concerning trend, with the economic recession in 2009 affecting average households in a much more negative way than it has affected the richest. Average households have lost 36 percent of their marketable assets, while the drop for the Top 1 percent was just 11 percent.
Globally, trends are similar. According to Capgemini and Merrill Lynch, the number of high net worth individuals (HNWI) in the world has grown to 10.9 million, marking an 8.3 percent increase. Their wealth is estimated to be USD 42.7 trillion, nearly 10 percent more than in 2010. North America hosts the largest number of HNWI, followed by Asia and Europe. One in four HNWI is reported to be a woman, although the typical demographic profile of a HNWI is a male, over 45 years of age (in 2010 73 percent were male and 83 percent were over 45).
It is notable that in other leading industrial countries inequality is much less of a problem. In the United Kingdom the Top 1 percent owns 21 percent of the total wealth and in Japan the figures are similar. In developing countries, however, the situation is quite different. Wealth inequality is a significant problem for African countries. Although Africa is the second most populated continent in the world, it holds a share of just over 2 percent of the total world Gross Domestic Product (GDP). In terms of wealth distribution, many of the African and Central Asian countries own zero percent of the total world wealth. This means that they either possess no marketable assets, or their debts surpass their net income.
The fact that nearly 80 percent of the world population lives on less than USD 10 a day is striking. According to UNESCO, 22,000 children die of poverty and hunger every day. The United Nations (UN) and other international organizations are trying to provide developing countries with better life conditions. One of the primary goals for the UN is to put and end to global poverty and hunger.