For the record, I am a devout capitalist. I believe in free markets, liberal democracy, and private ownership of property. Absent government, a smart capitalist will create sustainable businesses that preserve and nurture human and physical capital. A smart capitalist always chooses to protect their people and environment over a pure short-term bottom line approach to business and profitability.
I heard and processed some troubling statistics. A black eye supposedly delivered by capitalism to humanity. According to the non-profit Oxfam’s press release, “Pandemic creates new billionaire every 30 hours while a million people could fall into extreme poverty at the same rate in 2022” The brief shows that 573 people became new billionaires during the pandemic, at the rate of one every 30 hours. We expect this year that 263 million more people will be pushed into extreme poverty, at a rate of a million people every 33 hours.
“It’s no accident that we are seeing staggering levels of inequality in the US and globally. It’s by deliberate design. For decades, the ultra-wealthy and corporations have used their economic might to pressure those in power to write the rules so they can avoid taxes, pay poverty wages, and skirt responsibility. Meanwhile, working families are feeling the sharp edge of economic insecurity and loss of hope in the future” said Abby Maxman, Oxfam America President and CEO.
The indictment of inequity from Oxfam America’s President ignoring the 194 different political and economic systems employed by those countries to achieve their standard of living. Oxfam’s naked assertion is that the US is somehow responsible for 194 other regimes around the world, many of whom are democratic embracing economic liberty. This is a case of making wealth statistics indefensible under the guise of another agenda.
Wealth inequality: According to Oxfam’s analysis of the latest data from Forbes27:
• There are 2,668 billionaires in the world, 573 more than in 2020 when the pandemic began.
• These billionaires are collectively worth $12.7 trillion – a real-terms increase of $3.78 trillion (42%) during the COVID-19 pandemic.
• Total billionaire wealth is now the equivalent of 13.9% of global gross domestic product (GDP), up from 4.4% in 2000.
• The richest 10 men have greater wealth than the poorest 40% of humanity combined.
• The richest 20 billionaires are worth more than the entire GDP of sub-Saharan Africa.
• Elon Musk, the wealthiest man in the world, is so rich that he could lose 99% of his wealth and still be in the top 0.0001% of the world’s richest people. Since 2019 his wealth has increased by 699%. Excerpted completely without alteration from “PROFITING FROM PAIN”.
Broad brush statistics comparing the western standards of living like the US with sub-Saharan Africa, do not serve the greater argument. GDP per capita (current US$) in Sub-Saharan Africa is $1,501 versus the US’s GDP per capita (current US$) of 63,206.50. (World Bank 2020) Of course, the US lives a privileged existence by comparison. (see below)
With that being said, I am going to agree, in part, with Ms. Maxman’s “it’s no accident” statement. Follow along with me if you would look at the graphic below.
Please pay close attention to the “Crony Capitalism” in the red. And now let me give your Ms. Maxman’s prescription to correct the global inequity injustice.
“Governments must act now to rein in extreme wealth. They must agree now to increase the taxation of wealth and corporate windfall profits and to use this money to protect ordinary people across the world and reduce inequality and suffering.” Excerpted from “PROFITING FROM PAIN”
One of the parties literally responsible for the “Crony Capitalism” – our governments should be entrusted with the solution to global inequity? Really?
In 2014 The Economist devised a crony-capitalism index to measure whether the world was experiencing a new gilded age, characterized by the modern equivalent of the robber barons in late-19th-century America.
By contrast, around four-fifths of American billionaires, accounting for 90% of total wealth, operate in non-crony sectors. Led by a boom in tech valuations, wealth in non-crony sectors rose from 11% to 17% of GDP between 2016 and 2021. But in recent years America has opened investigations into the firms of its behemoth-building billionaires. Tech firms do exhibit some of the cosseted characteristics of crony industries: they spend heavily on lobbying to defend their juicy market shares, for instance. Reclassifying technology firms as crony would increase America’s crony wealth from 2% to 7% of GDP.
In 2016, when the Economist visited their index, they found that crony capitalists had thrived during the 2000s but they are beginning to feel the heat from trustbusters in the rich world and anti-corruption purges in developing countries. How has crony capitalism performed since?
The United States ranking at #17 is not a glowing endorsement of our current economic incarnation. “Crony Capitalists” persist in the US, as American politics is exploding with money’s exploitation over the last two decades. We can and should do better. Our social contract with our government demands as much.
Over the past decade, China has minted new billionaires faster than you can say, Ralph Lauren. In 2010 there were 89. Now there are 714 with a combined wealth of $3trn, around 70% of the amount in America. The crony-sector share of GDP has changed little in six years, though its share of overall billionaire wealth has fallen from 44% to 24%. Even China’s (state-sponsored) capitalism’s wave of prosperity lifted all boats.
Please note the uptick in wealth from crony sectors in 2021 (% GDP wealth from Crony Industries). A bad sign. Oxfam’s basic assertion (below) should cause each of us to sit up and take notice and question. Take time to dive into the deep end of statistics and their meaning.
” 573 people became new billionaires during the pandemic, at the rate of one every 30 hours. We expect this year that 263 million more people will be pushed into extreme poverty, at a rate of a million people every 33 hours.”
Did those new billionaires come from autocracies, like China and Russia? Oxfam is suggesting the liberal democracy’s western world is responsible for the growing inequities. I will investigate further.
Oxfam’s claims make for great sound bites, headlines, and friction but little else from a substance standpoint.
Until next time. Travel safe.