The wealthiest people in the Netherlands grew even richer last year, with their wealth increasing by an average of 5 percent, while the economy as a whole grew by a mere 0.2 percent, according to NOS.nl based on data from the Quote 500. Is this a sign that wealth inequality in the Netherlands is rising? We discuss this with Charles Kalshoven, expert strategist at APG.
In 2013, the Netherlands had 13 billionaires. This was during an economic crisis. Now, that number has risen to 52, as reported by the FD newspaper. Not only that, but the collective wealth of those listed in the Quote 500 has surged over the past decade from 84 billion to 253 billion euros. Additionally, the threshold to join this list keeps climbing, now requiring at least 130 million euros.
To get straight to the point: is wealth inequality really increasing?
“The short answer is ‘no.’ The most common measure of inequality is the so-called Gini coefficient, which is zero when everyone has the same wealth and one in the case of complete inequality. The Gini coefficient has actually been declining since 2013. But what explains this reduction in wealth inequality? One major factor is the significant rise in housing prices, which has built up more wealth for a broad middle group. Incidentally, accumulated pension wealth is not included in the Gini coefficient. If it were, the distribution of wealth would be much more even. For example, the wealthiest 10 percent in the Netherlands currently hold 62 percent of all wealth, but if pensions were included, this would drop to 48 percent. That said, don’t focus too much on the Quote 500 if you’re looking at wealth distribution. It represents a relatively small group of people, with limited impact on the bigger picture.”
The fact remains that the number of billionaires has grown, along with their wealth, which has outpaced both economic growth and inflation.
“That’s true, but these aren’t ideal comparisons. It’s more appropriate to compare this 5 percent wealth increase with the return on an investment portfolio. In that light, they’ve actually done poorly. Last year, the AEX gained 16 percent, and global stocks rose 18 percent in euros. A traditional 60/40 investment portfolio, with 60 percent in stocks and 40 percent in global bonds, also performed better, achieving a 12 percent return last year. Over a longer time horizon, wealth growth for the Quote 500 has also lagged behind stock market returns.
Since 2000, global stocks have outperformed with a 6 percent growth rate compared to 5 percent for the billionaires. If they had invested in a global index, collectively they would now be about 50 billion euros richer. Over the past few years, however, the wealthy have outpaced the stock market. Since 2014, their wealth has grown by an average of 13 percent, while a global equity portfolio rose by ‘only’ 10 percent per year during that time. But as I said, it’s a small group, so their wealth growth can still coincide with declining inequality.”