The argument around
International advocacy group Oxfam this week produced a report on global inequality to coincide with the World Economic Forum (WEF) in Davos, Switzerland, triggering a backlash from a variety of free market think-tanks and professional commentators worldwide.
Oxfam’s major claim is that the 62 richest billionaires have as much wealth as the bottom 50% of the human race combined: about $1.75 trillion (R28.8 trillion).
Apart from attacking that number, detractors also claim that rising global inequality is in fact acceptable, as long as poverty rates are also falling.
To arrive at the figures in the report, Oxfam compared the wealth of the top members of Forbes’ annual rich list, which outlines the estimated wealth of the world’s billionaires, to the findings of Swiss bank Credit Suisse’s annual Global Wealth Databook, which estimates the poorer half of the global population’s wealth.
Last year, when Oxfam produced the same measure using that year’s data, it took the top 80 billionaires to match the bottom 50% of the planet, leading Oxfam to conclude that the “global inequality crisis is reaching new extremes”.
Its foremost solution is that tax havens be dismantled globally to allow for more redistribution via taxation – along with a global push for higher minimum wages.
“South Africa is emblematic of the problem,” said Ronald Wesso, research and policy leader at Oxfam Southern Africa, while speaking at a media briefing about the report in Johannesburg.
Ayabonga Cawe, economic justice manager at Oxfam SA, admitted that a battle of ideas around inequality was sometimes “not helpful”, with people at opposite poles just arguing past each other.
The attacks on the “proven intervention” of a national minimum wage demonstrated the poor state of
The gain in global per capita income 1988-’08
Critics of Oxfam’s report argue that even though there might have been an explosive increase in inequality, what really matters is that the incomes of the poor have also risen. In percentage terms, it is actually the fifth decile that increased its income the most (72%), not the ‘1%’. This, however, reflects the low base off which the poor started. In money terms, practically all income growth has gone to the top. Oxfam emphasises the bars (money), while its critics emphasise the relative improvement of the lower groups (the percentages) $ PER PERSON, ADJUSTED FOR PURCHASING POWER IN 2005 TERMS
70.6% 71.7% 57.9% 4.6%
16.6% infancy”. Even if the numbers were true, they represented “net” wealth after debt, argued Oxfam critics.
This makes it appear that a hypothetical middle class person in the developed world with a mortgage equal to their pension is exactly as poor as, for example, a smallscale farmer who just lost a crop to drought and has nothing to fall back on.
The bottom 50% of the world has almost no wealth on this “net wealth” basis, with the bottom 10% instead having “negative wealth” of $750 million due to debt, according to Credit Suisse.
The fact that a few billionaires have as much wealth as 50% of the human race is meaningless because both groups in reality possess little of the world’s wealth, argue critics.
Oxfam, however, replied to critics this year by releasing a technical note. In it, the group admitted that the problem with “net wealth” existed, but insisted that its “main finding is not in question”.
If you cut out the bottom 10% and its “negative wealth” altogether, you still end up with the next-poorest 40% having 49.8% of the wealth of the top 1%, it pointed out.
“It is clear that, at the aggregate level, the negative wealth at the bottom of the distribution is completely dwarfed by the wealth at the top of the distribution,” said Oxfam.
A global Gini