The 62 billionaires and the truth about inequality

The global elites are meeting today for their annual jamboree at the World Economic Forum in Davos, Switzerland.  Some of the world’s top political leaders, banking chiefs and corporate moguls will discuss the key issues, ideas and strategies for how to rule the world.

This year’s main theme is the impact that ‘disruptive technologies’, robots and artificial intelligence will have the future of capitalism.  But the rising risk of new global economic recession, just eight years from the last, will also occupy minds.

Last year, the WEF debated the issue of rising inequality of income and wealth.  But nothing came of that.  So this year, Oxfam issued another report on the grotesque inequality of the ownership of wealth globally.  The headline was that just the 62 richest billionaires own as much as the poor half of the world’s population.  And the top 1% of wealth holders own more wealth than the other 99% combined!

Oxfam’s data suggest that inequality of wealth globally has got worse since the end of the Great Recession.  The wealth of the poorest 50% in the world dropped by 41% between 2010 and 2015, despite an increase in the global population of 400m.  In the same period, the wealth of these richest 62 people increased by $500bn (£350bn) to $1.76tn.  Back in 2010, it took 388 people to have as much personal wealth as the bottom 50%.  By 2014, that number had fallen to 80 people.  Now it’s just 62.  Oxfam’s prediction that the richest 1% would own the same wealth as the poorest 50% by 2016 had come true a year earlier than expected.  Last year, the average wealth of each of the 72 million adults belonging to the richest 1% was $1.7 million, compared with about $5,000 for the 648 million people in the bottom 90%.

And Oxfam’s measures do not account for the estimated $7.6tn in hidden offshore tax havens that inequality expert Gabriel Zucman has identified in a recent book. The charity said as much as 30% of all African financial wealth was thought to be held offshore. The estimated loss of $14bn in tax revenues would be enough to pay for healthcare for mothers and children that could save 4 million children’s lives a year and employ enough teachers to get every African child into school. Oxfam said nine out of 10 WEF corporate partners had a presence in at least one tax haven and it was estimated that tax dodging by multinational corporations costs developing countries at least $100bn every year. Corporate investment in tax havens almost quadrupled between 2000 and 2014.

To get its headline results, Oxfam used the data for the wealth of 1%, 50%, and 99% from Credit Suisse Global Wealth Databook (2013 and 2014)  The wealth of the richest 62 was calculated using Forbes’ billionaires list, with annual data taken from list published in March.  And calculations were after deducting debt.

Oxfam’s methods have come under severe criticism.  When Thomas Piketty published his tome, Capital in the 21st century, which argued that inequality of wealth was rising in most major economies, Chris Giles, the FT’s economics editor was quick to find holes in Piketty’s data and methods.  Piketty did an effective job of riposting Giles’ critique.

But Giles is now back having a go at Oxfam’s report.  First, Giles argues that actually the world is getting less unequal in income, and poverty is declining globally.  This is a hoary old argument from the mainstream.  Yes, inequality of income and wealth between countries has narrowed a little and poverty has fallen, as measured.  But this is for one main reason: the tremendous growth in real GDP and living standards for hundreds of millions living in China.  Take China out of the equation and there is no improvement in either inequality or poverty.  And within countries, inequality is rising as the gini coefficient of income and wealth in China and India shows.

Giles wants us to dismiss Oxfam’s numbers because they “splice together data on the richest individuals from Forbes, designed to sell magazines, with data on the rest of the world from Credit Suisse, which itself is compiled from a host of incompatible sources.”  I don’t think that the authors of the Credit Suisse report on global wealth would appreciate this attack on their integrity and methods.

I have reported before on the Credit Suisse report in this blog.  The co-author of that report is my friend Professor Anthony Shorrocks, who was head of the United Nations global wealth survey and is probably the world’s leading expert on global wealth.  He recently sent me an update on his data.  From this, he reckons that “the situation is even worse” than Oxfam indicates in its report.  He concludes that since 2000, the bottom 90% of the world’s population have seen a fall in their wealth, so that all the gain in personal wealth in the last 15 years globally has gone to the top 10%, with the lion’s share for the top 1%.

Giles also criticises the Credit Suisse measure of wealth as one of net worth (assets minus liabilities), so it treats a recent US graduate on a huge income, but with student debt, as poorer than a subsistence farmer in China. According to Giles, this explains why North America appears so unequal in this chart from the Credit Suisse report.  Actually, as a robustness check, Oxfam recalculated the share of wealth held by the richest 1 percent once negative wealth is excluded. It did not change significantly (falling from 50.1 percent to 49.8 percent). Negative wealth as a share of total wealth has remained constant over time, such that wealth distribution trends over time are not affected.

