Monday, 5 February 2018

Wealth and inequality

How do you measure wealth and poverty?
Futures Forum: Measuring poverty
Futures Forum: Absolute vs relative poverty

Oxfam have released their latest report on poverty:
5 shocking facts about extreme global inequality and how to even it up | Oxfam International
Richest 1 percent bagged 82 percent of wealth created last year - poorest half of humanity got nothing | Oxfam International

Oxfam's Davos inequality report: Why we do this

"We choose to point out that the world needs to address inequality if we are going to end poverty."

By Katy Chakrabortty
Since 2014 Oxfam has put out reports charting the growth of inequality and the increasing concentration of wealth at the top. This year is no different with news of a boom in billionaire fortunes, and data showing that 82% of wealth created in the last year went to the richest 1% of the global population.
This isn't because we're "obsessed with billionaires" or "anti-enterprise" as some of our wilder critics claim. What we're obsessed about is getting water to the 8.4 millionpeople in Yemen on the brink of famine and how to protect the Rohingya refugeescurrently in Bangladesh who have fled horrific violence in Myanmar. For 75 years and in over 90 countries around the world we have spent our time thinking about how to help women and men develop enterprises to work their way out of poverty, and how to help them hold their governments to account to ensure they have a fair chance.
We are obsessed with ending poverty, now and for good. And this obsession leads us to notice that the policies that allow for a vast concentration of wealth at the top often also create barriers that prevent people overcoming poverty at the bottom.  I'm talking about policies that allow for tax dodging and tax havens: great for those with wealth to protect, not good for people reliant on taxes to pay for their schools and medicines. I'm talking about companies that have vast pay differentials in their supply chains. Great for CEOs who earn in four days what a garment worker in Bangladesh earns in her lifetime, but a really raw deal for those for whom a small increase in income would make a massive difference. 

And so once a year - when the wealth, power and fame of the World Economic Forum meeting at Davos is all over the news – we choose to point out that the world needs to address inequality if we are going to end poverty.
Oxfam's Davos inequality report: Why we do this

And the focus has been on 'inequality' - as covered widely in the international press:
World's richest get 82 percent of global wealth: Oxfam | News | Al Jazeera
Oxfam: 42 super-rich hold same wealth as world's poorest 3.7 bln | Euronews
Oxfam: Richest one percent banked 82 percent of wealth created in 2017 | Business| Economy and finance news from a German perspective | DW | 22.01.2018
Wage growth: Australia’s inequality laid bare in Oxfam report

Here is a pretty balanced analysis from the Independent:

Oxfam is right to highlight global economic inequality despite the brickbats thrown by its critics

The Institute of Economic Affairs says the charity would make us all poorer by dismantling the current system  

The backlash against Oxfam’s annual attack on global inequality ahead of the opening of the World Economic Forum in Davos was underway almost as soon as the charity’s press release had landed. 
Oxfam’s claim this year is that the gap between the world’s super rich and its huddled masses widened last year, with some 82 per cent of the world’s money going to just 1 per cent of its population, and just 42 people boasting as much wealth as the entire poorest half of the planet. Its fortunes, Oxfam said, remained static. 
“Yet again Oxfam gets it wrong on inequality and poverty,” growled the Institute for Economic Affairs (IEA), in response to the charity’s call for, among other things, a fairer taxation system and a capitalism that recognises the interests of societies as much as those of shareholders. 

