In its lifelong struggle to fight wealth, rather than poverty, Oxfam released the 4th report of a series on wealth inequality. This year’s shocking claim was that the eight richest men are wealthier than half of the world’s population, that is 3.6 billion people. This was, unsurprisingly, met with resistance as, in a continuation of the ‘we are the 99%’ trend, people saw in Oxfam’s latest statistic the outrageous unfairness of capitalism.
Like the three others, the report was criticized for its use of net wealth, which includes debts, therefore allowing wealth to be negative. According to Oxfam, the bottom 10% have a net worth of a negative trillion dollars. By this measure, a Stanford student who owns a MacBook and enjoys $8 lattes but happens to have student loans appears poorer than a Chinese farmer who has no access to financial institutions. Furthermore, as exemplified by our hypothetical student, Oxfam’s approach wrongly considers all debt as something detrimental rather than an investment. These assumptions lead to shockingly outrageous graphs, such as the one below, in which Europe and North America have more poverty than Latin America and China.
More can be said about this report, which I encourage you to read about here. The findings are of little interest to me since my sentiment towards inequality in a free market is best described by Thatcher, who notes “[they] would rather have the poor poorer, provided the rich were less rich.” If everyone is getting richer, does it matter that some are getting more well-off than others? In the end, is the goal to reduce poverty or should we, as Oxfam believes in their 2010 piece ‘Venezuela: Latin America’s inequality success story’, aspire to be equal in misery?
Indeed, it is true, the least well-off have been getting richer, much richer. As Johan Norberg, Swedish author of “Progress: 10 reasons to look forward to the future,” correctly points out, the poor have never in history been this well-off. He says, “Part of our problem is one of success. As we get richer, our tolerance for global poverty diminishes. So we get angrier about injustices. Charities quite rightly wish to raise funds, so they draw our attention to the plight of the world’s poorest. But since the Cold War ended, extreme poverty has decreased from 37 per cent to 9.6 per cent — in single digits for the first time in history.”
Oxfam´s report also focused on inequality within High Income Countries such as the US or the UK. However, as Roger Barris discusses here, these statistics are cross-sectional and thus, give no notion of how wealth moves over time. With such statistics, one could easily assume that the top 1% retains that status for their entire lives but that is far from true since 12% of the US population will one day be part of that 1%, 56% will be in the top 10% and up to 73% of the population in the top 20%. With that in mind, all these figures show is the revelation that younger people are less wealthy than elderly ones – a reality most of us are well acquainted with.
Oxfam’s methodology even points this out, noting that “This [difference in wealth] is not unexpected, and reflects the fact that those younger than 35 are at the beginning of their life-cycle of saving and wealth accumulation.” Yet they fail to realize the futility of claiming that young people suffer from wealth inequality when they have yet to accumulate wealth. Furthermore, the use of net worth means that the wealth gap between low-asset holding, indebted youth (Oxfam claims that those beneath 35 years old are 15% more at “risk”- noting the negative connotation- of being indebted) and elderly asset owners, who paid off their student loans and mortgages long ago, is further enhanced.
There is one situation, however, where I do despise inequality and that is when it results from government intervention. Oxfam, for instance, never mentions that the youth they talk about, regularly get strongly disadvantaged by government programs such as socialized healthcare or social security, both of which are wealth transfers from the impoverished and healthy youth to the wealthy and sick elderly.
Although Oxfam did discuss the harm of increasingly large student loans on American millennials’ wealth, they failed to mention the New York Fed study which found that private colleges raise their tuition by $0.65 for every dollar of student loans provided by the government.
Not once did Oxfam discuss the fact that, according to the Financial Times, 40% of the wealth created in the UK, that is £3 trillion, comes from restrictive land use, which strongly benefits asset owners at the expense of renters and first time buyers. Nor do they address economists’ belief that increasing housing price are forcing less wealthy people to move by necessity from high productivity (i.e. higher salaries) to lower productivity areas (i.e. lower salaries), making the poor even poorer and, thus, further enhancing inequality.
Nor did Oxfam condemn the $4 trillion QE gift that Obama made to share owners; or the large wealth transfer from the Bank of England to George Soros simply due to what appears to be pure governmental incompetence; or the Dodd-Frank regulation that killed off community banks, the major provider of small business loans, to the benefit of large banks, which have never enjoyed such large market shares and quick recoveries from financial breakdowns. Has Oxfam talked about the “heads I win, tails you lose” policies that allow firms such as Silicon Valley Bank to hedge their risks by placing them on the taxpayer (a phenomena described more thoroughly here)? No, and they should have since that is the kind of cronyism that turns economies into zero-sum games and makes people believe that fighting wealth is more important than eliminating poverty. When the public is more shocked by eight wealthy people than it is by having less than 10% of the world in absolute poverty for the first time in history, we are clearly chasing the wrong aims.
Where is Oxfam’s dramatic outcry against all these governmentally created injustices? They were nonexistent in Oxfam’s most recent report and their myriad of articles critiquing the harms of free markets, wealthy individuals, and corporations, while championing increasing government intervention. Considering the scope and consistency of anti-capitalist attacks from organizations that are supposedly against poverty, like Oxfam or even the Pope who called unbridled capitalism, I quote, the “dung of the devil,” one cannot help but wonder if they truly fear capitalism or simply fear how quickly they are becoming irrelevant.