Eight people own as much as half the world

Just when it seemed we might be running out of superlatives to demonstrate the monstrous inequality of today’s capitalism, Oxfam has provided the most dramatic example yet: Eight individuals, all men, possess as much wealth as the poorest 50 percent of humanity.

Eight people have as much as 3.7 billion people.

How could this be? Oxfam calculated that 85 people had as much wealth as the poorest half of humanity in 2014, a staggering finding that researchers with the anti-poverty organization discovered through crunching numbers provided by Forbes magazine in its rich list and by the investment bank Credit Suisse in its global wealth distribution report. Oxfam found wealth distribution to be even more unequal than did Credit Suisse, which calculated that the top one percent equaled the bottom 50 percent. Oxfam, in its report, “An Economy for the 99%,” released this month, explains:

“This year we find that the wealth of the bottom 50% of the global population was lower than previously estimated, and it takes just eight individuals to equal their total wealth holdings. Every year, Credit Suisse acquires new and better data sources with which to estimate the global wealth distribution: its latest report shows both that there is more debt in the very poorest group and fewer assets in the 30–50% percentiles of the global population. Last year it was estimated that the cumulative share of wealth of the poorest 50% was 0.7%; this year it is 0.2%.” [page 11]

 

The "wealth pyramid" as calculated by Credit Suisse. Oxfam's findings are that even this is an under-estimation of inequality.

The “wealth pyramid” as calculated by Credit Suisse. Oxfam’s findings are that even this is an under-estimation of inequality.

Because Oxfam includes among the bottom 50 percent people in the advanced capitalist countries of the Global North who have a net worth of less than zero due to debt, some critics might argue that these people are nonetheless “income-rich” because they have credit available to them and thus distort the inequality outcome. Oxfam, however, says that almost three-quarters of those among the bottom 50 percent live in low-income countries, and excluding those from the North with negative wealth would make little difference in aggregate inequality. That total debt is equal to only 0.4 percent of overall global wealth. The Oxfam report says:

“At the very top, this year’s data finds that collectively the richest eight individuals have a net wealth of $426 bn, which is the same as the net wealth of the bottom half of humanity. …  [E]stimates from Credit Suisse find that collectively the poorest 50% of people have less than a quarter of 1% of global net wealth. Nine percent of the people in this group have negative wealth, and most of these people live in richer countries where student debt and other credit facilities are available. But even if we discount the debts of people living in Europe and North America, the total wealth of the bottom 50% is still less than 1%.” [page 10]

Profiting from cheap labor and forced labor

We are accustomed to hearing that chief executive officers in U.S.-based corporations earn hundreds of times more than their average employee, but this dynamic can be found in the developing world as well. No matter where the CEO lives, brutal and relenting exploitation of working people is the motor force of inequality. Oxfam reports:

“The CEO of India’s top information firm earns 416 times the salary of a typical employee in his company. In the 1980s, cocoa farmers received 18% of the value of a chocolate bar — today they get just 6%. In extreme cases, forced labour or slavery can be used to keep corporate costs down. The International Labour Organization estimates that 21 million people are forced labourers, generating an estimated $150 bn in profits each year. The world’s largest garment companies have all been linked to cotton-spinning mills in India, which routinely use the forced labour of girls.” [page 3]

appleoxfam-graphicPeople become sweatshop workers out of desperation; often these are men and women driven off the land their families had farmed for generations. Land, even small plots that provide only subsistence for those who work it, represents wealth taken away when those subsistence farmers are forced into migrating into urban slums. Displacement from global warming is also a factor.

“[M]any people experiencing poverty around the world are seeing an erosion of their main source of wealth — namely land, natural resources and homes — as a consequence of insecure land rights, land grabbing, land fragmentation and erosion, climate change, urban eviction and forced displacement. While total farmland has increased globally, small family farms operate a declining share of this land. Ownership of land among the poorest wealth quintile fell by 7.3% between the 1990s and 2000s. Change in land ownership in developing countries is commonly driven by large-scale acquisitions, which see the transfer of land from small-scale farmers to large investors and the conversion of land from subsistence to commercial use. Up to 59% of land deals cover communal lands claimed by indigenous peoples and small communities, which translates to the potential displacement of millions of people. Yet only 14% of deals have involved a proper process to obtain ‘free prior and informed consent.’ Distribution of land is most unequal in Latin America, where 64% of the total wealth is related to non-financial assets like land and housing and 1% of ‘super farms’ in Latin America now control more productive land than the other 99%.” [page 10]