The IEA, by contrast, beat the drum for “free” markets as the way to haul people out of the rubbish tip of human development and into something better.
Its contention, intended as a riposte to Oxfam, is that the economic growth they fuel is what takes people out of poverty, 1.2 billion of them, according to its director general, Mark Littlewood, in an article for City AM.
It’s interesting to note how Mr Littlewood pointed to China and India as particularly successful examples of this. Neither of them operate anything like what could be described as free market economies in the way that is understood here in the West. That is, however, a side issue, and to be fair Mr Littlewood noted that. 
The central issue is that hundreds of millions of people lack sufficient food to eat, or have clean water to drink, a roof over their heads, access to medical treatment, schooling for their children. In other words, the basics, that should be theirs as of right.  
At the same time, a very small number of very wealthy people hoard vast reservoirs of money that they could never hope to spend in three or four lifetimes let alone one. There is scant sign of any of it trickling down. 
In highlighting the immorality of this situation, Oxfam isn’t trying to dismantle the capitalist system and make us all poorer as a result. It just wants more of the wealth the latter generates to find its way into the hands of the majority of the world’s population. 
What stymies that is the way the current system has been gamed. The sort of free market capitalism the IEA advocates for doesn’t exist in the West any more than it does in India or China because of that. What we have would be better described as cronyism, or crony capitalism. It is dominated by giant, ownerless transnational corporations with the power to crush competition, or to buy it up, thus operating as thinly disguised monopolies or cartels. 
Those corporations, alongside the 42 who typically part-own and run them, deploy their wealth to ensure the system is fixed in their favour, as Oxfam points out, subverting democracy in the process. Through the use of offshore havens, and with the help of clever accountants, they also pay a fraction of the tax that they should, depriving nation states of money to fund healthcare, education and other services that enhance human development. 
Occasionally, one or another member of the 1 per cent will highlight the sheer perversity inherent in the current system. Warren Buffett noting that he paid a lower rate of marginal taxation than his cleaners a few years ago was a particularly good example. But when they are made, statements like that rarely elicit much more than a shrug of the shoulders. 
In the speeches they will make at Davos, during the debates and seminars they attend and in their pow wows over champagne on the evening cocktail circuit, those in attendance at the World Economic Forum might pretend to see that Oxfam has a point, and mutter about maybe thinking about doing something about it. Some of them might even recognise that unequal societies are profoundly unstable societies and an unequal world is an unstable world. Mass immigration, the backlash against it, refugee crises, the rise of an ugly populism in parts of the West are all of the problems created by that.
You can poke holes in Oxfam’s stats if you want. You can always poke holes in stats and the way they are collected, including the ones used by the IEA to hit back. But those developments point to the truth of Oxfam’s arguments.  Perhaps they might concentrate minds at the top people’s talking shop, but I’m not holding my breath. 
Oxfam is right to highlight global economic inequality despite the brickbats thrown by its critics | The Independent

Of course not everyone agrees:
Oxfam's inequality report 'dangerous and intellectually dishonest' — FMF - BizNews.com

Including the free-market Foundation for Economic Education:

