Ridiculous: “Why Oxfam is getting it wrong about poverty” – CapX

Bilge from a right-wing pseudo-intellectual. I’ve never heard of this guy before, but he seems to be an expert in deception rather than analysis.

As it’s Davos time, Oxfam has issued its traditional demand for a handout.  Their wealth report this year informs us that a mere eight people have more wealth than the bottom 50 percent of the world’s population. This is entirely true of course. But Oxfam’s solution is that we should take it from the rich and […]Source: Why Oxfam is getting it wrong about poverty – CapX

This is an example of deceptive reasoning. Here’s my quick analysis:

Worstall writes:

>The result is that entrepreneurs get to keep some 3 per cent of the value of their creations. The other 97 per cent of the value flows to us consumers out here.
….
>Poverty exists and obviously we’d prefer that it didn’t. That’s why we need more rich people not fewer: because we need someone to create value for the rest of us to consume.

So he is equating “rich people” to “entrepreneurs” to “creators of value.” If only that were true. Although a small number of tech entrepreneurs get most of the publicity (Steve Jobs, Bill Gates, etc), most of the giant corporate profits are coming from increasing market power/decreasing competition in many markets. For example, few outside the industry think that the “financial services” industry (e.g. investment banking) creates value comparable to the huge profits it makes.

He is also using misdirection to imply that Sam Walton’s heirs were the entrepreneurs who created Walmart’s economic value!

Finally, he keeps using a “3 percent” number to imply that “the masses” get 97 percent of increasing economic value, and the ultra-rich get only 3 percent. In fact median income has not grown for several decades. While the overall GDP has doubled in the last 30 years, the extra income has gone entirely to the upper ten percent. (Median household income rose by 8% in the last 30 years.)
Sources: http://www.multpl.com/us-gdp-inflation-adjusted/table
https://fred.stlouisfed.org/series/MEHOINUSA672N

A slightly different way of measuring. Compare black and red lines.

figure-9-e1455724425470

So the blog post is a dishonest piece of fallacious reasoning. Is this typical of the Adam Smith Institute, where he is apparently based? Is this the average reasoning level of right-wing intellectuals today?

By the way, I’m sure there are problems with Oxfam’s report – just not the ones he claims.

Advertisements

2 thoughts on “Ridiculous: “Why Oxfam is getting it wrong about poverty” – CapX

  1. “So he is equating “rich people” to “entrepreneurs” to “creators of value.” If only that were true. Although a small number of tech entrepreneurs get most of the publicity (Steve Jobs, Bill Gates, etc),”

    Oxfam claims that 8 people have more wealth than 50% of humanity. Those 8 people are Bill Gates, Amancio Ortega, Warren Buffett, Carlos Slim, Jeff Bezos, Mark Zuckerberg. Larry Ellison and Michael Bloomberg. All entrepreneurs.

    • Thanks for the comment. It’s certainly relevant.
      I’ve never heard anybody call Carlos Slim an entrepreneur. He got rich by keeping a stranglehold on Mexican telecom, with prices far above international norms and lots of laws, rules, and practices to keep competitors out. That’s classic monopoly power. Warren Buffett makes no pretense of being an entrepreneur, or of investing in startups.
      As far as the others, Ellison Bloomberg and Gates’ companies are 40+ years old. They were entrepreneurs when they started, but companies their size are no longer entrepreneurial. If you remember the antitrust cases of the 90s, Microsoft got wealthy by controlling the OS (Microsoft Windows). It extended its control by a variety of predatory practices.
      So there are 2 models here: 1)people get extremely rich by creating valuable new ideas and making businesses out of them and 2) people get extremely rich by crony capitalism, creating monopolies, or accidents of birth.
      Finally, the 50% number refers to wealth, not income. The stagnation of the lower 90% versus the 1% has been an income story.
      Bezos and Zuckerberg: Bezos is still acting entrepreneurial. I don’t think Zuckerberg is creating much new value at this point.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s