Criticism adds up over Oxfam inequality claim

Short division? Oxfam’s eight richest people are six Americans, a Spaniard and a Mexican.

Eight men own as much as the world’s poorest 3.6 billion people, according to anti-poverty charity Oxfam. Free trade advocates have hit back at the charity’s maths. Are the claims valid?

The first month of the year brings several familiar rituals. New year’s resolutions. Blue Monday. And now, rows over global inequality.

Each January, political and business leaders gather at the World Economic Forum (WEF) in the Swiss town of Davos. The charity Oxfam responds with a report on wealth distribution around the world. And pro-capitalist commentators question its findings.

Yesterday Oxfam’s report made the morning headlines. It said just eight men owned more than the poorest half of the entire human race. Mark Goldring, the charity’s GB chief executive, said this was ‘beyond grotesque’ and showed ‘how warped our economy has become’.

Soon Fraser Nelson of The Spectator said Oxfam has got its sums wrong. Its findings are misleading, he argued, because they include debt. By this measure, the world’s poorest two billion people have around $500bn of negative wealth — much less than nothing.

Many of these people only accumulate debts because they live comfortably and want to better their prospects. Oxfam’s figures suggest the USA has 7.5% of the world’s poorest people, but China has none. ‘Oxfam is asking us to believe that a Harvard law student is poorer – far, far poorer – than a penniless Chinese peasant,’ Nelson wrote.

A fairer picture, he said, would account for philanthropic spending by the world’s rich — and show that ‘global capitalism is lifting people out of poverty at the fastest rate in human history’.

Nelson echoes several other free-market advocates. In 2014 financial journalist Felix Salmon said counting people’s wealth was ‘misleading’ and ‘largely meaningless’. And Ben Southwood, of think tank the Adam Smith Institute, says other measures show the world becoming more equal.

But Oxfam has called for ‘a fundamental change in the way we manage our economies’, in which governments make more effort to redistribute wealth to the poorest. It says an extra 700 million people could have escaped poverty if the gap between rich and poor had been addressed. So who is right?

Squaring up

The critics say Oxfam is exploiting its figures to push an anti-capitalist agenda. The charity has a vested interest in downplaying the benefits of free trade, which has enriched millions. And journalists who know it is fashionable to bash a so-called ‘super rich elite’ are reporting eye-catching claims without sufficient intellectual criticism.

The report is worrying, supporters respond. Of course Oxfam seeks headlines. But there is a substantial global wealth divide, and a tiny number of people are benefiting much more than others. Even the WEF itself says ‘rising income and wealth disparity’ are major global risks. This is a recipe for resentment and chaos.

You Decide

  1. Does inequality worry you?
  2. Should we listen to Oxfam on global inequality?

Activities

  1. You have just won $75bn (£62bn) — Bill Gates’s net worth. Discuss in groups of four how you plan to spend (or save) it.
  2. Find out more about the definitions of net wealth and gross wealth. What is the difference between the two? (Write a paragraph in your own words). And which should economists use to measure global inequality? (Write a page).

Some People Say...

“It doesn’t matter how much money the richest people in the world have.”

What do you think?

Q & A

I’m as rich as I was yesterday. What does a charity report change?
The report, and the reaction to it, can teach you about the direction the world is likely to go in as you get older. The rich getting richer may be cause for celebration. Perhaps you could be very rich too one day; even if not, it arguably means people can invest more money and create jobs that you may benefit from. But you may also worry about poverty and people becoming detached from each other.
But do all of Oxfam’s calculations matter?
If the sums are wrong, dubious evidence may be skewing the debate on inequality. It may be harder for you and those around you to understand the issue, and people may be getting angry without good reason. But perhaps you think that is less important than the trend Oxfam has highlighted.

Word Watch

Blue Monday
Some regard the third Monday in January (yesterday) as the year’s most depressing day.
Capitalist
Capitalism is the economic system in which trade and industry are privately owned and ruled by the profit motive.
Better
They may borrow to help them through university or gain a professional qualification. Ben Southwood says negative assets may be a sign of prosperity, as only those with prospects can take out loans.
Poorest
The bottom 10% of the global population.
Philanthropic
Causes which promote others’ welfare. Nelson says Bill Gates, for example, ‘has perhaps donated more to the cause of third world development than any man alive. Or dead.’ Gates’s foundation paid $36.7bn in grants between 2000 and 2015.
Measures
For example, the pay of those in the middle and bottom of the world income distribution increased by around 40% between 1988 and 2008; global inequality of life expectancy has narrowed.
Effort
For example, Oxfam advocates a wealth tax and more action to prevent tax dodging.
Says
In its global risks report, published before this week’s meeting.