Inequality is worse than you think. And yes, we have the data

Nick Galasso Inequality, Methodology, Research

Our recent report on global inequality faced criticism from some voices in the sector and beyond. Nick Galasso explains why the critics are wrong and why we’re so sure of our data.

Oxfam’s recent assessment on the growing global gap between the rich and the poor is shocking: just 8 men now have as much wealth as the poorest 3.6 billion people. This is a sobering and eye-opening estimate that we have calculated and released to sound the alarm yet again on the global problem of income and wealth inequality.

Our report has received a lot of media attention here in the US and around the world, but there’s also been a critic or two. In the recent piece, “Inequality Is Bad, But Not as Bad as Recent Report Claims,” Global Citizen staff suggested that Oxfam’s methodology for calculating global wealth “is flawed in a few significant ways.” We beg to differ.

For our calculation, Oxfam relied on the analysis of renowned economists who lead Credit Suisse’s team charged with calculating the global wealth distribution. These guys are the experts to ask: how bad is global wealth inequality?

Global Citizen also claims that our methodology is flawed – because we omit healthcare, education, housing and income from our measurement of wealth.

Extreme inequality actually undermines efforts to help reduce poverty
 While healthcare and education are pertinent considerations in a holistic assessment of wellbeing, they are outside the scope of what we explicitly claim to be comparing Рwealth. Wealth, according to Credit Suisse, includes the value of financial assets plus real estate owned by households, minus their debts. That includes housing.

As far as income is concerned, well, that’s not the same thing as wealth. Wealth is the amount an individual owns at a given point, made up of all their financial and non-financial assets, including property, minus any debts. It is possible for someone with high net wealth to have a low income – for example a retiree who owns a house and has investments – and vice versa. Usually wealth and income are correlated – so that those with the highest incomes tend to have the greatest wealth.

Global Citizen staff also claim that our most recent report “fails to stress the scope of poverty reduction around the world.” But here’s a quote from the first page: “Hundreds of millions of people have been lifted out of poverty in recent decades, an achievement of which the world should be proud.”

Indeed, it’s great news that the number of people living in extreme poverty (on less than $2 a day) halved between 1990 and 2010. Yet many of those who escaped extreme poverty -maybe they earn $2.10 a day now rather than $1.90 – still face a daily struggle to put food on the table, pay for their children’s education or buy medicine when they are sick. In a world where 1 in 10 people live on less than $2 a day and 1 in 9 of us goes to bed hungry every night there is can be no room for complacency. Extreme inequality traps people in poverty and must be stopped – 700 million more
people would not be living in poverty today if action had been taken to reduce the gap between rich and poor.

The World Bank agrees – it has said that eliminating poverty will be impossible unless we simultaneously act to close the gap between rich and poor. The bottom line is that we cannot end poverty if inequality is not tackled. 700 million more people would not be living in poverty today if action had been taken to reduce the gap between rich and poor.

Inequality is not inevitable. It is a political choice Extreme inequality actually undermines efforts to help reduce poverty. And the power concentrated in the hands of the wealthy prevents the necessary policy changes that would push our economy to be more equitable.

That’s what our stat shows. It is indeed meant to shock, to spark conversation, and to enable us to be heard when we push for specific changes in our political system and economy that will reduce poverty. And the evidence is that this stat is extremely effective at accomplishing its goal. It is by far the most attention-getting single piece of information that Oxfam publishes, and it helps mobilize hundreds of thousands of people to take-action around the world.

Oxfam also puts out hundreds of thousands of words of research in gloriously wonky detail every single year about the underlying causes and solutions to poverty and inequality, but this single stat dwarfs them all when it comes to sparking discussion. That’s probably why some critics are more apt to focus on it than the other 36 pages in the report, or anything else we publish.

No stat is perfect, this one is no exception. But it happens to be immensely powerful in pushing people to pay attention and act. It’s also factually correct.

Inequality is not inevitable. It is a political choice our leaders make every day, with every law they pass and every regulation they write or dismantle. Here’s hoping Global Citizen staff and every one of you will join us to urge our leaders to take urgent action against extreme inequality.

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This blog was originally posted on Global citizen.


James Eaton-Lee