Coffee House

Under Oxfam’s dodgy maths, someone with 50p to his name is “richer” than bottom 2bn

19 January 2015

12:26 PM

19 January 2015

12:26 PM

Global capitalism has eradicated poverty and generated prosperity in the developing world at an unprecedented rate. You might imagine that a global anti-poverty charity, such as ‘Oxfam’, would celebrate this fact. But no – today Oxfam is making the headlines instead because it is worried about global wealth inequality. In particular, that ‘the wealthiest 1 per cent will soon own more than the rest of the world population combined’.

Oxfam has been pushing this sort of meme for a while. Last year, it made the startling claim that ‘the world’s 85 richest people own the same wealth as the bottom 3.5 billion combined’. It was shown at the time, not least by Reuter’s Felix Salmon, that this statistic was bogus. And there’s nothing new to see today, just a slight re-hashing of this factoid.

Oxfam’s claim that the richest 1 per cent own 48 per cent of the world’s wealth (and will soon own more than half) rests on Credit Suisse data. This data is on net wealth, which throws up all sorts of weird findings when you try to add it up across large populations. That’s because net wealth is calculated by adding up the value of assets and taking off debts.

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To see this, look at the figure below from the Credit Suisse report. If we were to split up the data into deciles, this methodology would suggest China has no people in the bottom 10 per cent – the world’s poorest – with most Chinese in the top 50 per cent. North America on the other hand supposedly has around 8 per cent of the world’s poorest population – because significant numbers of people in the States are loaded up with debts of various kind, making their net wealth negative!

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According to this methodology, the poorest 2 billion people in the world have a negative net wealth. Someone who has 50p but no assets or debts would be above the bottom 30 per cent of the world’s population. It doesn’t take an advanced mathematician to work out that adding up lots of negatives at the bottom to an overall wealth share figure for the bottom 99 per cent will of course make the figure much smaller than a gross wealth figure. Oxfam has then taken this bogus figure, looked at recent trends (which show the share of the top 1 per cent rising) and simply extrapolated into the future to get their headline (which seems a huge assumption given the potential QE unwinding).

Aggregating net wealth figures is largely meaningless and not the way most people think about poverty, or indeed the ‘rich’.  That Oxfam has been able to claim front pages with a nonsensical ‘report’ throws up all sorts of worrying questions about journalistic standards. But the more perturbing fact is that Oxfam’s latest meme will now be repeated ad nauseam by those who won’t examine the basis of the claim.

Ryan Bourne is Head of Public Policy at the Institute of Economic Affairs

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Show comments
  • Cesar Vicente

    I think my brain died a little after reading this garbage article.

    Try this one instead to understand the issue: http://www.newyorker.com/business/currency/critics-oxfams-poverty-statistics-missing-point

  • Andrew Cole

    I don’t donate to any of these sort of charities. Their ‘paid’ representatives rock up at my door, a different charity each day, sometimes 2 a day, Can I interest you in…..Nope..door closes. They all have chief execs pulling a very hefty wage. They all scaremonger and use propaganda.

  • Dodgy Geezer

    …You might imagine that a global anti-poverty charity, such as ‘Oxfam’, would celebrate this fact….

    Actually, no. The clue is in the NAME.

    Oxfam was a global anti-FAMINE charity. The problem for Oxfam is that its proposed cure (giving money to build wells) was a staggeringly useless way to address famine, and global high-technology, driven by global capitalism, has simply solved the problem completely over the last 30 years.

    So now Oxfam is looking frantically for another reason for existing, and trying to re-position itself as a ‘poverty’ charity. As Jesus pointed out, “The poor will ALWAYS be with us” – so Oxfam is trying to obtain a lifeline based on relative wealth. Essentially, it’s morphed into a communist organisation.