As entire areas of the world like Latin America have been plundered for the benefit of multi-national corporations based in the Global North, with those benefits flowing to the executives and financiers who control those corporations, it is no surprise that most of the wealth remains concentrated in the advanced capitalist countries. Although steering well clear of so much as a hint of the imperial nature of uneven development, the Credit Suisse report that Oxfam drew upon does note that North America and Europe together account for 65% of total household wealth with only 18% of the world’s adult population.

The sociologist James Petras estimates that the corporations and banks of the North took US$950 billion of wealth out of Latin America for the period 1975 to 2005. Thus it is no surprise that global inequality, when measured by the standard statistical measure of income distribution, the gini coefficient, is greater than inequality in any single country.

More programs on the way to make inequality still worse

Few countries of the Global North are more unequal than the United States, the imperial center of the world capitalist system that seeks to impose its ways and culture on the rest of the world. The new Trump administration is determined to make U.S. inequality even more extreme. Not only through intentions of cutting taxes on the wealthy and corporations, but via many less obvious routes.

For example, the Center on Budget and Policy Priorities reports that the repeal of Barack Obama’s Affordable Care Act, a process already in motion, would result in tax cuts of $2.8 billion per year for the country’s 400 highest-income taxpayers. Special Medicare taxes that fund subsidies for low-income United Statesians to buy insurance under the act are assessed only on those with annual incomes higher than $200,000. Conversely, the loss of tax credits to buy health insurance would lead to a tax increase for about seven million low- and moderate-income families.

Through the end of 2016, the central banks of Britain, the European Union, Japan and the United States have shoveled a colossal total of US$8 trillion (€7.4 trillion) into their “quantitative easing” programs — that is, programs that buy government bonds and other debt in an effort to boost the economy but in reality does little other than fuel stock-market bubbles and, secondarily, real estate bubbles. Vast rebuilding of crumbling infrastructure — a program that would actually put people to work — would have cost less.

CEO-to-worker ratioStandard economic ideology insists that the real problem is that wages have not fallen enough! Consistent with that, the Federal Reserve released a paper in 2015 claiming that “rigidities” “prevent businesses from reducing wages as much as they would like” during economic downturns.

Oh yes, falling wages instead of stagnant wages will bring happy times! Never mind that productivity has soared over the past four decades, while wages have consistently not kept pace. The average Canadian and U.S. household would earn hundreds of dollars per week more if wages had kept up with rising productivity, while wages in Britain and many other countries are also lagging.

What to do? The Oxfam report, in its conclusions, advocates a switch to a “human economy,” one in which governments are “accountable to the 99%,” businesses would be oriented toward policies that “increase prosperity for all,” and sustainability and equality would be paramount.

“Oxfam firmly believes humanity can do better,” its report concludes. Surely we can do better. But not under capitalism. Does anyone believe that the world’s elites, who profit so enormously and believe they can build a wall high enough to keep the world’s environmental and social problems away, are going to suddenly accept business as usual can no longer go on and willingly give up their enormous privileges?

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21 comments on “Eight people own as much as half the world

  1. biowrite says:

    Reblogged this on The BioWrite Blog and commented:
    I am reblogging this, which I consider essential reading.

  2. newtonfinn says:

    Standing Rock is a key–the infusion of anti-capitalist activism with a universal, elemental form of spirituality flowing from indigenous culture and captured in a powerful meme by Schweitzer: reverence for life. Untapped resources for radical social change and deep environmental healing lie in this direction, if we can overcome our conditioned, reflexive secularism and expand our minds and hearts to receive the gifts.

  3. Geminijen says:

    This is a brilliant piece that puts in one place all of the intersecting ways that the engine of developmental inequality works in advanced financial capitalism — from traditional individual wage labor exploitation, to monetary manipulation through the financial institutions to the wholesale redistribution through land redistribution to traditional tax redistribution — I’m sure I missed a couple. I would also be interested to see how the changing role of women as they enter the formal labor market while still performing labor outside the market plays into the changes. The information is so much richer than the Piketty’s approach, I will be studying it and appropriating it for used in my own analysis of the changes brought about by the cataclysmic transitions in the economy in the 50 years.

