Davos: new briefing on global wealth, inequality and an update of that 85 richest = 3.5 billion poorest killer fact

This is Davos week, and over on the Oxfam Research team’s excellent new Mind the Gap blog, Deborah Hardoon has an update on the mind-boggling maths of global inequality .

Deborah Hardoon

Wealth data from Credit Suisse, finds that the 99% have been getting less and less of the economic pie over the past few years as the 1% get more. By next year, if the 2010-2014 trend for the growing concentration of global wealth is to continue, the richest 1% of people in the world will have more wealth than the rest of the world put together.

Davos fig 1Measurements of wealth capture financial assets (including money in the bank) as well as non financial assets such as property. It is not just inefficient to concentrate more and more wealth in the hands of a few, but also unjust. Just think of all the empty properties bought by wealthy people as investments rather than providing housing for those in need of a home.  Think of the billionaire chugging out carbon emissions flying around in a private jet, whilst the poorest countries suffer most from the impacts of climate change and the poorest individuals living want for a decent bicycle to get to school or work.

Davos fig 2Wealth inequality is now so extreme, that in 2014 just 80 people have the same wealth as the bottom half of the planet. The richest 80 people in the world have a collective wealth of $1,898,600,000,000, (that’s 1.9 trillion dollars) or an average of $24,000,000,000 (24 billion dollars) each. These are big numbers, lots of 0’s, so let’s try to break it down.

Let’s get rid of all the zeroes. Wealth of $24 per person would be pretty negligible, not much you can do to invest this or purchase productive assets. Increasing this by $3 in one year wouldn’t make much difference at all, especially as prices in the economy increase.

Wealth of $24,000 could be transformative. It could enable you have own a mode of transport or farming equipment to enable your work and livelihood. It could provide cash in the bank, just in case you need some reserves if the income that you rely on is affected or you face a financial surprise or shock. $3,000 more in a year could make an important difference for you and your family.

Wealth of $24,000,000 would be more than enough for a (financially) worry free life. So long as you do not have a dangerous shopping habit, you potentially be financially secure for your entire life with this kind of wealth, owning property so that you would never need to pay rent and earning enough interest to provide a stable income, a 1% interest on this would give you an annual income of $230,000). Another $3,000,000 every year is, quite frankly, unnecessary.

Wealth of $24,000,000,000 blows my mind. Based on even tiny levels of interest, this wealth would grow faster than you could spend it. And it grows fast, an extra $3,000,000,000 in one year alone. Aside from what this extreme level of wealth might do to shopping habits and holiday destinations, what does it mean for the rest of us that do not have this amount of wealth at our disposal?

Wealth: Having it all and wanting more” is a short research brief published today that looks at wealth data and finds that it is more unequally distributed than ever before. In 2010 it took 388 billionaires to have the same amount of wealth of the bottom half of the world, it now takes just 80 of them. The extreme wealth at the top of the distribution as desired above is not only mindblowing, but quite obscene when compared with how wealth is distributed to the rest of us in the world. The average wealth of adults in the bottom half of the world is $784, in Malawi the wealth per adult is just $230.

Davos fig 3Why do I use the word obscene? Why is this disparity a problem? Many reasons, better articulated in Oxfam’s recent Even It Up report and by others herehere and here. But I’ll just mention one that I feel strongly about, the vicious and pernicious cycle of wealth, power and influence that leaves the rest of us excluded from determining the policies that affect us all, as stated last year in Oxfam’s “Working for the Few”.

In the report, I delve into the Forbes billionaires data to identify the origins of their extreme wealth (the excel file I used is also online, so you can have a look too). Around one third inherited some or all of their wealth. But most interesting were the sectors from which their fortunes were derived. 20% of the billionaires on the 2014 list were listed as having interests or activities in the finance or insurance sector. No doubt these individuals have been hardworking, smart and creative, but we also know that companies from the finance and insurance sector spend a lot of time and money on influencing, in 2013 more than $500mil was spent on lobbying by this sector in Washington and Brussels alone. And this is just scratching the surface of how high net worth individuals and companies can use their position to influence others to support their agenda to the detriment of the rest of society, particularly the poor. There is a real cost involved here, when the policies and people that are influenced no longer work in the interests of the majority, of those most in need of support, those people that can’t afford to take their political representatives out for swanky meals. Companies from the pharmaceutical and healthcare sector are spending similar amounts on lobbying, protecting their corporate interests when the world is badly in need of the provision of affordable drugs and new vaccines – both which challenge the bottom line of pharma companies.