Giles makes much of the point that it does not take much wealth to end up in the top 1% globally: “most people owning a London property will have more than $760,000 wealth and put you in the supposed plutocrat zone of the global top 1 per cent.”  Yes, this is true.   But what this shows is how poor in personal wealth nearly everybody is: ownership of property is the province of the very few.  And even in London, most property owners do so through huge mortgages for which they must work to service.  That does not apply to the billionaires.

Giles’ last critique is to complain that Oxfam and Credit Suisse measure wealth in dollars rather than in purchasing power parity.  The latter supposedly measures what your wealth can buy in local currency.  Local currency goes further in Indonesia or Somalia but may not be worth much in dollars, particularly as the US dollar has been rising against most other currencies, making dollar wealth more than it is.   Giles claims that the change in national wealth in 2015 “is almost entirely linked to the size of last year’s depreciation against the US dollar.”  Maybe so, but PPP measures of wealth are just as biased as dollar measures.  You need dollars to buy imported goods like cars, i-phones, computers.  That form of durable goods or wealth is affected by your dollar wealth, along with land and buildings too in many countries.

The Giles critique does not really dent the Oxfam report or the work of authors of the Credit Suisse wealth report, just as he failed to do with Piketty’s data.  There is no getting away from the conclusion that the world is grotesquely unequal in the ownership of cash, bonds, stocks, land, buildings and means of production and in the incomes ‘earned’ by people globally.  It is unequal to the extreme between countries and within countries.  And the evidence suggests that inequality is not being reduced, at the very least, and probably is worsening.

But don’t expect the Davos elite to do anything about it.


10 Responses to “The 62 billionaires and the truth about inequality”

  1. Simon Guy Says:

    I think the bottom 90% figure should be times ten.

  2. Mike Ballard Says:

    The truth about inequality is that it is generated through the social dynamic of power embedded in the wage system. This is why that great socialist, Karl Marx, called on workers to inscribe on their banners, “Abolition of the wage system”.

    Google Wobbly times number 173 for Karl’s class analysis of the wage system.

  3. Frank Gramt Says:

    It will be interesting to add the analysis and statistics of the book published in Quebec, “L´Hydre Mondiale. L´Oligopole Bancaire” by François Morin, in your blogs.

  4. Henry Says:

    In the words of Boffy, more good news for workers. After all, their interests are ours!

  5. N. Says:

    An LSE study on austerity,-says-new-LSE-study.aspx

  6. vallebaeza Says:

    Reblogged this on Econo Marx 21.

  7. Barry Brooks Says:

    We are so lost that we debate how we might best do the wrong
    thing…produce too much to keep all workers busy. Why we fail to be more
    destructive was explained long ago. It is not due to a lack of
    investors with money to invest. Veblens exposure of how business stands
    in the way of full output would shock the market faithful.


    From “The Engineers and the Price System,” by Thorsteen Veblen

    “Sabotage” is a derivative of sabot, which is French for a wooden shoe.
    It means going slow, with a dragging, clumsy movement, such as that
    manner of footgear may be expected to bring on. So it has come to
    describe any manoeuvre of slowing-down, inefficiency, bungling,
    obstruction. In American usage the word is very often taken to mean
    forcible obstruction, destructive tactics, industrial frightfulness,
    incendiarism and high explosives, although that is plainly not its
    first meaning nor its common meaning. Nor is that its ordinary meaning
    as the word is used among those who have advocated a recourse to
    sabotage as a means of enforcing an argument about wages or the
    conditions of work. The ordinary meaning of the word is better defined
    by an expression which has latterly come into use among the I. W. W., ?
    conscientious withdrawal of efficiency? ? although that phrase does not
    cover all that is rightly to be included under this technical term. The


