Ricardo Fuentes (@rivefuentes) reflects on a killer fact (85 individuals own as much wealth as half the world’s population) that made a big splash last week, and I add a few thoughts at the end.
Last week we released a report on the relationship between the growing concentration of income and biases in political decision making. “Working for the Few” got a lot of attention, generating the biggest-ever traffic day on the Oxfam International website the day of the launch.
A large part of the attention was generated by one fact: the 85 richest people own as much as the bottom half of the world.
We had direct reference to Oxfam’s “85” on The Now Show on BBC radio 4 and in The Onion with a pull-quote: “Imagine if the wealthiest donated just one dollar a day to charity. That could work out to around 85 bucks a day.”
There’s the have nots. And then there’s the have yachts.
Others pieces with large readership that featured our number include the World Bank president Jim Kim’s personal blog, The Atlantic magazine, Slate news website, Salon news website, Washington Post’s Ezra Klein, National Public Radio and The New Yorker.
How did we come to this figure? It’s a simple calculation. And yet it required a lot of work.
First, we didn’t design the statistic to shock, as some commentators have argued. What’s shocking is the concentration of wealth around the world – that’s a fact. Instead, we studied a series of available databases on income and wealth and analysed the trends. That fact captured the attention but we did plenty more data work with alternative sources. All of them pointed to the same results: since 1980 or so, concentration of income and wealth has been increasing and is now at remarkably high levels.
One of the databases we worked with is the 2013 Global Wealth Report and Databook, compiled by James Davies, Rodrigo Lluberas and Anthony Shorrocks for Credit Suisse. They all are respected economists. Shorrocks is probably the best known. He was the director of the United Nation’s World Institute for Development Economics Research (better known as UNU-WIDER) and has a long list of publications on poverty and inequality.
Davis, Lluberas and Shorrocks have been calculating global personal wealth for four years now and the estimates are as credible as one can get on global wealth by country and around the world. I spent several weeks studying the methodology and understanding their assumptions. I also asked the opinion of Branko Milanovic and James Foster, respected scholars in the field, about the quality of the database. I was confident we could use it for the analysis we presented in “Working For The Few”. So we did.
The summary statistics of the Global Wealth Report are eye-popping. We reproduced some of them in the paper: The richest 1% own 46% of the world’s wealth. The richest 10% own 86% of wealth. The poorest 10% live in debt.
Once Nick Galasso and I had mostly finished the paper last December, I decided to go back to the Credit Suisse report and look for more facts that could add punch to our argument. There was one sentence that caught my eye: the bottom half of the population own less than 1% of global wealth. The report didn’t have the exact figure, so I had to dig into the statistical annex and the long list of PDF tables (to the best of my knowledge, there is no datafile available to the public) until I found the share of wealth by decile on page 106 of the Databook. Adding the bottom five deciles gave me a figure of 0.71 %. Yes. Unbelievable. Half the world own only 0.71 % of global wealth, totaling 1.7 trillion dollars (just multiply that 0.71% by 241 trillion dollars reported as total global wealth by Credit Suisse).
The next step was to go to the Forbes list of billionaires (which is, fittingly, sorted in descending order) and add up the richest individual’s wealth. By the time I got to number 85 among in the league table of wealthiest people I had reached 1.7 trillion dollars, the same amount as the total wealth of the bottom half.
For the billionaires list, I chose Forbes over Bloomberg because the Credit Suisse work actually uses the Forbes list to adjust their methodology since the richest people in the world are unlikely to be captured in the distribution of global wealth without that adjustment. This means that the two databases (Forbes and Credit Suisse) are consistent.
What assumptions did I make? I took Credit Suisse’s work at face value, so I implicitly accepted their assumptions. Then I made some additional ones. The sample for the Credit Suisse Report is world’s adults – it doesn’t include youth or children. We could then either say we are only talking about the world’s adults or assume that children do not possess any individual wealth and there are the same number of children in each wealth decile – clearly, a conservative approach as fertility rates are higher in poorer households. Our number might actually underestimate the extent of wealth inequality.
This killer fact – 85 people owns as much as half of the world – has created a massive interest in our work but the analysis we produced in the paper goes well beyond it. We used four different databases (all cited in the paper) in our work. We studied the problem at length, and during that process we identified some eye-opening trends. We did not intend to shock. The facts themselves are quite shocking enough. There is no need to make up injustices when there are so many real-life ones.
And a few thoughts from me
What struck me as the media storm engulfed Ricardo is the importance of timing. A great killer fact will get media attention, but this one came not just in time for Davos, but when the global head of steam on inequality was already building – Ricardo’s paper (with Nick Galasso) has certainly added to that momentum. For Davos last year, we produced a similar fact (the 100 richest individuals in the world earned enough to end world poverty four times over). It got good coverage (you can see a spike in the website hits) , but nothing like this time. The report backing it up had a greater investment in research this time (although last year’s stat was based on work by Bloomberg and the Brookings Institution, so it was hardly back of an envelope). But maybe the zeitgeist just wasn’t ready for it last year.
Update, 26 March. According to Forbes magazine, using the 2014 Billionaires List, the number has now dropped to 67 individuals = 3.5 billion poorest. The killer fact just got deadlier.