    • Thank you for your generous comments. Readers can follow the links to discussions of some of the issues behind inequality, and of course there is so much more than I didn’t touch on today. Certainly, the unpaid labor of women does much to prop up the capitalist system, a subject that needs much more attention.

  4. Tyler says:

    One wonders how much farther the suffering must accelerate for the proletariat to revolt.

    • That is the most important question, isn’t it?

      • Tyler says:

        Sometimes I wonder if the proletariat has become so effectively brainwashed that they’ll never rise up against their masters.

        • newtonfinn says:

          So do I, Tyler. I’m sure that all readers of this blog have these periods of despair, feelings of futility. I’ve spent most of my life fighting the bastards, including the building of a powerful citizens movement that improved the quality of life in a rustbelt city and twice came within a hair of seizing governmental power. I don’t second guess what I did for a moment, but as I grow old and my vitality ebbs, I’m sensing something new emerging in the activist arena–a mode of challenge to the status quo that may ultimately prove more effective than just digging in and fighting the bastards. The following link touches upon this, as does the Charles Eisenstein video I linked into an earlier comment. As my aunt, a formidable feminist warrior, always loved to say in parting: onward and upward.

          http://www.counterpunch.org/2017/01/19/its-high-time-for-a-politics-of-desire/

          • Alcuin says:

            That was an interesting article at Counterpunch, newtonfinn. Even more interesting was the article by Chris Floyd on the sidebar, entitled Infinite Jest: Liberals Laughing All the Way to Hell. I used to read Chris Floyd more often, but his dark outlook (even if true) depressed me so much that I found it better to not read him. In his article, he has a photograph of Bill Clinton with his head thrown back, laughing, sitting in a chair not 8 feet from Vladimir Putin, whose government owns 20% of U.S. uranium production. That was in 2010.

            This comment may seem to be off-topic, but I don’t think it is because the mind-sets of Clinton and Trump are in no way different than that of the eight men referred to in the post. Those eight men just got there first and could easily be knocked from their perches. My inclination would be to re-title Floyd’s article to Infinite Jest: Liberals and Conservatives Laughing All the Way to Hell.” and taking all the rest of us with them.

  5. There’s a mixture of good and bad data in this article. The chart on iPhone costs is based on industrial age accounting where you list material costs and labour and everything else is “profits”. But for an information good the largest chunk of costs (and customer value) is in R&D and in the chart that’s buried in the category “profits”. Apple’s profits are high, but not over 50%.

    As to aggregating wealth of very poor people, it’s misleading in various ways. Net wealth may be negative because of debt. Some real wealth may be invisible such as use of land not recorded anywhere. See here:
    http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding-up-the-wealth-of-the-poor/

    Your main points of course stand, there’s too much inequality, but if one wanted to get into the next level of detail there’d be scope for nitpicking.

    I’m all for getting into detail and deconstructing wealth for this and another reason: It’s kind of meaningless to compare Mark Zuckerberg’s wealth to an ordinary person’s savings. They’re acquired differently (stock valuations vs. saving cash) and they’re used differently (political power, security, consumption) and they have different macro-economic effects. It’s more meaningful to establish categories and compare within those, for example equality of consumption, equality of access to healthcare, housing etc. moving up to categories like power to direct investment and political power.

    All of these matter but not the same way, and I believe discussion will be more constructive if framed within each category. For example if you say “Inequality is really bad because some people have super yachts” some rich people will say “my money what’s your problem” and others will say “but I donate the bulk of my wealth to charity or invest in startups”. Society will get further by framing this specifically as inequality of consumption, of power to direct investment, of power to direct charity/common goods, etc.

    • There is no single way to measure inequality, which is why different studies come up with different results. Measuring wealth is a better measurement of inequality than simply income, but how to measure wealth is a problem with no single answer. Certainly, there is further scope for debate.

      As to Apple, its research and development costs surely are larger than the value of the labor put into iPhones, but that is a result of the sweatshop wages paid by its subcontractors in China. I wrote a bit about this in 2013 when discussing a paper written by Yuqing Xing and Neal Detert, who found that almost all of the value created by iPhone production in China goes to manufacturing corporations outside of China, where only the final assembly is conducted. The article, “More capitalism for Chinese ‘Communist’ Party” is here, and the Xing/Detert paper is here. Some analysts do find this paper controversial.

