For decades, the debate over wealth inequality in Western societies has been dominated by one narrative: the rich are getting richer while the rest fall behind. French economist Thomas Piketty famously argued that wealth concentration among the top earners follows a U-shaped curve — high before the Great Depression, lower in the mid-20th century, and rising again in recent decades due to market liberalization and lower progressive taxation.
But economist Daniel Waldenström, in his groundbreaking book Richer and More Equal: A New History of Wealth in the West (2024), offers a compelling counterpoint. By analyzing wealth more comprehensively — including real estate and pension assets often overlooked in earlier studies — Waldenström paints a different picture. According to his research, the past century in Western economies has not been defined by worsening inequality, but by the democratization of wealth, with the middle class emerging as a dominant economic force.
The Century of Wealth Democratization
Waldenström’s core argument is striking: while total wealth relative to GDP has steadily grown over the past 100 years, the share owned by the wealthiest 1% has consistently declined.
Historically, elites concentrated their assets in stocks and bonds, while ordinary citizens built wealth primarily through homeownership and retirement savings. These forms of wealth grew faster for the working and middle classes than for capital elites. In other words, rather than an era of widening gaps, the 20th century saw a major expansion of middle-class prosperity, supported by political and institutional changes such as:
- Access to quality education
- Rising wages and stronger labor protections
- Widespread homeownership
- Pension systems ensuring long-term financial security
Although extreme wealth and poverty still exist, Western societies have undergone a fundamental transformation toward broader wealth distribution.
A Historical Shift in Wealth Sources
In the first part of his book, Waldenström challenges the myth that wealth accumulation has always been reserved for the elite. Drawing from newly compiled datasets, he tracks how wealth sources evolved:
- Pre-16th Century – Land ownership dominated, with aristocrats and landholders holding the majority of wealth.
- Renaissance and Colonial Era – Merchant classes grew wealthy through international trade.
- Industrial Revolution (19th Century) – Industrial capitalists became the new elite, profiting from manufacturing and mechanization.
- Early 20th Century – The Great Depression and two world wars reduced inequality through progressive taxation and large-scale public investment in education and healthcare.
- Late 20th to 21st Century – Financial assets (stocks, bonds) grew in importance, but so did housing and pensions as key forms of middle-class wealth.
Today, property ownership and retirement savings are central to financial stability for millions, enabled by mortgage access, pension reforms, and a stronger social safety net.
Inequality in Retreat (1914–1975)
The most dramatic reduction in wealth inequality occurred between 1914 and 1975, when the wealth share of the richest 1% dropped from around 50% to just 20% in many Western countries. Waldenström identifies three main drivers:
- Global Shocks – Wars and the Great Depression destroyed capital and triggered high taxation to fund recovery efforts.
- Institutional Reforms – Expansion of free education, public healthcare, better labor conditions, higher wages, and robust pension systems.
- Economic Changes – Rising productivity boosted wages for the middle class, while housing and pensions became accessible to wider segments of society.
However, post-1980, trends diverged: Europe maintained relatively equal wealth distribution, but the U.S. saw wealth concentration rebound, with the top 1% now holding 35–40% of total wealth.
The Hidden Wealth Problem
A less visible — but highly damaging — form of inequality lies in offshore wealth. These are assets secretly held in tax havens to avoid taxation, amounting to 10% of global GDP. Scandinavian countries have low levels of hidden wealth, while in parts of Latin America, offshore holdings represent up to 60% of total wealth.
This hidden wealth deprives governments of $200 billion annually, reducing their ability to fund public services, particularly in poorer nations. Despite international efforts to improve transparency, resistance from tax havens and certain governments keeps the problem alive. Waldenström stresses that closing loopholes and enforcing global financial transparency are essential steps toward fairer wealth distribution.
Public Wealth: The State’s Economic Backbone
Public wealth — government-owned assets like infrastructure, land, public enterprises, and reserves — plays a critical role in economic stability and equality.
After World War II, Western governments massively expanded public investments, driving growth and reducing inequality. Later, privatization waves in the late 20th century shifted many assets to the private sector, creating large disparities between countries in the scale of public wealth.
Well-managed public assets can:
- Provide universal access to education and healthcare
- Stabilize economies through strategic investments
- Reduce inequality via progressive taxation and social programs
However, political pressures, debt burdens, and inadequate maintenance often undermine the value of public wealth. Waldenström warns that safeguarding and modernizing public assets is key to sustainable, inclusive prosperity.
Inheritance and the Return of Dynastic Wealth
Inheritance remains one of the most persistent engines of inequality. While its role diminished in the mid-20th century, it has reemerged as wealth concentration has grown.
- Europe – 55–60% of total wealth is inherited
- U.S. – 35–45% is inherited
- Japan – 65% (the highest globally)
This trend risks creating a new “hidden aristocracy,” where wealth is locked within elite families. Waldenström proposes policy reforms, including inheritance tax restructuring, caps on estate transfers, and measures to redistribute inherited wealth more broadly.
Conclusion: A More Balanced Future Is Possible
Daniel Waldenström’s research reframes the history of wealth in the West as one not of inevitable inequality, but of fluctuating and often improving distribution. The past century saw unprecedented growth in middle-class prosperity, driven by education, social safety nets, and economic reform.
Yet, new challenges — offshore wealth, inheritance concentration, and uneven wealth growth across regions — threaten to reverse these gains. The solution, Waldenström argues, lies in coordinated international policy, smarter taxation, transparent finance, and continued investment in public wealth.
If history teaches anything, it’s that wealth distribution is never fixed. With the right policies, the next century could be defined not by elite dominance, but by shared prosperity and economic justice.