    In much the same way, the police are anxious for the illegal drug industry to keep going, and the military and security apparatus have been advising murderous foreign policy activity for years in order to keep their industry alive…

  • Christine Mackay

    I Chair a small charity trying to feed and educate the children in one Orphanage in Burundi, one of the poorest countries in the world (www.orphanageofhearts.org). We directly oversee that they get our donations and we don’t have any paid staff to ensure they get it all. According to these stats the relative pittance we are able to give them takes them out of the 1%, making them richer on paper than some of our donors. I will have to remember that when asking for support! Totally ridiculous.

  • Des Demona

    Good Grief. Before any neo-liberals have a heart attack, Oxfam aren’t saying capitalism is a bad thing, they are saying that if you want to grow the global economy in any significant way then concentrating the profits of capitalism in the hands of a miniscule minority is a grossly inefficient way of going about it.
    As any fule kno.

    • Dodgy Geezer

      if I wanted economic growth, I would ensure that there were instances of large funds being handled by small groups, so that rapid and directed investments could be made in profitable ways.

      If I wanted economic stasis, I would ensure that funds were evenly spread throughout the entire community, so that there was no easy single place to go to to get large-scale investment.

      If I wanted to get negative growth, I would ensure that any investment decision was taken out of the hands of avaricious investors entirely, and run instead by a state bureaucracy.

      I’m not commenting on whether growth is good or bad, or in which direction it’s going. Just that, if you want growth, then concentrating profits and re-investing is the only way to go…

      • Des Demona

        ”if I wanted economic growth, I would ensure that there were instances of large funds being handled by small groups, so that rapid and directed investments could be made in profitable ways.”
        Sounds good in theory. Providing of course they make rapid and directed investments. Most large corporations are sitting on mountains of cash and have been for several years. But who decides what is directed? Does it go to growth or simply to make an individual much richer? They can only buy so many yachts.

        ”I’m not commenting on whether growth is good or bad, or in which direction it’s going. Just that, if you want growth, then concentrating profits and re-investing is the only way to go…”

        I have nothing against concentrating profit and re-investing. Which I agree is a good thing. This is about profit being sucked out and upwards to the wealthy and not re-invested efficiently.

        • Dodgy Geezer

          “…concentrating the profits of capitalism in the hands of a miniscule minority is a grossly inefficient way of going about it.”

          “I have nothing against concentrating profit and re-investing. Which I agree is a good thing…”

          Come back when you have learnt how to present your thoughts coherently.

          Capitalism 101 – they are wealthy BECAUSE they know how to re-invest efficiently. If they didn’t, they would soon be poor.

          Capitalism 102 – corporations sit on precisely as much cash as necessary. Half a percent over and the shareholders would agree to a hostile takeover.
          Capitalism 103 – try not to believe moronic anti-capitalist commentators who tell you that the mega-rich wear diamond-encrusted underwear and have a different yacht for every day of the week…

          • Des Demona

            Oh dear. You obviously can’t be helped.

            • Dodgy Geezer

              Certainly not by someone who can’t respond to a single one of the points I made…

  • ajnd jdns

    what’s dodgy in that ?
    It clearly states the methodology used in calculating net wealth i.e. assets – liabilities.

    It doesn’t say “standard of living” or anything like that -which many people in the bottom 20% net worth may have amazingly varied standard of living.

    Looks like this author has comprehension issues.

  • Dimitar Mirchev

    So I guess we have that “free market inequality” where everybody earned what he deserves and no one steals from other people.

    No. We have “CRONY inequality” where you get richer BECAUSE YOU CAN BUY THE RIGHT POLITICIANS.

  • JohnCrichton89

    So you’re telling me I’m rich then…………… yippee !

  • Paul Fletcher-Tomeni

    Extraordinary that there is an apparently serious attempt to debunk Oxfam’s main findings. I understand that capitalism works when there is competition and consumption. Both these prerequisites fade with huge concentrations of wealth. Dealing with this problem is pro-capitalist. It therefore appears that both the Spectator and a number of its readers are ( inadvertently, surely!) ANTI-capitalist. Problem is that you have become so accustomed to associating attacks on wealth concentration with the Red Peril, you are failing to see the very great threat to the dynamism of capitalism. Please, please, more thought and stop shooting from the hip!

