Oxfam’s pre-Davos wealth report says the world’s 62 richest people own half the wealth – but global inequality is actually falling
Oxfam gets a lot of mileage out of its global inequality statistics. Back in 2014, we were told that the world's top 85 wealthiest people owned as much as the bottom half, 3.5bn.
Now we’re told 62 own as much as the other half—you could fit them all on a coach, the Oxfam chief executive helpfully told us in a piece for the Independent.
Each time they release the new number there is much wailing and gnashing of teeth, but their numbers are nonsense, and on top of that they tell the wrong story.
Oxfam uses net wealth figures—assets minus liabilities—which can be very useful but also suffers two key flaws.
Firstly, adding up negative numbers gives some paradoxical results. For example, as far in debt as the most indebted person is (i.e. the poorest person by Oxfam’s measure) they are still richer than the next two billion people all put together, because all of those people have small negative net wealth.
Secondly, and more importantly, it cannot measure human capital. For most people, their most valuable assets are their talents and skills.
A recent Harvard graduate starting at Goldman Sachs may not seem poor to you or me, but their huge student debt pile will put them near the bottom of Oxfam’s ranking. They own millions of dollars of human capital, but it’s unmeasured.
This means that in their 2013 data, 7.5 per cent of the poorest tenth are from the USA (the second most of any country in the world after India), while none of them are from China—which has a GDP/capita almost ten times smaller. In fact, being in net debt may well imply exactly the opposite of Oxfam’s result, because only those with intangible assets are likely to be able to get hold of unsecured loans.
As well as this technical issue, the numbers tell a misleading tale. The big news in the world income distribution of the past 30 years is not greater inequality but less.
Not only is extreme poverty falling across the world, but income is being spread more equally. Between 1988 and 2008, the 10th to 70th percentiles—the global poor and middle—have received pay rises of around 40%, whereas those in rich countries have seen their real incomes barely rise or even fall.
It’s true that the global one per cent, 0.1 per cent and 0.01 per cent is doing amazingly well, but this doesn’t seem to be coming at the cost of the global poor.
So Oxfam’s report is wrong: its approach is bad, and its narrative is misleading. The world’s poor don’t care about how many private jets Carlos Slim owns, but about their own living standards—and these are rising.