January rolls around again, the World Economic Forum gathers at Davos, and Oxfam release their latest work on inequality. I’ve been wondering how long Oxfam could continue to get headlines with this strategy, but then every year the figures get worse. And every year our leaders talk more about inequality without doing anything about it. So why not keep on highlighting it?
This year’s ‘killer stat‘ is that 82% of the wealth generated last year went to the richest 1% of the world’s population. That’s $762 billion created between March 2016 and March 2017, enough to end extreme poverty seven times over.
The flipside of that is that the poorest half of the world’s population got exactly 0% of the new growth.
To me, it’s the second statistic that’s the more powerful one. If we focus on the rich getting richer, it’s easy for people to say that we’re motivated by envy, and that we’re anti-wealth and want the world to be poorer – see the rush of anti-Oxfam articles on the Institute of Economic Affairs this week.
The second statistic shows that we can’t just carry on as if everything’s fine, and wait for wealth to trickle down. It isn’t trickling down fast enough. The report behind Oxfam’s statistics, Reward Work, Not Wealth, points out that if you are among the poorest 10% of people, your income will have improved by less than $3 in the last 25 years. As they say, “this is a deeply inefficient way to eliminate poverty.”
More to the point, if making people a tiny bit less poor means giving the rich infinite increases in wealth and consumption, we will run out of planet long before we end poverty. To raise everyone in the world to the (still miserable) level of $5 a day, the global economy would need to be 175 times larger than it is today. This, I shouldn’t need to tell you, is impossible.
In words that echo the title of this blog, Oxfam’s Nick Bryer puts it succinctly: “What has become increasingly clear over the years however, is that there’s no way we’re going to end poverty unless we tackle extreme wealth too. They are two sides of the same coin.”
- You can download the report here.
The Earthbound Report 
That the income of the poorest 10% may only have increased by $3 per year in the last 25 years is sad and you think that is very inefficient. Well the problem is that no other period in time has seen a better increase over a similar timescale. So the I say to you and Oxfam, show Me a functioning alternative. Not just some maths and a report praising Venezuela for its reduction of inequality.
Why do you want an alternative? I’m looking for improvements myself. As are Oxfam, and the recommendations are there in the report for you to read for yourself. As the title of Oxfam’s report makes quite obvious, there needs to be a rebalancing of the labour share. Much of the wealth going to the 1% is rent seeking and monopoly power, which should offend your free-market principles as much as it offends my sense of justice.
What Venezuela praise are you referring to exactly? Oxfam’s report mentions Venezuela once in passing, in neutral language, in a list of countries that have recently passed legislation improving workers rights. If you’ve read somewhere else that it praises Venezuela, that person was misrepresenting it and you should be wary of their motives.
Oxfam praising Venezuela:
https://oxfamblogs.org/fp2p/venezuela-latin-americas-inequality-success-story/
Now this was from 2010 so you might say its old hat but in 2010 evil Neoliberals like myself were predicting the Bolivarian Revolution would result in economic collapse and dictatorship when back then the petrodollars were rolling in. Oxfam wasn’t. We were right, Oxfam was wrong. But has Oxfam thought about why it was wrong? No. Its just doubled down on the socialism.
I have read the whole report, all 76 pages of it and it is a really poor people of work, in the sense its really shoddy. The logic is confused (they are now against offshoring when that was a key driver in development for many poor countries). They like their footnotes but you follow those and it reveals really weak supporting evidence rather than the well researched academic proof you are meant to expect. Oxfam now advocate nationalisations but the two footnotes (362 and 363) to support this go to one open blog puff piece supporting Jeremy Corbyn and another that claims to show Scandinavia favours state ownership but rapidly drops Sweden and Demark because they don’t and is left with Norway and Finland. Norway being so exceptional that it isn’t a model for anything so that’s just Finland. I can go on and on with similar examples.
It is interesting that you alight on their view that most super wealth comes from crony capitalism or monopolies. I guess you didn’t know that to get that figure they decided that the whole IT industry is a monopoly. That would be news to Apple and Microsoft. Same with all finance, healthcare or legal industries. Or that every firm in the minerals, gas and oil business is part of crony capitalism. I think you can see that Oxfam are now just making it up.
If you value decent research and decent advocacy of public policy you would stop giving Oxfam their annual gasp of publicity for these truly bad pieces of work.
That’s not Oxfam on Venezuela, but Duncan Green on his personal blog that quite clearly states “is not intended as a comprehensive statement of Oxfam’s agreed policies.” Neither is it a glowing endorsement of Chavez, just observations on the country’s inequality figures. You’re digging pretty deep in search of your socialist conspiracy here.
I do know what they’ve done with IT, because I read Sam Dumitriu’s comments on it. And while it’s nice of you to give the benefit of the doubt to the corporations, it would not be news to Apple or Microsoft. Both of them have repeatedly faced monopoly cases in court, winning some and losing others. Amazon and Google are in exactly the same position.
Of course you think Oxfam’s paper is nonsense. You fundamentally disagree with its basic premise. I’m not ignorant of how it’s figures are constructed, and I don’t think they’re any more contrived than GDP is – and I don’t see Forbes, the IEA et al nitpicking about their methodology every quarter.
Are you suggesting ALL the wealth from ALL IT firms is due to monopoly power? Really?
