“Economic inequality is out of control,” according to Oxfam, which releases a dire-sounding report about inequality every year on the eve of the World Economic Forum in Davos. The 2020 edition faults the supposed “dominance of neoliberal economics, which values deregulation and reduction in public spending,” and the alleged existence of “monopolies,” for “accelerating economic inequality.”
“Oxfam focuses primarily on wealth inequality, because it fuels the capture of power and politics, and perpetuates inequality across generations,” the report states.
While its authors cite a variety of statistics, and admit the difficulty in measuring wealth inequality, they leave the reader with the unmistakable impression that the “problem” of the wealth gap is growing.
Not so, according to a new report from the Center for Political Studies (CEPOS), which is based in Denmark.
Oxfam’s annual report “gives a misleading picture of wealth,” CEPOS states. “Global wealth [inequality] has actually reduced over the past 20 years.”
Part of the problem rests in Oxfam’s flawed measures, CEPOS holds. For instance, the 2019 Oxfam report stated that 26 people owned as much wealth as the bottom 50 percent of the world’s population.
However, “The wealth of the 26 richest [people] is 0.4 percent of total global wealth,” the CEPOS report states – and it’s falling.
“The richest 10 percent’s share of global wealth has been reduced from 88.5 percent in 2000 to 81.7 percent. in 2019,” said CEPOS chief consultant Jørgen Sloth. “Looking at other measures of global wealth inequality, such as the Gini [coefficient], and the share of the [global] wealth held by the top one percent and the top five percent, inequality in global wealth has also declined since 2000.”
Money has the ability to produce more wealth through the wonders of investment. Capital creates jobs, which in turn create a demand for labor. The law of supply and demand dictates that a tighter labor market raises wages.
CEPOS notes that much of the global reduction in poverty during the last two decades can be attributed to one country: China.
The rise of China has been the main driver of global wealth convergence, as Beijing has soared into the primary rival of U.S. economic dominance.
Given President Xi Jinping’s ironclad grip on the Chinese Communist Party, and the party’s grasp on every level of society – including the legal Protestant and Roman Catholic Churches – this presents concerns all its own. However, before the signing of the “Phase One” trade agreement, many Chinese companies had begun to offshore to Vietnam, Malaysia, and other regional hubs with lower-paid workers. This may, in turn, lift those nations out of poverty.
Oxfam’s insistence on measuring “inequality” misses the mark on several fronts. Most importantly, it ignores the key issue of whether actual living standards are rising or falling. (After all, the world’s population can live in equal destitution and appear to be an improvement under Oxfam’s standards.) The good news is that global GDP per capita has more than doubled since 2000.
Instead of embracing free market economics, the latest Oxfam report proposes a global wealth tax. This comes as nations that once collected such a tax have abolished wealth taxes, discovering the hard way that they reduce investment, decimate tax revenues, and cause the most productive citizens to emigrate.
But even in terms of its chosen analysis of wealth inequality, Oxfam’s report is misleading, CEPOS states. The global wealth gap has been falling, according to the Danish think tank. To base global tax policy on a flawed measure would compound the damage.
You can read the full CEPOS report, in Danish, here.
(Photo credit: Public domain.)