    • AJ

      100% agree. This is not an attack on capitalism as being portrayed, but extreme inequality is. The likes of Ryan Bourne are so wedded to dogma about the awfulness of Govn. and the sanctity of markets they’ve refused to genuinely look at what is going right and wrong and what the pragmatic ways to resolve problems are. Very sad, they’re going to regret this.

  • AJ

    Oh and the attack on charities is pitiful. Tell me how supporting inequality reduction is party political when all parties have talked of its importance.

  • AJ

    It is also completely misleading, as the opening statement suggests, to imply this is an attack on global capitalism. There are many many economists of different persuasions who believe reducing inequality in developed nations is vital to save capitalism. 80% of people believe the gap between rich and poor is too great, and there is rising anti-business sentiment. The former has not come about because of a few Oxfam stories in the Guardian and all Ryan’s frothing with indignation won’t change that fact. People do not support his belief that extreme inequality is harmless.

  • AJ

    It is not a dodgy statistic in that it is not untrue and the data that Credit Suisse uses, while far from perfect, is reasonable. Ryan is right re those in debt etc. but that doesn’t get away from the fact that a small number of people have a huge amount of wealth compared to others, including those in debt. And that this is wealth without the burden of debt repayment. If anyone here thinks wealth does not equate to power and influence they are completely stark raving bonkers. If anyone thinks that everyone who is wealthy is as cuddly as Warren Buffett or as reasonable as Bill Gates, again, you are sadly deluded.

  • CanuckleDragger

    One of the best ways the 99% can battle back is with unions. Walmart and Mc Donalds should go union and demand $15 per hour.

  • CanuckleDragger

    It is immoral for a group to have more than they can possibly use while others go hungry. It would be different if they got their wealth honestly. They didn’t. When the 99% get fed up, the 1% had better watch out. Greed is such an ugly trait.

    • Andrew Dixon

      If they got there wealth honestly, what the **** are you on about, are you saying all rich people only get rich illegally. You say they got there money illegally but you wouldn’t have a problem with other people taking the money off them illegally. FFS your an idiot as well as a hypocrite

      • CanuckleDragger

        The rich bought the Federal Government, Congress, The Senate, and the Supreme Court. All laws and amendments to laws have been made in their favor. How do you think their share of the pie grows astronomically while the middle class is stagnate? They lobby for changes that grow their bottom line at the expense of the middle class. I don’t know what rock you just crawled out from under, it was just announced that the 1% owns more than half of the world’s wealth. Do you think the 1% are becoming astronomically smarter or do you think the rules of the game are becoming more and more stacked in their favor? The answer is unions. Start with Walmart and McDonalds and demand $15 per hour. I’m willing to pay $.50 for a burger so these people can have a living wage. The Walton family can give up a few of their billions so their employees can have a living wage. But, your being a right wing sheep who gets his education from Fox News and Duck Dynasty, you see the 1% as the jobs providers. Can’t tax them. The more non thinking sheep like you there are, the worse off society is. You are a thoroughbred idiot.

        • Andrew Dixon

          By the way taking all the money off the worlds rich and distributing to every person in the world would give everyone an extra $500 bucks, hopefully in your dream world they don’t waste it.

          • CanuckleDragger

            Shill much?

  • English_Independence_Movement

    The Left don’t hate poverty, they hate inequality: they’d be quite happy if we all led short miserable lives living in mud huts without health care, just so long as no one person had a single penny more than any other.

    • astraea

      It’s not about inequality – that would be boring. It’s about inequity, aka justice.

  • http://elfnhappiness.blogspot.com/ eeore

    If the poor were allowed to print their own money to help them through hard times….

  • SelfSufficientOne

    Money is an agent of debt where too much debt brings on poverty. And there are two types of debt, personal and private. Individuals can control their private debt but governments have taken away our ability to control the public debt. It is the public debt that enriches the “powerful” and burdens the middle class. It is this debt that we the people have lost control of, we are indeed indentured servants.

