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January 2007, Volume 14, Number 1

Global: Remittances, Wealth

Remittances to developing countries surpassed ODA in the mid-1990s, when the monies sent by migrants topped $70 billion, and in 2006 remittances of $199 billion were almost twice ODA; remittances to developing countries were $96 billion in 2001 http://www.worldbank.org/prospects/migrationandremittances).

Many studies show that remittances reduce poverty and have the potential to speed development. Some governments seem to believe that remittances are the key to development, but they are in fact like many other factors that can affect development. If a country is poised to develop, the discovery of natural resources, FDI, or remittances can speed growth. However, if a country is wracked by internal divisions or has poor institutions, these new sources of funds can instead lead to dependence, conflict and corruption.

Some analysts point out that because remittances are more stable than other financial flows, rising when there is turmoil that reduces FDI, as when migrants abroad send money despite coups or natural disasters, local residents may be less likely to save, counting instead on remittances. Remittances can also increase the value of the local currency, reducing exports, or serve as a salve that postpones needed economic reforms.

Wealth. A study of global wealth in 2000 found that the top one percent of the world's adults, 37 million people, each had a net worth of at least $515,000 and accounted for 40 percent of the world's total net worth. The bottom half of the world's adults, by contrast, had 1.1 percent of the world's wealth. In another measure, the 90 percent poorest adults on earth share 15 percent of the world's wealth. Median wealth of adults was $2,200.

The US has about five percent of the world's residents, but a third of the world's wealth. Wealth is far more unequally distributed in the US than income; the richest one percent of Americans had more than a third of US wealth.