For a fairer and more just policy making and governance, alongside keeping lobbyists and other influencing mechanisms in check, we also need to be pro active in strengthening the voice and participation of the 99%. Transparency and open government initiatives in many countries presents an opportunity for citizens to engage, but we need to find a way to do that effectively. Strengthening unions, actively supporting causes we feel strongly about, standing up against restrictions on freedom of expression. We need more power and we need it now to prevent the runaway wealth of the rich running us into insignificance.

Lots of coverage of Deborah’s briefing in the Financial TimesBBC and Guardian, among others – top job. (And if you’re pining for this week’s Links I Liked, it’ll be along tomorrow)

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7 Responses to “Davos: new briefing on global wealth, inequality and an update of that 85 richest = 3.5 billion poorest killer fact”
  1. Ros Hirschowitz

    I fully agree with you that the distribution of wealth in our time is totally obscene. But how did we let this happen?
    The processes of impoverishment, not only of people, but also of many developing countries has been taking place gradually over the last 50 or 60 years. Over this time period, so many tax-paying middle class people in Western countries were being seduced by the ideology of neo-liberalism.
    United Nations institutions moved away from the Keynesian economic system as agreed to in Bretton Woods, to supporting the Washington Consensus.
    Indeed, the ideals of the French Revolution were Liberty, Fraternity and Equality, but in the West, both Fraternity and Equality are now totally ignored. Even freedom is interpreted as “doing and saying what I want”, without regard to the consequences.
    What has happened to ideals such as the “common good” and “social justice”? If things continue the way they are, we will be returning to a less caring feudal system, where only the rich count, and only lip service is paid to fraternity and equality. we will become the serfs of the billionaires.

  2. Maya Forstater

    The wealth of the wealthiest is mind boggling, and makes for great headlines. But as with last year’s killer facts on inequality there are a lot of thoughtful people wondering if these statistics are meaningful, and what it is they mean.

    Felix Salmon – http://fusion.net/story/39185/oxfams-misleading-wealth-statistics/
    Channel 4’s Fact Check -http://blogs.channel4.com/factcheck/factcheck-inequality-worse/19925

    The obvious takeaway from the big numbers seems to be “lets stop worrying so much about how to create more wealth and just share the pie more fairly”. But the figures show that the wealth of the world’s richest 80 billionaires, shocking as it is, would only work out as $300 each divided up between the rest of us. The wealth of the 1% would go a bit further (if it could really be liquidated and distributed) giving every man, woman and child an $18,000 nest egg. But this thought experiment means confiscating the property of 60% of UK adults, 75% of americans, 90% of Norwegians etc…(according to Credit Suisse data that underlies the killer facts). I guess that’s not what Oxfam is calling for, but still its all too easy to mobilise people to get angry with the narrative that there are some ‘others who are not like us’ who are the cause of all the problems.

  3. Ros Hirschowitz

    Maya, your argument that we can have either inequality or else redistribution is indeed spurious. There are all sorts of other possibilities regarding both wealth creation and investment in people’s potential that make economic sense, and at the same time support social justice. The so-called size of the pie is not immutable. I suggest you read someone like Thomas Piketty.

  4. Maya Forstater

    I am @roshirshowitz! Certainly not arguing that the size of pie is immutable. I completely agree that there are allsorts of possibilities regarding wealth creation & social justice, just think that it is worth highlighting the concerns with these numbers (which were also raised last year) which seem to communicate that the poor are poor because the rich are rich’ – when both ‘the poor’ and ‘the rich’ in this dataset are not quite what we expect them to be (the ‘poorest 10% in the world’ includes for example recent MBA graduates with student loans, while the ‘richest 1%’ includes relatively ordinary homeowners with a bit of a pension.

