Should we (and everyone in Davos) worry about extreme wealth? New Oxfam briefing

January 21, 2013

     By Duncan Green     

Good to see Oxfam highlighting inequality in its media briefing ahead of this week’s annual gathering of power & plutocrats in Davos.inequality cartoon Because inequality is about the relationship between different social groups, it is inherently more political and more controversial than poverty. As our head of campaigns Ben Phillips, who packs a mean sound bite, said in his Al Jazeera interview, ‘’We sometimes talk about the ‘have-nots’ and the ‘haves’ – well, we’re talking about the ‘have-lots’.’ (I misheard it as ‘have yachts’, which would have been even better….)

An extreme concentration of wealth not only misallocates resources, it undermines political processes, as those who control wealth pay for increased lobbying, which in turn leads to decisions that further skew wealth (Joe Stiglitz has highlighted this kind of destructive feedback loop in relation to the finance industry).

The briefing calls for an end to ‘extreme wealth’. I helped out with our first killer fact of 2013:

The top 100 billionaires added $240 billion to their wealth in 2012 – enough to end world poverty four times over.’

I suspect this one could be around for a while, so here are the sources for the calculation:

First, Bloomberg for the increase in income of the richest 100 people:

‘The world’s 100 richest people added $241 billion to their combined wealth in 2012, according to the Bloomberg Billionaires Index. The top 100 controlled an aggregate $1.9 trillion as calculated by the prices on world stock markets December 31, for an average of nearly $20 billion apiece.’

Then the Brookings Institution calculated the money required to lift everyone in the world over the $1.25 a day line

‘Providing every person in the world with a minimum income of $1.25/day in 2010 would [cost] just $66 billion.’

Divide Bloomberg by Brookings and you get the figure of (roughly) four.

The more I think about it, the more astonishing this number is. A quarter of the additional wealth accumulated in 2012 by 100 people could end extreme poverty for 1.4 billion people – that’s a ratio of 1 to 14 million. So if each of the world’s top 100 billionaires gave up 25% of their income (we could call it a ‘tax’ or ‘extreme wealth surcharge’…), they could each take 14 million people out of extreme poverty. OK I know it’s not that simple, you can’t just get money directly to poor people (though it’s getting easier with mobile banking etc), but still, the disparity in scale is breathtaking.

January 21, 2013
Duncan Green