This year’s meeting of the World Economic Forum in Davos once again saw the issue of income inequality high up the agenda. It topped the group’s annual risk list, alongside “increasing polarization of societies,” climate change, and “technological change” (for example, the impact of artificial intelligence and robotics on employment). And in light of Brexit and Trump, the warnings might have taken on added weight. Arguably, it was the elites congregating in Switzerland, with their messages of relentless globalization and freedom of capital, who helped create the groundswell that led to last year’s populist revolts.
But income inequality continues to deepen, whatever the risk lists say. Three prominent economists recently revealed that the bottom 50% of Americans (by earnings) have seen no effective rise in incomes since the 1970s (even after taxes and welfare spending). And, across the world, the 1%-versus-the-rest ratios look more and more like something out of the 1920s. In 2015, Oxfam reported that 62 people now control the same amount of wealth as 3.6 billion people (the bottom half of global income scale) combined.
The British charity’s latest inequality reckoning produces more dark statistics. Eight billionaires–Bill Gates, Warren Buffett, Carlos Slim Helú, Jeff Bezos, Mark Zuckerberg, Larry Ellison, Michael Bloomberg, and Zara founder Amancio Ortega–now hold the same wealth as the poorest half of the world, it says. The poorest 10% gained just $3 a year between 1988 and 2011, while the wealth of the 1% rose 182 times as much, it goes on. (You get the picture: At some point, inequality statistics lose their ability to shock, like climate change predictions).
Oxfam calculates the numbers using a combination of Credit Suisse’s Global Wealth Databook 2016 and Forbes’s rich list. The bank reported in November that total global wealth in the previous 12 months grew by $3.5 trillion to $256 trillion dollars. “While the bottom half collectively own less than 1% of total wealth, the wealthiest top 10% own 89% of all global assets,” it pointed out.
It’s important to note that journalists like Felix Salmon and Ezra Klein have criticized Oxfam’s methodology and accused the charity of privileging publicity over statistical robustness. They have a point. The wealth numbers fail to account for debt and the fact that someone in a rich country is more likely to have access to credit than someone in, say, rural Kenya. “For the purposes of Oxfam’s calculation, a farmer in China’s rural Sichuan province with no debt but also very little money is wealthier than an American who just graduated from medical school with substantial debt but also a hefty, six-figure income,” Klein wrote following Oxfam’s previous report in 2015.
But these criticisms somewhat miss the point, as others have said. There aren’t that many high-prospective income/high-debt medical students in the global scheme of things, and computing in debt doesn’t make a huge difference to the numbers. And the inequality trends are still undeniable. The more interesting questions are one, how much inequality matters to the type of world we want to have, and two, if inequality is a serious structural problem (not just a moral problem), what to do about it.
The key point in Thomas Piketty’s blockbuster book Capital is that inequality feeds on itself. Wealth in the form of financial assets appreciates at a faster rate (roughly 5%) than wages that are tied to economic growth (forecast to be 2-2.5% this year). Slow growth widens the gap between the capital-rich and the rest, reasserting the kind inequality that the U.S. saw before World War Two and the Depression. Over time, as the wealth of the super-rich is passed on to the next generation, it’s likely to create a more dynastic, oligarchical form of capitalism, rather than the self-made type America prides itself on.
“The emergence of a new gilded age, with vast amounts of wealth concentrated in too few hands–the majority male–is economically inefficient, politically corrosive, and undermines our collective progress. A more equal distribution of wealth is necessary,” Oxfam says.
See more from the report here.