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In recent months the global elite, including the Catholic head of the Bank of England Mark Carney, have joined Pope Francis in expressing concern about inequality. The issue was also discussed at Davos last week. Within this debate on inequality, statistical gymnastics are becoming more sophisticated and thus obscuring important issues such as how to improve the position of the world’s poorest people.

For example, last week Oxfam published a report arguing that inequality is rising. ‘The combined wealth of the richest 1 per cent will overtake that of the other 99 per cent of people next year unless the current trend is checked.’ What did not make the front pages was the fact that the share of wealth held by the richest 1 per cent is lower than it was 15 years ago and that Oxfam’s numbers for next year are an extrapolation of trends in asset prices caused largely by quantitative easing and unlikely to be repeated.

Indeed, Oxfam’s figures are as meaningless as its extrapolations are misleading. The inequality figures are based on what is known as ‘net wealth’ – total wealth minus debts. On this measure, for example, a US Harvard MBA graduate just joining a hedge fund is likely to have negative net wealth. Thus, on the basis of Oxfam’s figures, the world's least wealthy 10 per cent contains almost no Chinese; North America, on the other hand, with all those potentially rich young people borrowing to buy houses and study for MBAs, has 8 per cent of the world’s very poorest people; and a subsistence farmer in Africa earning a dollar a day would find himself amongst the world’s richest 70 per cent and quite possibly further up Oxfam’s net wealth distribution than most British graduates.

Meaningless figures deflect attention from serious issues. There is much good news when it comes to poverty reduction, and all Catholics should want the poor to become better off (spiritually and materially). The proportion of very poor people in the world has fallen more rapidly than at any other time in history. Pope Francis’ claim that: ‘While the income of a minority is increasing exponentially, that of the majority is crumbling’ is, fortunately, demonstrably and objectively untrue. These improvements in the position of the poor happen when there is peace within countries, good governance, the protection of property, openness to trade and good conditions for business to establish. There is much to be done and much to be debated about how to improve matters. Oxfam’s presentation of statistics does not help clarify these debates.

What really matters is how people become rich – are people enriching themselves through enterprise whilst helping to make others better off too, or are they enriching themselves at the expense of others through corruption and cronyism? It should be noted too that, in a free and justly ordered society, all will benefit even if outcomes are more unequal. This is not ‘trickle-down’ economics but the outcome of enterprise. In Mao’s China, tens of millions were starving in a shared equality of misery. Today, hundreds of millions of Chinese are more prosperous than in the 1970s.

In fact, we are beginning to look more and more like ‘one world’ – the slogan of Oxfam and other campaign groups when I was at university. If you look at the distribution of world incomes in 1970, it very clearly showed two worlds. The vast majority of people in poor countries earned much, much less than anybody in rich countries. If you look at the same graph today, the poor countries are catching up (rapidly). Oxfam admit this. They now argue ‘it is inequality within countries that matters most to people’. This change of focus is a regrettable one for Catholics who think of solidarity in worldwide terms.

This article was originally published in The Tablet.

Comments (1)
Assuming the people speaking for Oxfam aren't fools, one has to question their good faith in continuing to use misleading statistics. I have noticed in debates during recent months a strong reluctance on the part of 'opponents' to recognise that easily the most effective way to help the poor is economic growth. Those who prefer to press for redistribution instead (whether of income or wealth) would appear to be keener on hurting the 'rich' than on helping the 'poor'. This is a pity, as there seems to be no good reason to adopt an adversarial stance if we all genuinely want to help the poor.

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As in all IEA publications, the views expressed in this blog are those of the authors and not those of the Institute (which has no corporate view), its managing trustees, Academic Advisory Council or senior staff.

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