BANKS AND THE ACCUMULATION OF WEALTH

The emergence of the limited liability company in the UK and its colonies, continental Europe, the US, and Japan in the nineteenth century undoubtedly contributed to the growth of wealth. With limited liability, shareholders in a company are not personally liable for any of the debts of the company, but may lose the capital they have invested in the business. Prior to this, businesspeople were personally exposed for the liabilities of their businesses, whether these were individual proprietorships or partnerships.

The development of the limited company facilitated the move to large-scale enterprises. Vast amounts of financial capital thus became available and company shares became transferable unlike with other forms of business enterprise.  Inevitably, more and more jobs of a type that had never existed before became available.

A significant number of these new jobs were in banks and insurance companies, and in their wake the new professions of accountancy and law prospered.

As incomes have risen over time, wealth has accumulated but as the Allianz ‘Wealth Pyramid’ shows it is concentrated today in the hands of just 1 percent of the global population. In 2020, Allianz calculated that 2.9 billion people with average wealth of less than $10,000 each had just 1.3 percent of the world’s wealth. When the wealth ceiling is raised to $100,000, 4.6 billion people are reckoned by Allianz to have 15 percent of global wealth.

The total number of people with assets of up to $1 million is 5.2 billion, holding 54 percent of global wealth. In broad terms, this is the retail banking mass market.