Now there is much criticism of GDP and what it misses from the Neoliberal side. https://www.adamsmith.org/blog/can-gdp-continue
The difference is that GDP is a globally recognised calculation that is carried out by official statistical offices (UK even has a kite market). It has been reviewed and developed by many many economists over many many years. It many be flawed but it is consistent. GDP was not ‘contrived’ to push a particular view (though it may only show one side of a story imperfectly).
Oxfam’s figures are made up by one person without peer review explicitly to push a position. They are not balanced and are intended to paint the worst picture. They are made up and fit the term ‘Fake News’. They have little integrity. Yet you defend them.
You said that it would be news to Microsoft and Apple that they are monopolies. I said it would not be news to them. I don’t think that all IT wealth is monopoly power. Neither do Oxfam – that report refers only to billionaire wealth, not all wealth in IT (Sam Dumitriu gets this wrong, but you can go and look for yourself)
Oxfam’s research is not by one person. Dozens of people are involved, with a variety of experts inputting into it. All its calculations and methodology are published alongside the report and it is fully transparent about how its numbers are derived.
And every year, certain publications and think tanks reliably come out with a list of quibbles. All of them are groups that don’t believe that inequality matters. That’s why they focus on the methodology, because the basic underlying reality of gross inequality in incontrovertible.
Oxfam’s research is partisan and skewed to give the worst impression. Unlike national statistics. You like to point to my ideological blinkers while missing your own.
Good old Bill Gates gives more to poor countries than Oxfam does in 15 years. But obviously we share a maximum limit on wealth as Oxfam propose.
Absolutely, I’m massively biased in favour of social justice and will always side with the poorest. I’m aware of my biases, which is why I read Oxfam’s stuff, and then the IEA and Adam Smith Institute responses. They raise questions around the methodology (that Oxfam are aware of and open about), but don’t ultimately question the basic facts of extreme inequality. And they would say the same – I remember Worstall writing a couple of years ago about their statistics and basically saying ‘they’re absolutely right about inequality, but wrong to say it matters’.
On that basis, I have no problem with Oxfam’s work.
I guess what it boils down to is that I don’t accept that an economic system where it takes 25 years to give the destitute a $3 rise is the best of all possible worlds.
Well here’s the problem. You don’t think our current system is the best possible. OK, but measured by any historical comparative it is the best there has ever been. So I think I’m right to ask what the alternative is and what’s its track record. The risk is that your burning sense of injustice will drive policies that will lead to a worst system, with slower growth of income of the poorest 10%. I mean $3 extra over 25 years is very little but what was the growth in the 25 years before that for the poorest 10%, or the 25 before that? Its easy to say there must be something better, far harder to find it.
Oxfam’s policies are not the ones to raise people out of poverty. They are opposing globalisation which has been a major driver in progress in incomes of the poor. It now promotes nationalisations and state run industries based little and poor evidence when those have been really bad, holding back developing economies. They don’t seem to think investment should be rewarded which would also slow the kind of development that raises people’s income.
What Oxfam are promoting is designed to appeal to disgruntled Western people. The policies they propose would, if they worked at all, principally benefit those same Westerners while doing less than nothing for the truly poor. They are not siding with the poorest but relatively rich Western kids. In that sense they are immoral.
Did you read the post? In order to deliver just $2 a day more for those at the bottom, the global economy has to grow by 175 times. That isn’t possible.
So to say that this is as good as it gets is to condemn Sub-Saharan Africa to everlasting poverty.
We have to improve the flow of wealth to the poorest.
The how to improve it is the key. Reversing globalisation, nationalisations and a global wealth tax aren’t the way to do it.
The 1% are not the cause of poor governance in African countries. Mark Zuckerberg’s billions were not taken from the poor of Sub Saharan Africa and if we took them from him they wouldn’t reach those Africans either. But taking his billions could make millions of people in both the developing and developed world worse off. Only a goal if you only care about inequality and not living standards. That might describe Oxfam but not most people
Who’s talking about taking away Zuckerberg’s billions? You’re dealing in caricatures here.
Oxfam want a global wealth tax and a maximum upper limit to a person’s wealth. Pretty clear Zuckerberg is above that.
That’s what you are defending. Perhaps you should read to the end.
You’re talking about ‘taking his billions’. That’s the language of forced confiscation, not paying tax.
A tax rate of 100% is a forced contribution. It is unlikely he would choose it. That tax would ‘take his billions’. Legally or not they have been taken away from him. Are you sure you understand how tax works?
And side stepping that terminological discussion, the result would be the same: damaging the economy of the wealthier world and doing less than nothing for the poorest. You back that?
In what world is that possible? What global government is going to enforce such a thing? This is a completely pointless debate.
Page 56 on ‘Reward Work, Not Wealth’: “Introduce a global wealth tax on billionaires, to help finance the SDGs”. You need to ask Oxfam how that would work, not me.
Lets not forget. These “richest” are almost exclusively white men, and that bottom 50% is all people of color. Dont let them off the hook for a system that is fueled by explicit racism. All of us benefiting are complicit! Please be disgusted and ashamed!
That follows automatically from Ricardo’s Law of Rent. The process is explored in depth in “Progess and Poverty”
Yes, and the report uses that word. Those defending the rights of billionaires to be billionaires need to be aware of these processes, because ‘self-made’ job creating entrepreneurs are the exception rather than the norm.