  • Leo McKinstry

    One of the equality lobby’s most deceitful statistical exercises in the invention of the concept of “relative poverty.” According to this piece of sentimental manipulation, anyone can be deemed to be living in “relative poverty” if their income is less than 60 per cent of the median, an entirely arbitrary threshold. On that basis, even some multi-millionaires in Monaco must be living in “relative poverty” compared to the multi-billionaires.

    • Airey Belvoir

      Indeed – a cunning way of ensuring that ‘the poor will always be with us’. And so will lots of highly paid charity jobs.

  • davidhill

    I don’t know about dodgy statistics but Credit Suisse’s ‘Global Wealth Report’ states the same as the Oxfam’s figures if you read it.

    But it has to be said that this subject is the most dangerous growing situation for future humanity as eventually the reaction and fire will be ignited by the majority ‘have nots’. Even billionaires are aware of this according to a recent BBC programme on inequality, but where apparently greed blinds them to the growing and presently hidden discontent around the world. You can forget about terrorism, obscene inequality will be the eventual tipping point to light the fuse of world violence and human uprising. Don’t rely on the Army to suppress this anger and people conflict either, as most of the foot soldiers come from the 90% of the world’s population who are the impoverished ones as the 1% take from them year-on-year. For history has shown with all backlashes that eventually the ordinary soldier sides on the people’s side and not the government or those who have created the situation. The French and Russian Revolution are prime examples here where vast inequality caused such events to take place.

    http://worldinnovationfoundation.blogspot.co.uk/2014/08/inequality-and-top-10-getting-richer.html

    http://worldinnovationfoundation.blogspot.co.uk/2014/08/the-kings-of-kings-and-masters-of.html

    http://worldinnovationfoundation.blogspot.co.uk/2014/10/the-destroyer-of-worldscapitalism-and.html

    • Dodgy Geezer

      The ordinary soldier sides with the group which can afford to pay him.

      • davidhill

        No, basic common values kick in and especially if they affect their family directly. There are greater considerations than just money in this life I am afraid to say. Sorry to say if you are a former squaddie.

  • Pappu Italvi

    Now thugs at Oxfam will enjoy touring across the world with grants raised through charity in name of spreading this manufactured report

    • http://elfnhappiness.blogspot.com/ eeore

      Spies need a cover you know….

    • AJ

      What does this even mean? A manufactured report? ‘thugs at Oxfam’? come on.

  • Marcus

    Agreed. It’s worrying journalism; yet predictable.
    Even it was true….. There are millions being brought out of poverty every year. So that’s millions more people to buy iphones and toasters. Which means if you make toasters and iphones you will be richer year on year. So this trend will hopefully go on forever and it indicates nothing more than there are less people trapped in poverty each year.

    • AJ

      Yes, and that should be celebrated, but this is happening in spite of widening inequality not because of it. In developed nations we’re going backwards and it’s not because global inequality is falling, it’s because it’s rising in our own countries as recognised by the IMF and OECD. People like Ryan Bourne see the world in terms of iphones and toasters rather than people and what genuinely matters to them. That is why he and others like him are losing the debate on inequality. They are drab men with drab ideas that people have seen enough of and don’t like much.

      • Marcus

        You don’t get it AJ.
        Bill Gates will become richer and richer as year on year more people can afford his products. So the gap between his wealth and those who’ve just moved out of poverty and brought his product. And you and me will continue to increase. ..and it’s a good thing.

        • AJ

          I think/hope I do get it. I think i just respectfully disagree. I absolutely understand your point. I would argue that year on year more people cannot afford more of Bill Gates products because we are seeing stagnant wages. We can argue of course as to the causes of this. I think rising inequality is both a cause and a symptom of this. The only way people are affording more products is by increasing their debt at the moment. This is not a good thing. The argument is not whether the size of the pie can increase and we all do better. The argument is whether inequality limits the size of the pie AS WELL as allowing those at the top to get a larger and larger share. Ryan is swimming against the tide of evidence and opinion on this.