Oxfam Cares More About Ideology than Poverty

Its dodgy methodology, nit-picking of facts, and ideological commitment to the non-problem of inequality make it an intellectually dishonest player in policy advocacy.
The so-called international “charity,” Oxfam, recently published its latest report on global inequality, pretentiously titled “Reward Work, Not Wealth.” In the report, Oxfam not only regurgitates all the same economic fallacies we’re used to — chief among them, the labor theory of value and the notion that wealth inequality is a problem to be solved — but it goes on to make dangerous and authoritarian recommendations to governments on how they should respond to this supposed “inequality crisis.”
It has been repeated over and over again, but seemingly to no avail: Poverty, not inequality, is the problem.
Inequality is something that comes about naturally, as a result of different skills, desires, and circumstances. Where it is induced by force or fraud, it is usually manifested in destitution rather than a mere absence of parity.
Inequality even comes about when everyone is getting richer. The example of Hong Kong comes to mind, where inequality is apparently high, but poverty unknown. As the economic conditions for Hong Kong residents improve, the rich’s increase in wealth may well be greater than the poor’s increase in wealth, but that does not mean the poor aren’t getting wealthier.
Inequality is meaningless in the context of welfare and prosperity. Politically, however, inequality has become the quintessential “cheat code” in the hands of the political class. When government programs fail to alleviate poverty – as they always will – inequality is an easy scapegoat to point to.
Too Few or Too Many Billionaires?
Oxfam should decide what its angle is going to be.
Oxfam is among that cabal of non-government organizations that love the much-touted slogan that the world’s wealth is increasingly being concentrated in the hands of fewer and fewer people. This was a central aspect of its 2016 report, released last year, titled “An Economy for the 99%.” In this year’s report, however, Oxfam cites research that 2017 saw the biggest increase in the number of billionaires in human history; “one more every two days,” the charity claims.
But rather than celebrating the fact that its 2016 findings have been reversed – with 61, rather than 8, people now holding as much wealth as the poorest half of the world – Oxfam condemns the fact that there is now a dramatic increase in the number of billionaires around the world. It considers this phenomenon as indicative of “extreme wealth,” no doubt a play on the notion of extreme poverty, a problem that must be ended.
Either wealth is increasingly being concentrated in the hands of fewer and fewer people – as Oxfam’s scary graph below from 2016 indicates – or, as Oxfam reported this year, there has been a substantial, indeed unprecedented, increase in the number of billionaires. Oxfam should decide what its angle is going to be: that more people are getting richer quicker, or that fewer and fewer people have an opportunity to get rich.
Ending Extreme Poverty Seven Times Over
The report makes another incredible claim: globally, billionaires’ wealth increased by $762 billion in 12 months. According to Oxfam, this “huge increase could have ended global extreme poverty seven times over.” All the extreme poverty in the world!
Poverty isn’t eliminated by throwing money at the poor.
There is, of course, a massive problem with this claim. In 2011 alone, the United States government spent more than $668 billion on 126 welfare programs. $668 billion is nearly 88 percent of what is ostensibly required today to eliminate extreme poverty across the world.
Presumably, and implicit in the Oxfam report, however, poverty has certainly not been eliminated in the US. How is it that the United States government, with a fraction of the world’s (non-extreme) poor, is unable to completely eliminate poverty within its own borders when it has 87.6 percent of the resources needed to end extreme poverty globally seven times over?
The answer, of course, is that poverty isn’t eliminated by throwing money at the poor. This has been tried. According to Michael Tanner at the Cato Institute, the United States has spent nearly $15 trillion on welfare since the War on Poverty was declared by Lyndon B. Johnson in 1964. South Africa spends 6.4% of its GDP on basic education — one of the highest in the world — yet in a 2016 assessment, South Africa placed 39th out of 39 countries for the performance of ninth graders in science. “Few countries spend as much to so little effect,” noted The Economist in January 2017.
Poverty is ended through employment, savings, and, crucially, a political environment conducive to economic freedom and economic growth; not by throwing money at the problem. Thankfully, on the up-side totally ignored by Oxfam, global extreme poverty has fallen dramatically over recent decades. It is likely that extreme poverty will be eliminated within the current generation. This won’t satiate Oxfam, however, because it concerns itself with the rich, not the destitute.
Authoritarian Solutions to Non-Problems
The most worrying aspect of the Oxfam report — intellectual dishonesty aside — are its recommendations to governments around the world.
This is social engineering at its most obvious.
Among a laundry list of state-centric suggestions, Oxfam calls on governments to “use regulation and taxation to radically reduce levels of extreme wealth, as well as limit the influence of wealthy individuals and groups over policymaking.” It is safe to assume that Oxfam excludes itself — an extremely wealthy lobbying organization, having received over $244 million from governments alone between 2015-16 — from those groups that need limiting. It further advocates that governments should set targets “for the collective income of the top 10% to be no more than the income of the bottom 40%.”
Worryingly, it ambiguously asks governments to implement “policies to tackle all forms of gender discrimination, promote positive social norms and attitudes towards women and women’s work, and rebalance power dynamics at the household, local, national and international levels.” Positive social norms? Rebalance power-dynamics in the household? This is social engineering at its most obvious. We should be vigilant about supposed charities pushing governments toward violating property rights and personal liberty.
It is high time that Oxfam be reduced to irrelevancy, at least as far as public policy goes. Its dodgy methodology, nit-picking of facts, and ideological commitment to the non-problem of inequality – at the expense of the very real problem of destitution – make it an intellectually dishonest player in policy advocacy. To the extent that Oxfam still engages in charity work, we must wish it all the best of luck. But solving poverty will not come out of its recommendations; instead, it will only yield more despair and tyranny.
Oxfam Cares More About Ideology than Poverty - Foundation for Economic Education - Working for a free and prosperous world

See also:
Futures Forum: Fairness and/or equality
Futures Forum: Economic freedom and political equality at the local level >>> or, the triumph of corporatism

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