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Monday, October 20, 2014

Is America really as rich as people think?

Many, if not most, Americans grow up with a long-held narrative: The United States is the richest country in the world, and we should thank our lucky stars that we live here and not over there, wherever there might be. And trust me when I say I am grateful that I live here.

There are two Americas, though: one that resides in the rich world and one in the poor world. Understanding this divide requires that we first disabuse ourselves of the notion that the U.S. is the richest country on earth. It isn’t, not when we examine the economic measures that count.

No doubt, the U.S. boasts the world’s largest economy, last year accounting for 22 percent of the world’s gross domestic product, the sum of all goods and services produced in a year, according to the Credit Suisse Research Institute’s Global Wealth Databook. The next largest economy belonged to China, which accounted for 11.25 percent of global GDP.

Yes, our economic output is humongous. The vast wealth generated by our sprawling economy, though, is not evenly distributed, not the way it is in other rich nations –– not even close. As a result, we end up with a society of über-haves and have-nots.

If you look at our mean, or average, wealth per adult, we are the fifth-richest nation on earth, a fair distance behind Luxembourg and just ahead of Sweden (first table, next page). Wealth, or net worth, is calculated by adding together all of a person’s assets (home, retirement funds, etc.) and subtracting debts (mortgage, credit cards, etc).

Our mean wealth per adult is a little over $300,000. Here’s the thing: Our median wealth per adult is just $44,911 (bottom table). Median wealth tells us where the middle point of a country’s wealth scale lies. To have a median wealth level as low as the U.S.’s when mean wealth is as high as it is, many, many people must be deep in debt –– that is, their net worth is in negative territory.

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