        • Andrew Cole

          I disagree. Bill Gates (used as an example) along with Apple, Samsung, DFS, and Murdoch etc get richer and richer year on year NOT because more people can afford their products. It is because more and more people must have those products even though they can’t really afford them and then moan about the cost of living.

          • Marcus

            Erm no. People in the third world need smartphones every bit as much as you do.

            • Andrew Cole

              Need? Can you answer me why? People in the UK don’t ‘need’ half the crap they are buying….on credit…then complaining about the cost of living.

              • Marcus

                Do you need one?

                • Andrew Cole

                  Nope. My Phone rings and texts and doesn’t get used that much at all. I use a laptop for the internet. I have no need to have my head buried in a phone when I am out and about.

                  So no I don’t ‘need’ one. I don’t really need any mobile phone. Just like I didn’t need one when I first got one in the early noughties.

                  If I weren’t married now I would have gone without even my cheapy a long time ago.

                  How did people cope before the advent of mobile phones and ‘smartphones’.

  • Torybushhug

    This obsession with wealth is a tragic tale really. Last night CH4’s ‘The Nile’ showed for example these peasant farmers living by the banks of the Nile that had a real joyful life. I’ve encountered this in rural Turkey where people had simple but very satisfying lives, chatting away on the porch at night after tending their melons, a single light bulb lighting their bungalow, happy as Larry, none of the complexity of western living, none of our hang-ups s and relentless chattering in our attempt to perfect the world to ensure everyone is as wealthy and long lived as possible.

    • http://elfnhappiness.blogspot.com/ eeore

      Did they have watch that recorded their blood pressure and displayed the current daily average on their smart-glasses?

      Then they have no idea what happiness is.

    • AJ

      Very true. But Ryan Bourne fails to understand this and fails to understand that relentless competition between one another to acquire more ‘stuff’ and status leaves us all deeply unhappy. All the iphones in the world aren’t going to make him understand that how people think and feel is actually quite important. In any case, a huge amount of tech development has come through Govn. grants, something he should be more honest about.

    • Dodgy Geezer

      … none of the complexity of western living…

      They have:

      1) a light bulb, brought to them by a complex web of engineering development and power generation and transmission technology,

      2) specific hybrid melon seeds, brought to them by a deeply complex understanding of genetics and bio-chemistry,

      3) a market for their produce, brought to them by a global communications and logistics network of staggering complexity,

      4) payment for their produce, brought to them by futures investors and commodity brokers transferring funds in complex ways….

      …and I’ll bet they are wearing Chinese-made clothes, watching American/Korean made films/TV, and obtaining grants from European agricultural improvement funds.

      Apart from that, yes, they are living a carefree happy non-complex life…

  • sir_graphus

    In future, any charity I come across wasting my donations on political campaigning will forfeit my support.

    If I give a charity £10 to, say, help the homeless, I expect it to be spent on food, clothing, shelter. I do not want it spent on a lobbyist to campaign for govt to allocate £10 of my taxes to the homeless.

    • http://elfnhappiness.blogspot.com/ eeore

      You sir, will be a very rich man.

    • AJ

      Any money for those trying to tackle the causes of poverty, rather than the symptoms? Seems a more long-term approach to me.

    • Liberty

      They want the government to give £10 per head of ours to charity because 70% of it will go to charity administration, marketing and heads who pay themselves like CEOs without the risks plus a gold plated public sector pension.

  • Torybushhug

    Bob Geldof has placed his real estate in a Virgin Islands trust, I cannot see how you would ever stop this.
    JK Rowling, Russell Brand and Stephen Fry employ the best tax advisors money can buy, these people are globe trotters and can domicile themselves anywhere.

    Tony Ben despite gifting much of his wealth to his kids when alive still died a multi millionaire. If even he wont share what hope is there?

    Worse than fat cat Bankers as the lefty charlatans disguise their greed.

