Preaching to the Converted and the Path to Unlearning: this week’s random conversations

January 16, 2017

Davos & Inequality Continued: What does an alternative economic vision for the future look like?

January 16, 2017

8 men now own the same as the poorest half of the world: the Davos killer fact just got more deadly

January 16, 2017
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It’s Davos this week, which means it’s time for Oxfam’s latest global ‘killer fact’ on extreme

Got that wrong - a minibus should do it

2016 numbers: now a golfcart should do it

inequality. Since our first calculation in 2014, these have helped get inequality onto the agenda of the global leaders assembled in Switzerland. This year, the grabber of any headlines not devoted to the US presidential inauguration on Friday is that it’s worse than we thought. Last year it was 62 people who owned the same as the poorest half of the world. This year it is down to 8. Just 8 men. Have as much wealth as 3.6 billion poor men, women and children. Think about that for a moment, before getting geeky and carrying on with the rest of this post.

Every year, there are also regular attempts at rubbishing the new stat. An admirably nerdy box in Oxfam’s new paper for Davos both explains the origins of the new number (better data) and addresses the expected counterarguments.

And here's a golfcart

And here’s a golfcart

‘In January 2014, Oxfam calculated that just 85 people had the same amount of wealth as the bottom half of humanity. This was based on data on the net wealth of the richest individuals from Forbes and data on the global wealth distribution from Credit Suisse. For the past three years, we have been tracking these data sources to understand how the global wealth distribution is evolving. In the Credit Suisse report of October 2015, the richest 1% had the same amount of wealth as the other 99%.

This year we find that the wealth of the bottom 50% of the global population was lower than previously estimated, and it takes just eight individuals to equal their total wealth holdings. Every year, Credit Suisse acquires new and better data sources with which to estimate the global wealth distribution: its latest report shows both that there is more debt in the very poorest group and fewer assets in the 30–50% percentiles of the global population. Last year it was estimated that the cumulative share of wealth of the poorest 50% was 0.7%; this year it is 0.2%.

Table 1: Share of wealth across the poorest 50% of the global population

Poorest 10% 2% 3 4 5 Poorest 50%
2015 calculations -0.3 0.1 0.1 0.3 0.5 0.7
2015 UPDATED -0.4 0.0 0.1 0.2 0.3 0.2
2016 data -0.4 0.0 0.1 0.2 0.3 0.2

 

The inequality of wealth that these calculations illustrate has attracted a lot of attention, both to the obscene level of inequality they expose and to the underlying data and the calculations themselves. Two common challenges are heard. First, that the poorest people are in net debt, but these people may be income-rich thanks to well-functioning credit markets (think of the indebted Harvard graduate). However, in terms of population, this group is insignificant at the aggregate global level, where 70% of people in the bottom 50% live in low-income countries. The total net debt of the bottom 50% of the global population is also just 0.4% of overall global wealth, or $1.1 trillion. If you ignore the net debt, the wealth of the bottom 50% is $1.5 trillion. It still takes just 56 of the wealthiest individuals to equal the wealth of this group.

The second challenge is that changes over time of net wealth can be due to exchange-rate fluctuations, which matter little to people who want to use their wealth domestically. As the Credit Suisse reports in US$, it is of course true that wealth held in other currencies must be converted to US$. Indeed, wealth in the UK declined by $1.5 trillion over the past year due to the decline in the value of Sterling. However, exchange-rate fluctuations cannot explain the long-run persistent 8 v 3.6 bnwealth inequality which Credit Suisse shows (using current exchange rates): the bottom 50% have never had more than 1.5% of total wealth since 2000, and the richest 1% have never had less than 46%. Given the importance of globally traded capital in total wealth stocks, exchange rates remain an appropriate way to convert between currencies.’

The paper has a larger aim, setting out some initial thinking on the constituent elements of a ‘human economy approach’ that can turn around both inequality and other public bads created by prevailing orthodoxies. Here are the headlines:

  • A human economy would see national governments accountable to the 99%, and playing a more interventionist role in their economies to make them fairer and more sustainable.
  • A human economy would see national governments cooperate to effectively fix global problems such as tax dodging, climate change and other environmental harm.
  • A human economy would see businesses designed in ways that increase prosperity for all, and contribute to a sustainable future.
  • A human economy would not tolerate the extreme concentration of wealth or poverty, and the gap between rich and poor would be far smaller.
  • A human economy would work equally as well for women as it does for men.
  • A human economy would ensure that advances in technology are actively steered to be to the benefit of everyone, rather than meaning job losses for workers or more wealth for those who own the businesses.
  • A human economy would ensure an environmentally sustainable future by breaking free of fossil fuels and embarking on a rapid and just transition to renewable energy.
  • A human economy would see progress measured by what actually matters, not just by GDP. This would include women’s unpaid care, and the impact of our economies on the planet.

5 comments

  1. Why not make a list people can sign if they agree with the program presented at Davos. I would be the first!

    Birgitta N, Sweden

  2. I am curious as to why Oxfam designates the term human economy for an equitable economy– seems to me that one of the principals to the existing neo-classical economic paradigm is exploitation of resources (labour & natural resources) to achieve profit and create capital. How can we isolate our human needs from that of the earth, water, air, flora, fauna, insects, etc.? The Human Economy actually reinforces the principal of exploitation because it is saying that all humans deserve to exploit and become ‘rich’, not just the 8 who have as much as 50% of the world’s population.

    If we go back to the etymology of the word economy, we find that it originates from the Greek term oikonomia which means household management. Household management pertains to all aspects of the household and households create a community which is the basis of a society. As OXFAM is a leader in the development world, I would encourage OXFAM to go back to the drawing board and come up with a term that reflects a new paradigm of thinking rather than setting up another pillar where only one aspect of the planet is included. Humans are part of a system- a very complex system, and the whole complex system should be reflected in the type of economy we want to pursue.

  3. Agree with Mary Morgan on the inadequacy of the term ‘human economy’. Other concepts that are being shared include that of the solidarity economy.. so yes a more appropriate term is worth developing… I also have another question -if the recommendation is to see “businesses designed in ways that increase prosperity for all, and contribute to a sustainable future” what should we be doing about the push for development partnerships with the private sector? and OXFAM’s own ranking of private businesses which I find hugely problematic, with Nestle being placed in second place (unilever is first!!)

  4. And until the human – or solidarity – economy is in place, those 8 should provide all of us annually with a clear and detailed account of how they obtained their wealth and how they use it for the benefit of the world, using criteria aligned with the concept of a human/ solidarity economy.

  5. So if you normalize for the new calculation this year. What were the prior two years # of people that had equivalent wealth to bottom 50%? Would it still be 62 and 85? Obviously going from 62 to 8 with consistent methodology year over year is troubling. But Just wondering if last year it was say 12 or 15 or something with the new calculation used this year?

    Thanks for clarifying.

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