Once again, Oxfam is circulating their statistic that 62 people have as much wealth at the bottom half of the world’s population. Think about that for a moment. When you read that, what do you think that means? Particularly, what is wealth?
Many people will interpret “wealth” as financial assets. Many others realize wealth includes the value of our non-financial possessions. Therefore, Oxfam is saying that if you add up the value of all our possessions, 62 people own half. Right? Wrong! Though that is the message they want you to hear.
Terminology lesson. The sum of your financial assets and your non-financial possessions is your total assets. Wealth is your total assets minus your debt. Wealth is your net worth. Oxfam misconstrues wealth as total assets. (And as this has been thoroughly documented in the press for years now, we can only assume the misrepresentation is intentional.)
Thanks to Reuters reporter Felix Salmon, who dug into Oxfam’s sources, we know Oxfam uses Credit Suisse Global Wealth Databook to calculate their numbers. Here is how it works (using the 2015 Databook):
- Step 1: Find the global wealth total. Page 90 says it is $263 trillion.
- Step 2: Find the percentage of wealth owned by the bottom 50%. Here are the percentages of global wealth for the bottom 5 deciles of wealth ownership from lowest to highest (p. 148): -0.3 + 0.1 + 0.1 + 0.3 + 0.5 = 0.7%.
- Step 3: Calculate the amount of wealth for the bottom half. Multiply $263 trillion by .07%. That gives $1.84 trillion.
- Step 4: Get a list of the wealthiest people in the world and then add them up until you get to $1.84 trillion.
That may seem right at first glance but look at this graph from Credit Suisse’s Global Wealth Report 2015. (p. 15) It shows what percentage of each decile lives in which region of the world. I’ve added two notations.
Note that the United States has 10% of the world’s least wealthy people (circle 1). China has none of them (circle 2)! How is that possible? Because the bottom number for wealth at he left side of the chart is not zero. It is a negative number. The middle class American with a mortgage, student, loan, and consumer debt totaling more than the value of her home, bank account, and other possessions, is less “wealthy” than a Chinese peasant farmer who owns virtually nothing but also has no debt. The entrepreneur who borrowed a million dollars for his business is even “poorer” than these two. This is who Oxfam is grouping together in its bottom 50% of wealth. It is a meaningless comparison. But the deception does not stop there.
Oxfam builds a narrative that the increasing concentration of wealth at the top has the corresponding negative effect of making people poorer at the bottom. Their misrepresentation of wealth as total assets gives us no insight into this claim. I will suggest that for the poorest people in the world, income is a more critical issue than wealth or total assets. One must have an income that at least meets basic needs before she can begin to save, invest, and buy capital goods.
Extreme poverty, measured by income, is rapidly disappearing. The percentage of people living on less than $1.90 per day has shrunk from almost 40% in 1990, to less than 10% today (and we have added an extra 2 billion people.)
(Source: Washington Post)
Furthermore, the global distribution of income has been progressively moving toward a bell curve distribution and away from a bi-modal distribution, with wealthy people clustered at the top and very low income people clustered at the bottom.
(Source: Business Insider)
And this chart shows hows the mean and median global per capita income numbers keep rising, also noting that the global GINI coefficient declined from 68.7 to 64.9 between 2003 and 2013. (Lower GINI number means more equality.)
(Source: Conversable Economist)
As I have continued to learn about these issues, I keep coming to this graph as a discussion starter on economic inequality.
(Source: Pew Research)
To me, this chart suggests that recent trends in technology and globalization have benefited billions of people who once lived in bare subsistence poverty. There is a small minority of people at the left of the chart who are not being touched by these changes, most of them living in counties with turmoil and failed nation-states. At the extreme right are the owners of capital who have benefited from productivity and expanded trade. Middle class people in developed nations have experienced downward pressure on their wages due to technology and from a burgeoning supply of labor in a global economy. However, living standards are not just a function of wages but also the cost of living. A case can be made that the developed world middle class had improvements in living standards because globalization kept the cost of living lower than it otherwise would have been. That does not show up in this chart. It is more complex than this but I think a chart like this is a better place to begin a discussion.
In short, Oxfam wants to promote a narrative that casts global capitalism primarily as an exploitative enterprise, a zero-sum game where the growth of wealth at the top necessarily means the reduction of wealth at the bottom. The narrative intuitively makes sense. Some version of this thinking is common but it is virtual gospel on the left where the moral compass is directed predominately by equalization rather a robust conceptualization of justice. But it is wrong. It is every bit as ideologically myopic as the "free markets and democracy fixes everything" mantra on the right.
Finally, let me be clear about what I did not say. I did not say I thought that the growing concentration of wealth at the top was good, that there are not masses of people who need substantial improvement in their economic well-being, that global capitalism is an unqualified good, or that there are not profound economic injustices in the world. I did not speak to any of Oxfam's proposed policy solutions. Discernment on economic issues is complex and requires our best efforts at sound analysis if we want to be bring lasting and just change. Oxfam's misuse of the data to support ideologically predetermined policy's does not help. They are telling the truth about the numbers they use, knowing the numbers they use will lead most of us. That is what I'm addressing.