    • AJ

      Sorry, this is just plain untrue. Russell Brand does not employ tax advisors and JK Rowling is also known not to, to the extent that she pays more tax than the rest of the super-rich combined. There are plenty of champagne socialists to direct your fury towards, these are not two of them

      • Kingstonian

        “JK Rowling is also known not to, to the extent that she pays more tax than the rest of the super-rich combined.” Really? Is that a fact? Or is this another “fact” from the Oxfam stable of dodgy maths?

        • AJ

          She’s been on record explicitly saying she does and she does so because she believes in the welfare state and felt indebted to it when it helped her at her lowest. Others have stated this to be true. It would be extraordinarily brave or stupid to make a public, principled stand knowing it to be untrue. I suppose it’s possible. But I think the burden of proof is on you if you want to accuse her of that.

      • Andrew Cole

        Russell Brand just accepts money to fund films enabling others to get tax breaks. He’s whiter than white……….oops that sounds a little bad. Oh well.

        • AJ

          That may be a fairer point, if we know he made that decision and with that knowledge. Do we? Otherwise it seems a bit like his supposedly supporting tax-dodging by paying rent to someone who does that.

  • Michael990

    “journalistic standards”. Well, they died, if they ever really existed, with the advent of the press release. Took a few years but now, as long as there’s a press release to reprint, the ‘journalists’ are content. The internet age has helped enormously of course, because it’s all now a simple cut ‘n paste job.

  • Shinsei1967

    It is a bonkers way of measuring wealth as, amongst other things, takes no account of age or potential.

    So a 28 year old Oxbridge-educated Goldman Sachs banker on a six figure salary (that he spends on rent & high living) with a 50k student debt is comfortably in the world’s bottom decile, if not bottom 1%, when it comes to (net) wealth.

    Whereas a 65 year old British woman, living in her 250k semi-detached house with a state pension (a £250k asset in itself) is in the top 1% globally.

    • Benjamin Palmer

      I gave Oxfam an email about this, as I’m someone who would fit that category (well nearly) and here is their reply:

      “We are confident that our statistics give a true picture of the state of inequality in the world today. Don’t just take our word for it, Christine Lagarde, head of the IMF, has quoted Oxfam statistics on wealth inequality and our last report on inequality, which included statistics calculated on this basis, was endorsed by the Chief Economist of the Bank of England.

      The bottom 50% includes 3.5 billion people around the world. This does include the indebted graduate with high future earning potential, but this is very much the exception rather than the rule. This group is overwhelming populated by people with little or no assets to support their livelihoods.

      I hope this makes our position clear. Thank you for your interest in Oxfam’s report. If you have any further queries please let me know I’ll be happy to help. “

  • starfish

    unsurprisingly the BBC has lapped this up without question

    They just love dodgy statistics that support lefty causes and lobby groups

    • ArthurSparknottle

      Jacques Peretti has also been propagating the same nonsense in his two hour ‘expose’ of ‘the problem’ on BBC1. He seemed to focus on the lavish extravagance of some UK based toffs who were buying Ferraris and quaffing champagne.

    • Malcolm Knott

      Yes, I noticed that the figure was mentioned on the Today programme, and in the news headlines, for all the world as if it was an established fact.

    • janieblack

      How is using ‘net’ wealth a dodgy use of stats? Oxfam is not claiming anything false and you should be taking this article with as much of a dose of scepticism as the Oxfam data… And you know what is a bigger issue that using ‘net’ wealth in this analysis? Labelling things like poverty as “lefty causes”.

      • Andrew Dixon

        I think he explained it pretty well, just because you are in debt doesn’t mean your poor and cant put food on the table, not that hard to understand really.

      • Andrew Cole

        Because the ‘lefty’ slogan is that there is a ‘cost of living crisis’.

        The truth is there are a lot of people struggling to cope with the cost of living. There always have been and always will be. The vast majority though..you know the ones that Labour and Conservatives are trying to get the vote from are simply struggling because of the ‘cost of living above your means crisis’.

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