Dear Oxfam, There Is No Inequality Crisis

In January every year the conspiracy think-tank Oxfam publishes a report claiming that some number of billionaires own as much as the world's poorest 50%. This year the number they cranked out is 8 – and the top 1% owns more than the rest of the planet combined. Wow, goes every indignant left-leaning person from the Guardian's editors to Social Justice Warriors on every political site across the globe. That's so unfair, and so bad, and capitalism has obviously failed. Oxfam describes the distribution as 'obscene'; here's Max Lawson, Oxfam's head of policy:

There are different ways of running capitalism that could be much, much more beneficial to the majority of people.

We'll get back to that. The first paragraph of the report, after all the compulsary clichés about sustainable human-friendly economy and some imagined need for urgent reform (read: government bashing-people-on-the-head), reveals Oxfams sneaky statistical ploy:

Total global wealth has reached a staggering $255 trillion. Since 2015, more than half of this wealth has been in the hands of the richest 1% of people. At the very top, this year‟s data finds that collectively the richest eight individuals have a net wealth of $426bn, which is the same as the net wealth of the bottom half of humanity. (p. 10)

The common-sense objection here that many people have raised over the years is that quite a lot of normal middle-class people in the West have negative net wealth, from a combination of student debts, mortgages, credit card etc., making the Ivy League graduate show up in the statistics as poorer than the Kenyan rural farmer. Ha, Oxfam figured, this year we're rebutting this silly objection:

[...] 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. (my emphasis)

Three points, snarkiness first: so the 70% of bottom half living in low-income countries aren't using debt to finance small businesses or send their kids to school? Right. Second, you just admitted that 30% of the bottom half of the world in terms of net wealth live in middle-income or high-income countries, i.e., they are not poor by any strech of the imagination. This is a billion people Oxfam just discarded as "insignificant at the aggregate global level". Not buying it. Moreover, figures pointing to a certain share of that living in North America, but for all the talk of the 'working poor' and poverty in America, Americans aren't poor by neither historical nor global standards.

Third, and more importantly, Oxfam just gave away their entire case (see my emphasis). They say that we can discard the Net Debt objection by saying "look, it's not a very large number, only 0.4% of overall global wealth... which is em, *cough*, $1.1trn". Ok, but your entire case is based on objecting to the eight richest individuals owning $426 billion, i.e. a third of that. By this very metric, the richest 8 people owns no more than 0.17% of total global wealth, the rest of the 99.83% of global wealth is owned by the rest of us. Tiny figure, isn't it? Besides, if we ignore debt, Oxfam says the wealth of the bottom 50% is $1.5trn. That is, let's reduce the figure we use for comparison by three-fourths for the non-rich only, then marvel at the incredible differences between the top-1% and the rest. Oh, god, inequality crisis!

Oxfam, you can't have it both ways! Either the net debt objection is not sound because the number is comparatively small (which also means that the 8 billionaires' wealth is comparatively small), or you must admit that the net debt objection is sound, should you continue to condemn the atrocious acts of the top-8-wealthiest. Regardless, Oxfam is intentionally discarding data that would make their figures less intimidating. Disingenious, and misleading.

But the madness doesn't end here. Oxfam unconvincingly goes on and on about how we could have more inclusive growth, how a different distribution of income gains over the last three decades would have meant another 700 million people lifted out of poverty etc. And they fall into the same trap Piketty, Saez and most left-leaning pundits do every time. I discussed this in reviewing Ellenberg's book in October. Here's the take-away point:

Percentages no longer means what they normally mean. The take-away is this: don't talk about percentages of numbers when those numbers may be negative. Shit goes bananas.

But moreover, by design, this method creates a very large and scary number. A distribution of incomes, or in this case wealth, has a top part, a middle part and a bottom part. If you make sure that normal well-off people in the first world, with mortgages, houses and some minor savings, are reduced to net wealth figures, their claims to the world's total asset fall dramatically. Yes, they'll still be positive since most normal household's have houses/cars/savings slightly in excess of their debts, but the reduction from measuring total assets to net assets likely reduces their contribution by some 80-90%. When done for the entire wealth distribution, most of the middle part drops out. The poorest have very few assets, if any, and by Oxfam design, now neither does the middle part. What are we left with? The scary conclusion that "Since 2015, the richest 1% has owned more wealth than the rest of the planet." Buhu.

Next point: demographics. Here I'm gonna let Ryan Bource @ IEA speak for me:

we know from the lifecycle of asset and debt accumulation owing to demographics that people tend to have little in the way of asset accumulation until well into their working lives. We also know that many of the oldest will live in the very rich countries and be very rich. It is not surprising then that the global net wealth distribution is so skewed — demographics alone is vastly important.

Lastly, here's the key point Oxfam and pretty much anyone else discussing inequality refuses to deal with: It does not matter. Inequality is irrelevant. What matter morally and economically is the absolute standard of living for the poor, a standard the very things Oxfam despise so much (capitalism, trade, property, finance, markets) have increased humph-fold since 1800. Here's what McCloskey wrote in the New York Times during Christmas:

What matters ethically is that the poor have a roof over their heads and enough to eat, and the opportunity to read and vote and get equal treatment by the police and courts. Enforcing the Voting Rights Act matters. Restraining police violence matters. Equalizing possession of Rolexes does not.

And the 20th century's most famous philosophers agree. Even John Rawls' Difference principle allows for it; as long as the rewards of the richest improves the lives of those at the bottom, an undeniable truth in the era of smartphones, computer software, world trade and free trade.

There is, as always, a lot more juicy stuff to attack in Oxfam's report: Concentrated wealth is economically inefficient and undermines our "collective progress"; the inequality crisis has prevented the fight to eliminate poverty, but my favorite is this one, echoing luddites of the 19th century, communists from the European Civil War (1918-1989) or socialists from every era:

In reality, the market has failed to prove itself the best way of organizing and valuing much of our common life or designing our common future. (p. 5)

It's finally January again, and Oxfam reminds us by spitting out nonsense about world wealth inequality.