      Inequality of consumption is a function of inequalities in wealth and income, and although consumption trends are surely useful, I’m not sure that would necessarily shed significant further light. To those who argue that some super-wealthy people donate large sums to charity, I would point out that these donations usually function to advance personal goals. For example, there are three billionaire families that dominate funding of educational initiatives in the U.S. — but all this funding goes toward privatizing schools and advancing narrow corporate agendas, including eliminating public control of education. Hardly a good outcome. This article in Dissent is highly recommended: “Got Dough? How Billionaires Rule Our Schools.”

      But even had such charity work truly gone to benefit society, why should policy be decided by a handful of billionaires? Shouldn’t the public have a say in public policy? Shouldn’t education professionals be in charge of educational institutions rather than a handful of billionaires and hedge funders? And that is before we begin to discuss the question of where that enormous concentrated wealth comes from — systematic exploitation of working people.

      Profit derives from the surplus value extracted out of employees, and profit is converted into wealth, which can be passed down to the next generation. We’ll get nowhere without understanding this basic fact.

      • I disagree that [wealth] derives from the surplus value extracted out of employees as a general statement. It does in the industrial context, but wealth also comes from land rents, artificial IP monopolies, from natural monopolies such as Facebook, and as artificial assets created by banks. More labour power would help in one case but not the others. Also these nominal wealth numbers may not be fully comparable in real terms. You can to some extent convert stock value, sovereign bonds or central bank money to cash (or use them to buy tangible things) but if you did that wholesale systemic effects would occur and the numbers would change. For example I don’t think these 8 guys could actually go out and buy half of all houses, cows, etc. in the world.

        Also on the spending side, if the CEO of Zara uses the profits of sweatshop labour to buy a mansion you could make a moral case based on inequality of consumption. I think Bill Gates and Warren Buffett would be on your side. But if you complain that Gates improperly directs health policy in the third world, or that Buffett has excessive control of industrial investments in the US, that case is at least different. If we treat all inequality as the same thing all we can say is “First, overthrow capitalism…” and I don’t think that most people, right now, would have confidence in what that brings the day after. If we see capitalism as a mechanism rather than an ideology, we can take reformist paths. For example ask if IP rights serve the public interest, or require that charitable foundations are publicly governed in some way.

        • I would argue that surplus value underlies profits in essentially all contexts. This is not always direct, however. The vast sums of money that financiers scoop up through speculation, for example, do derive from surplus value originally extracted in production.

          The industrialist pockets far more money than he or she can use for personal consumption, investment or mergers and acquisitions. That excess capital goes into speculation, and financiers take healthy cuts of that money as their compensation. Finance capital does not create wealth; it confiscates wealth.

          That Facebook or Microsoft or similar companies extract monopoly rents does not alter the fact that they reap enormous profits off the backs of their employees, and in the case of social-media outlets, off the free labor of their users, who after all provide the “content” gratis.

          Land wealth is less clear-cut, yes, but your typical real estate management company is still extracting surplus value from the employees who make the company run. And the wealthy person who scoops up land or real estate got the capital to do so either by extracting surplus value from their employees in other businesses or inherited the money from a parent or other family member who did the same. So this is simply putting surplus value to use in other ways to generate new profits.

          Capitalism is a mechanism, but it is also an ideology and, most importantly, a social relation. Capitalism is a totalizing system that requires a sweeping, dominant ideology because it brings ever more spheres of human life and the natural world under its control. This is why it is so difficult for people to imagine a world beyond or outside capitalism. Indeed, as Fredric Jameson famously put it, it is more difficult to imagine the end of capitalism than the end of the world.

          • I’m still not sure that surplus extraction is the problem. In an ideal world firms (or whatever they’re called) exist to provide goods and services that the public value, and to engage the members of the firm in fulfilling and valued work. Still, these firms have to set aside a positive surplus. If they don’t, if they operate on zero surplus by paying more wages, the firm can’t grow or adapt or respond to challenges. Zero surplus may be a limit that mature firms tend to, but if it was the norm the whole economy would be far too static. Even if you replace money by some other token of virtue, like popularity or bureaucratic favour, the argument still applies. The firm’s leadership wants to accumulate more points that they then spend to try something new or recover a miss-step.

