Western Europe Has Most Millionaires, Study Finds

John Roach
for National Geographic News
July 11, 2003
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In real life, unlike reality TV, Europe really is the place to meet an honest Joe (or Jo) millionaire, according to a recent report of the world's richest people. The continent is home to approximately 2.6 million of the deep-pocketed individuals.

"In Europe there is a lot of old and inherited money. There has been capital formation for a number of years, centuries really," said Jim Wiggins, a spokesman for Merrill Lynch's Global Private Client Group in New York.

The money managers, in collaboration with the consulting firm Cap, Gemini, Ernst & Young, produce the annual World Wealth Report to determine how best to serve the niche market of so-called high net worth individuals.

In total, there are an estimated 7.3 million people in the world whose assets—excluding their home—amount to U.S. $1 million or more. Behind Europe, North America has the second highest concentration of millionaires at 2.2 million. The Asia Pacific region accounts for 1.8 million. Latin America and the Middle East account for 300,000 each, and Africa accounts for 100,000.

"Generally where you see the largest concentration of high net worth individuals are countries with the most developed economies," said Wiggins. "Western Europe has had a developed economy for longer than any other region."

The world's 7.3 million millionaires collectively own U.S. $27.2 trillion in financial assets, which is a 3.6 percent rise from the 2002 report. Nearly 200,000 people joined the ranks of the world's millionaires in 2003, a 2.1 percent rise. According to the report's authors, 2003 had the lowest growth rate in the report's seven-year history.

Overall, the Asia Pacific region experienced the strongest regional growth in millionaires, while North America reported a decline of 2.1 percent due to the crumbling stock market and Latin America experienced a 3.6 percent decline due to the oil crisis in Venezuela and the crash of the Argentinean peso.

World's Poor

While the rich struggle to get richer, the World Bank estimates in its 2003 World Bank Atlas that nearly 23 percent of the world's 6.1 billion people struggle to get by on less than U.S. $1 a day.

For the world's poor, and many other people, "wealth" is not necessarily measured in financial assets, but could include the relative luxury of access to fresh water and clean air, the ability to read a book, and a balanced meal at the end of the day.

"We in most of the developed world are used to having access to water. In other parts of the world that may be a large portion of their income to have access to that water," said Richard Fix, a spokesman at the World Bank's 'Development Data Group in Washington, D.C.

According to the bank's report, the poorest countries are in sub-Saharan Africa where, for example, in Democratic Republic of Congo the average person earns just U.S. $80 per year. South Asia is the second poorest region, with nearly 37 percent of the population making less than U.S. $1 a day.

In comparison, the World Bank ranks Luxembourg as the country with the highest per capita income. The United States, Western European countries, Japan, and Canada follow closely behind.

The World Bank's modern-day focus is to help the poorest people and the poorest countries get on the "paths of stable, sustainable, and equitable growth."

To determine where to help, the bank categorizes countries as low, middle, or high income based on a calculation of the per capita income. Countries that fall into the low and middle categories are eligible for aid.

"In essence what the bank is looking at is those countries that are in need, that are developing, and what is needed to help them develop further—not strictly on an economic basis, but also environmental or other issues," said Fix.

Geography of Wealth

Andrew Mellinger, a research associate at the Center for International Development at Harvard University in Cambridge, Massachusetts, said that aid organizations such as the World Bank and the United Nations need to factor in a country's physical geography when making development decisions.

"When you consider the ways in which geography affects development, you begin to see how pervasive and significant it is," he said.

For example, countries that have access to trade via a coastline or navigable waterway to the ocean are at a distinct economic advantage to landlocked countries since trade via the ocean is significantly cheaper than by road or air. Other geographic barriers include a region's agricultural productivity and the prevalence of infectious disease, said Mellinger.

The United States and Western Europe both have ample access to ocean trade routes and are located in temperate regions that are good for growing crops and where it is difficult for infectious diseases, such as malaria, to spread.

"Many of the countries with tropical or desert climates face many more obstacles on the development path," said Mellinger. Harsher growing climates, less sunlight in the growing season as compared with temperate regions, too much rainfall or too little water, no easy way to get goods to market, and conditions geared towards infectious diseases are some of the obstacles cited.

Generating and Maintaining Wealth

To overcome the geographic barriers, Mellinger recommends development strategies such as creating and distributing a vaccine for malaria, promoting agricultural techniques that make crops more productive in tropical and desert soils, and improving infrastructure that links landlocked countries to the sea.

Another way to help economies grow, said Fix, is a reduction of barriers to free trade. "A lot of countries seem to have benefited the further along they go with that," he said.

As the developing countries keep developing their economies they should, in theory, produce more and more of the high net worth individuals sought by financial services firms such as Merrill Lynch who would like to help them maintain their wealth.

Study of the high net worth individuals' investment strategies helps financial advisors and consultants learn how best to preserve and continue to grow their clients' capital. Diversification, said Wiggins, is key.

"What we see in high net worth individuals is that these people tend to be very much diversified," said Wiggins. "They tend to be geared towards asset preservation, they are not as likely to be concentrated in one or two asset classes but spread their money across asset classes."

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