    the rate and volume of output have to be regulated with a view to what
    the traffic will bear, that is to say, what will yield the largest net
    return in terms of price to the business men who manage the country’s
    industrial system. Otherwise there will be overproduction, business
    depression, and consequent hard times all around. Overproduction means
    production in excess of what the market will carry off at a
    sufficiently profitable price. So it appears that the continued
    prosperity of the country from day to day hangs on a conscientious
    withdrawal of efficiency by the business men who control the country’s
    industrial output. They control it all for their own use, of course,
    and their own use means always a profitable price. In any community
    that is organized on the price system, with investment and business
    enterprise, habitual unemployment of the available industrial plant and
    workmen, in whole or in part, appears to be the indispensable condition
    without which tolerable conditions of life cannot be maintained. That
    is to say, in no such community can the industrial system be allowed to
    work at full capacity for any appreciable interval of time, on pain of
    business stagnation and consequent privation for all classes and
    conditions of men. The requirements of profitable business will not
    tolerate it. So the rate and volume of output must be adjusted to the
    needs of the market, not to the working capacity of the available
    resources, equipment and man power, nor to the community’s need of
    consumable goods. Therefore there must always be a certain variable
    margin of unemployment of plant and man power. Rate and volume of
    output can, of course, not be adjusted by exceeding the productive
    capacity of the industrial system. So it has to be regulated by keeping
    short of maximum production by more or less as the condition of the
    market may require. It is always a question of more or less
    unemployment of plant and man power, and a shrewd moderation in the
    unemployment of these available resources, a ?conscientious withdrawal
    of efficiency,? therefore, is the beginning of wisdom in all sound
    workday business enterprise that has to do with industry.

    All this is matter of course, and notorious. But it is not a topic on
    which one prefers to dwell. Writers and speakers who dilate on the
    meritorious exploits of the nation’s business men will not commonly
    allude to this voluminous running administration of sabotage, this
    conscientious withdrawal of efficiency, that goes into their ordinary
    day’s work. One prefers to dwell on those exceptional, sporadic, and
    spectacular episodes in business where business men have now and again
    successfully gone out of the safe and sane highway of conservative
    business enterprise that is hedged about with a conscientious
    withdrawal of efficiency, and have endeavored to regulate the output by
    increasing the productive capacity of the industrial system at one
    point or another.

    But after all, such habitual recourse to peaceable or surreptitious
    measures of restraint, delay, and obstruction in the ordinary
    businesslike management of industry is too widely known and too well
    approved to call for much exposition or illustration. Yet, as one
    capital illustration of the scope and force of such businesslike
    withdrawal of efficiency, it may be in place to recall that all the
    civilized nations are just now undergoing an experiment in businesslike
    sabotage on an unexampled scale and carried out with unexampled
    effrontery. All these nations that have come through the war, whether
    as belligerents or as neutrals, have come into a state of more or less
    pronounced distress, due to a scarcity of the common necessaries of
    life; and this distress falls, of course, chiefly on the common sort,
    who have at the same time borne the chief burden of the war which has
    brought them to this state of distress. The common man has won the war
    and lost his livelihood. This need not be said by way of praise or
    blame. As it stands it is, broadly, an objective statement of fact,
    which may need some slight qualification, such as broad statements of
    fact will commonly need. All these nations that have come through the
    war, and more particularly the common run of their populations, are
    very much in need of all sorts of supplies for daily use, both for
    immediate consumption and for productive use. So much so that the
    prevailing state of distress rises in many places to an altogether
    unwhole- some pitch of privation, for want of the necessary food,
    clothing, shelter, and fuel. Yet in all these countries the staple
    industries are slowing down. There is an ever increasing withdrawal of
    efficiency. The industrial plant is increasingly running idle or half
    idle, running increasingly short of its productive capacity. Workmen
    are being laid off and an increasing number of those workmen who have
    been serving in the armies are going idle for want of work, at the same
    time that the troops which are no longer needed in the service are
    being demobilized as slowly as popular sentiment will tolerate,
    apparently for fear that the number of unemployed workmen in the
    country may presently increase to such proportions as to bring on a
    catastrophe. And all the while all these peoples are in great need of
    all sorts of goods and services which these idle plants and idle
    workmen are fit to produce. But for reasons of business expediency it
    is impossible to let these idle plants and idle workmen go to work ?
    that is to say for reasons of insufficient profit to the business men
    interested, or in other words, for the reasons of insufficient income
    to the vested interests which control the staple industries and so
    regulate the output of product. The traffic will not bear so large a
    production of goods as the community needs for current consump- tion,
    because it is considered doubtful whether so large a supply could be
    sold at prices that would yield a reasonable profit on the investment
    or rather on the capitalization; that is to say, it is considered
    doubtful whether an increased production, such as to employ more
    workmen and supply the goods needed by the community, would result in
    an increased net aggregate income for the vested interests which
    control these industries. A reasonable profit always means, in effect,
    the largest obtainable profit. All this is simple and obvious, and it
    should scarcely need explicit statement. It is for these business men
    to manage the country’s industry, of course, and therefore to regulate
    the rate and volume of output; and also of course any regulation of the
    output by them will be made with a view to the needs of business; that
    is to say, with a view to the largest obtainable net profit, not with a
    view to the physical needs of these peoples who have come through the
    war and have made the world safe for the business of the vested
    interests. Should the business men in charge, by any chance aberration,
    stray from this straight and narrow path of business integrity, and
    allow the community’s needs unduly to influence their management of the
    commu- nity’s industry, they would presently find themselves
    discredited and would probably face insolvency. Their only salvation is
    a conscientious withdrawal of efficiency. All this lies in the nature
    of the case. It is the working of the price system, whose creatures and
    agents these business men are. Their case is rather pathetic, as indeed
    they admit quite volubly. They are not in a position to manage with a
    free hand, the reason being that they have in the past, under the
    routine requirements of the price system as it takes effect in
    corporation finance, taken on so large an overhead burden of fixed
    charges that any appreciable decrease in the net earnings of the
    business will bring any well-managed concern of this class face to face
    with bankruptcy.

