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THAT OXFAM REPORT
By Laura Black in All Sorts
the author argues that a focus on poverty rather than inequality will lead to actions that will help the poorTHAT OXFAM REPORT
“Inequality is Deepening!”
“26 Billionaires Worth More Than Half the Planet!” “World’s Richest Get Richer While the Poorest Get Poorer!”
“There are three kinds of lies: lies, damned lies, and statistics.”
Let me set out my stall on inequality: I do not think that inequality deserves the attention it gets. I believe that poverty is far more significant an issue, and one to which we should be devoting the attention and effort that inequality receives.
My thesis is this: resolving inequality does not generally help the poor. It helps the middle classes. It does this by shifting the tax burden from the middle to the upper, and it does this by bringing public services and spending to the middle.
The Living Wage is a good example: for the target group (a family with two adults and two children, one parent working full time the other working part-time, living in Auckland) the increase in their wages will be offset by the decrease in Working for Families payments, which are covered by taxes mostly paid by the middle class. All other things being equal, the middle class will likely demand a tax cut off those savings.
Having got that off my chest, let’s turn to Oxfam and those headlines.
Very early this year, Oxfam released its annual Public Good or Private Wealth report, which claimed that in the last year 2,200 billionaires worldwide saw their wealth grow by 12% and the poorest half (3.8 billion people) saw its wealth fall by 11%.
Oxfam claimed that 26 billionaires had the same wealth as the bottom half of the world’s population.
But like the Spirit Level before it, there are some problems with the maths. (For a reader on what’s worrying about the Spirit Level, have a look at the Guardian from 2010 https://www.theguardian.com/commentisfree/2010/jul/08/spirit- level-book-critique).
Firstly, wealth is a really difficult measure. A lot of rich people (even Donald Trump for a while) have negative wealth – their debts temporarily or by design overwhelm their assets. Middle class people have student loans and mortgages, credit card debts, which they will pay off from the cashflow of a good income, but which in a snapshot, lowers their wealth.
So they’re going to be ok; they are definitely not by any reasonable definition, poor. Except for Oxfam’s report in which they are.
It shows in the source data Oxfam used: the bottom 10% for wealth contains a substantial number (roughly 160 million people) of North Americans and Europeans, whereas the next 10% has almost none.
The second problem is measuring the wealth of the “bottom half”. For starters, a shrinkage in half the world’s wealth of 11% would have meant a worldwide recession so far in advance of the GFC in 2008, we would ALL have noticed it.
It is because the report doesn’t use purchasing power as its basis (which matters – a cup of rice in NZ costs a lot more in absolute currency than a cup of rice in India), but exchange rates. Which fluctuate a lot but which may not affect the purchasing power of lower income people by much.
So that in 2018 the US dollar appreciated against the Nigerian Naira, the South African Rand, and the Indian Rupee, immediately made Americans (with low debt) richer, and Nigerians, South Africans, and Indians a whole lot poorer. It is also really difficult to measure “wealth” via ownership in communities where access to productive land isn’t via title and ownership.
The upshot is, the Oxfam report doesn’t really lead us to anywhere useful. Far more useful, I think, are things like MSD’s hardship indicators which include access to:
• Clean drinking water
• Sanitation and waste disposal
• Adequate food / nutrition
• Hot running water
• Suitable clothes and shoes
• Adequate housing – shelter / warmth
• Dental and medical care as required
• Mains electricity or equivalent
• Household durable goods: food storage and cooking, sleeping,
cleaning and maintenance, having people around, ......
• Transport (for employment, supplies, ‘helping’, children ...., leisure)
• ICT including a computer in the household and broadband internet
• Social engagement that involves financial cost
• Financial resources to cope with unexpected essential expenses
And which are, collectively, an excellent way to define whether a family is experiencing poverty, while giving us enough to go on that we can focus assistance on the missing bits.
A focus on poverty will lead to us actually doing something that will help the poor.
A focus on inequality, and dramatic but misleading statistics, won’t.