            The problem is more what firms do with the surplus, who appropriates it, and what incentives this produces. Apple has far more surplus than it knows what to do with, so much so that hoarding it has a dampening effect on the economy. Zuckerberg has absurd wealth because people value Facebook (why? but whatever). If he shared all this surplus with the few hundred employees who built the system it would be fairer but till far from reasonable. Network effects create runaway concentrations of surplus. Gates is rich because for a while network effects and copyright laws granted him a monopoly on office software. He used this power to squeeze customers more so than Microsoft employees. These customers, mostly other firms, then squeezed their employees to pay for Windows and Office. It’s all Milton Friedman’s fault with his dogma of shareholder value.

            Also on a different tangent, real value like land and goods is disconnected from financial value. Money, and other titles such as shares, are not value. They’re claims to value. All the mechanisms that generate money or other titles (unless the claim is generated by the very act of production, which in most cases it isn’t) represent parasitic claims on value created by others. Not just the surplus, all of it. The biggest offender is the housing market. When someone bids up a house in London, a bank creates a claim out of nothing with the house as collateral. The increase in value is either false (it’s a bubble) or it’s a parasitic claim on the surplus of artists, baristas, teachers, designers, booksellers, or whoever it is whose work makes London desirable.

            Finance is guilty of two quite distinct sins. It churns money and creams off profit regardless of losses, mostly from willing victims. For all the exotic instruments whose purpose is to increase the volume of trade, banks and brokers get rich by the pedestrian means of collecting fees. But if that’s all they did, the financial sector would suck the life out of the economy and deflate. To sustain itself, Capitalism has found ways to privatise the creation of completely new claims (bank money, shares, IP rights) that are completely divorced from and accrue to different people than the actual creation of value. It’s not just the surplus extraction of the industrial revolution. It’s that value is created over here by some hard working people, and at the same time claims to that value are created over there on behalf of someone completely different.

            • You’ve raised several excellent point here, Pavlos. In any economy, socialist or capitali0st, that relies on money, then firms would have to achieve some surplus, in order to fund investment, pay taxes and provide funds for social services. But the competitive dynamic of capitalism — specially, grow or die — mandates that the surplus (profits) continually grow, and in no small part this is driven by the ravenous demands of finance capital. Profits must be grow, because stock prices, at bottom, are a claim on future profits. If profits remain steady, the stock price doesn’t rise and Wall Street, the City, et. al, become very angry and do react.

              So, as you said, finance capital is a parasite that skims off wealth created by others, who don’t share in the wealth their work creates. But there is no neat division between financiers and industrialists. The captains of industry benefit personally from the whips of the financial industry, and speculation can’t exist without the surplus value created by industry. In turn, industrialists speculate with their massive wealth, and thus need a bloated financial sector, and finance capital routinely invests in industry. The two great halves of capitalism need each other at the same time they compete to split the pie between themselves.

              I don’t see that there is any strong distinction to be made between “excessive” surplus extraction and surplus extraction in the abstract. Under capitalism, there will be surplus extraction and that extraction will become more extreme, save for the points in time when mass social movements can temporarily reverse the trend. Speculation will tend to increase because there are too few investment opportunities in which to place all that capital, and during times of economic stagnation or recession, speculation will be more profitable than investment, thereby bloating the financial sector even more.

              Given that capitalism is a social relation, what we see is what we are going to get.

    • Geminijen says:

      Some of the categories you suggest are helpful but what I liked about the article is that it does try to show the interrelationship between political structural factors, tech factors, land use factors, how consumption factors like debt, relate to production factors, etc. By dealing with these factors as distinct categories, we sometimes obfuscate the dialects of the big picture (can’t see the forest for the trees) and the people have no idea of the imperialist dynamics of the neoliberal, let alone neoconservative, free trade agenda or the difference between them. At least this article, whatever it’s limitations, starts people thinking in a more holistic, less static direction & maybe I’m reading the wrong articles but I have seen very few articles like that unless they are just ideological treatises on imperialism.

  6. And even this isn’t enough for the billionaire elite. They won’t stop until they own everything – or until we stop them.

  7. […] Le 18 janvier 2017 – Source Systemic Disorder […]

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