    At the present conjuncture, brought on by the war and its
    termination, the case stands somewhat in this typical shape. In the
    recent past earnings have been large; these large earnings (free
    income) have been capitalized; their capitalized value has been added
    to the corporate capital and covered with securities bearing a fixed
    income-charge; this income-charge, representing free income, has
    thereby become a liability on the earnings of the corpora- tion; this
    liability cannot be met in case the concern’s net aggregate earnings
    fall off in any degree; therefore prices must be kept up to such a
    figure as will bring the largest net aggregate return, and the only
    means of keeping up prices is a conscientious withdrawal of efficiency
    in these staple industries on which the community depends for a supply
    of the necessaries of life.

    The business community has hopes of tiding things over by this means,
    but it is still a point in doubt whether the present unexampled large
    use of sabotage in the businesslike management of the staple industries
    will now suffice to bring the business community through this grave
    crisis without a disastrous shrinkage of its capitalization, and a
    consequent liquidation; but the point is not in doubt that the physical
    salvation of these peoples who have come through the war must in any
    case wait on the pecuniary salvation of these owners of corporate
    securities which represent free income. It is a sufficiently difficult
    passage. It appears that production must be curtailed in the staple
    industries, on pain of unprofitable prices. The case is not so
    desperate in those industries which have immediately to do with the
    production of superfluities; but even these, which depend chiefly on
    the custom of those kept classes to whom the free income goes, are not
    feeling altogether secure. For the good of business it is necessary to
    curtail produc- tion of the means of life, on pain of unprofitable
    prices, at the same time that the increasing need of all sorts of the
    necessaries of life must be met in some passable fashion, on pain of
    such popular disturbances as will always come of popular distress when
    it passes the limit of tolerance.

    Those wise business men who are charged with administering the
    salutary modicum of sabotage at this grave juncture may conceivably be
    faced with a dubious choice between a distasteful curtailment of the
    free income that goes to the vested interests, on the one hand, and an
    unmanageable onset of popular discontent on the other hand. And in
    either alternative lies disaster.

  8. benleet Says:

    The most important sentence of your report: “In the same period [2010 to 2015], the wealth of these richest 62 people increased by $500bn (£350bn) to $1.76tn.” In 5 years these 62 increased their wealth by 40%. How is that possible? Inflated value of financial assets, probably. My theory is that financial assets “reflated” after the collapse of 2008-2010 because of QEs in the U.S., but also because the bubble effect, profits had no productive outlet in employment, production and sales, while income and purchasing demand has stalled so surplus money goes one place, into stocks. I’m a Keynsian but appreciate Michael Roberts. Also look at the PEW report on the changes in world poverty, low income, middle class, etc. — see two places, and this short article

    71% of the world lives on less than $10 a day, says the report, and the author says the majority live on $3 a day. The Supplemental Poverty Report from the USCensus reports that the poverty level is $16 a day, deep poverty is $8 a day, and extreme poverty in the U.S. is below $2 a day. 15.3% live in poverty, about 5% in deep poverty, and 1.5% in extreme poverty. I think you can find this in an article by the Stanford University inequality magazine, Pathways, summer 2014. And lastly, the pre-tax average income of the top 0.9% of U.S. taxpayers is $1.6 million, and there are 1.6 million such, and you reported that $1.7 million was the average wealth of 72 million in the world’s top 1%. Curious. Source, Congressional Joint Committee on Taxation, Overview, 2015, page 29, on web.
    I write a blog, Economics Without Greed,, and my last effort compares the 1950s with today. Thanks.

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