    Anyway had a cup of tea, and realised I did the calculations wrong -60% of UK adults are in the top 10% not the top 1% (43% of americans and 50% of Norwegians in the global top 10%). That makes mores sense -apologies!

  5. Ros Hirschowitz

    Maya, there is indeed a link between the rich getting richer and the poor getting poorer. It is called exploitation. For example, Sipho Moyo tells us about a Ghanaian cocoa farmer who supplies produce for manufacturing chocolates. The industry would not exist without her. But the West African farmers who supply 70% of the $110 billion chocolate industry struggle to feed their families. There are many other examples,as well as statistics to show this link. Is this social justice?

  6. Cliff Asiimwe

    No doubt, the rich(majority) directly or indirectly affect the poor. The process of primitive accummulation of wealth by the rich comes at a very huge cost on the poor in form of land evictions, pollution, etc.

  7. Dr David Hill

    These people have no real empathy with humanity.

    Indeed although women are even in a minority at Davos accounting for only 17% or participants, they are still ruthless people who have been corrupted by power, self-interest and ultimately personal greed. There is not one of them who has not climbed the greasy pole that have not undertaken actions that were ultimately detrimental to others. They all use their positions to get others to help them to attain top positions, but once there, they forget all the favours that others have done. Therefore there is no difference in the mindsets of women and men when it comes to the power struggle and sheer personal greed. This constellation of personal ingredients has no empathy with humankind or human sustainability, only results for those at the top no matter what the consequences may be. This covers the minds of all those who rise to the top from industrialists and politicians to civil servants and bankers. Indeed and although research into corporate psychopaths is in its infancy and has only been researched for a mere two decades in depth, more is coming to the surface that indicates that these individuals are driving capitalism to the edge, as sustainability of planet earth becomes less by the decade. In this respect even eminent institutions as the Royal Society and MIT are projecting that human functionality will fail on its present path by mid 2032, a mere 17 years from now. Therefore as by next year according to Credit Suisse analysis the top 1% will control as much as the remaining 99%, they cannot go on as they are for the majority of the world’s people and where ultimately, Agamemnon awaits.

    ‘Corporate Psychopathy and Psychopaths are Destroying the World Order, but where the Political and Corporate Psychopaths are Not aware of what they are doing to the world-at-large – Globalization is the Weapon they are using to Sequentially destroy the planet and the People are the Only Ones who will ultimately suffer, not the rich and powerful who have created this monster’ – http://worldinnovationfoundation.blogspot.co.uk/2014/12/corporate-psychopathy-is-destroying.html

    ‘The Destroyer of Worlds…the ‘present’ Globalization model’ – http://worldinnovationfoundation.blogspot.co.uk/2014/10/the-destroyer-of-worldsthe-present.html

    ‘The KINGS of KINGS and Masters of Humankind’s Ultimate Kismet – the ‘New’ WORLD ORDER that will eventually dispatch Humankind to Oblivion and its Ultimate Extinction – The Greed of the Few Combined with Our Planet’s Natural Resources Running Out will make this Inevitable…We have to Change Our Development Mechanism from Corporate Globalization to Sustainability before we have Used Up ‘All’ the Non-Replenishable Natural Resources of the World…the planet belongs to all of us NOT the Few ! ‘ – http://worldinnovationfoundation.blogspot.co.uk/2014/08/the-kings-of-kings-and-masters-of.html

    ‘Humanity is heading towards Armagedon’ – http://www.eureporter.co/frontpage/2014/03/29/comment-humanity-is-heading-towards-armageddon/

    The problem of course is that our political leaders are dancing to the tune of the top 1% and where all are taking no notice of the unfolding dire state of the world order.

    They all use their positions to get others to help them to attain top positions, but once there, they forget all the favours that others have done. Therefore there is no difference in the mindsets of women and men when it comes to the power struggle and sheer personal greed.