The Take

The Wealth Gap

January 21, 2017

Multiple Pages
The Wealth Gap

The claim by Oxfam, the charity that so loves the poor that it is safe to predict that it will never abolish itself no matter how rich humanity becomes, that the eight richest men in the world own as much as the poorer half of the whole of humanity combined, is at first sight extremely startling. Assuming the claim to be true and meaningful (which I doubt that it can be, for a number of reasons), who would not react with unease, with the feeling that there must be something profoundly and fundamentally wrong with the way the world is organized, or at least functions, economically? And that, of course, is precisely what that statistic is supposed to do.

Let us, then, spread the whole wealth of the eight richest men and thereby make the world a juster place. This would leave the 3.6 billion poorer half of humanity about $120 a head better off. For a family of eight in Bangladesh, say, this might be a considerable boon for a time: Extra money has a large marginal utility for the poor, at least if it is not reduced by equivalent inflation. And $120 would represent a 12 percent increase in the per capita GDP of Bangladesh—for a year. Of course, there might be certain difficulties in the disbursement of the money to the poor in Bangladesh: Its native multimillionaires, a couple of whom are in government, might get in the way, to say nothing of the other difficulties too numerous to mention.

“In its present form, Oxfam’s propaganda is an incitement to envy, one of the seven deadly sins.”

The sale of all the richest men’s stock at once would reduce its value drastically, of course, but let us overlook that. If, instead of receiving the whole capital value of that stock at its present nominal price at one go, it was vested in the poor half of humanity, each of the world’s poorest would receive, if they were very lucky, six dollars a year each, less the costs of distribution. This would represent less than a 1 percent increase in the per capita GDP of the supposedly poorest country in the world, the Central African Republic.

Underlying the Oxfam statistic is what might be called the cake model of economics: My slice of cake is one slice less to be distributed to everyone else, and therefore, if my slice grows, everyone else’s must reduce. By developing Windows and becoming incalculably rich thereby, Mr. Gates deprived me of wealth that is rightfully mine—or would have been mine if I happened to be among the poorer half of the world’s population. (As it happens, my wealth, though much less than immense, would have to be shared out too, because on Oxfam’s reasoning it is perhaps two or three thousand times that of people in the poorer half of humanity. My only defense is that the ratio of Mr. Gates’ wealth to mine is ten times greater than the ratio of my wealth to that of the poorest 3.6 billion people. This takes no account of marginal utility: I can afford to eat as well as Warren Buffett, despite his immensely greater wealth, and to judge by his public expressions of his dietary preferences, in practice I eat a great deal better than he. By contrast, the poorer half of humanity cannot afford to eat as well as I.) In fact, Mr. Gates enriched me.

Let us suppose (what is highly unlikely) that I invented something useful that sold very well because it was just what people needed, though they didn’t know until I invented it that they needed it, invention being the mother of most necessity. This invention would make me immensely rich, very much richer than I was before. Whom would I have impoverished by my invention?

Perhaps a Luddite would reply that I had reduced the demand for labor in some way, or alternatively my invention has replaced something else, the manufacturers of which have now to go out of business, causing unemployment and therefore hardship. But this is to assume that there is no really new thing under the sun, and that the sum total of goods and services remains always the same, it only gets shared round in different ways. The railways and motorcars put horse-carriage builders out of business, and so on and so forth.

This is not to deny the reality of the distress of redundant horse-carriage builders, whose very considerable, and often admirable, skills became redundant far quicker than the dinosaurs disappeared from the face of the earth. But it would be preposterous to suggest that, overall, we were not richer than we had been in the heyday of horse-carriage builders. Moreover, it is true that some inventions that make people immensely rich, though wanted and perhaps valued by millions, may be valueless, or worse than valueless, according to some scale of values sub specie aeternitatis. It is not difficult to imagine someone becoming immensely wealthy by the development of a website that ought never to have been developed.

Nor is it to deny that there is such a thing as illicit or dishonest enrichment, or that rules may be rigged. There is no market in which there is no rigging, either formal or informal, but I suspect that Oxfam’s preferred solution to an inevitable degree of rigging is complete rigging by philosopher kings such as themselves.

There is one sense in which I may by definition increase poverty if I grow richer. Suppose my wealth increases faster than that of most of the people in the society in which I live. The people in that society are poorer, relative to me, than they were before, even if, in absolute terms, they are all richer than they were before. This is not the same as active impoverishment. But since poverty is now usually defined in relative and not absolute terms, poverty can increase even where no one, not a single person, is the poorer. By the same token, a society can grow richer as everyone in it becomes poorer. This is absurd.

The question about the eight richest people in the world is not, or at least ought not to be, by how many times they are richer than other people, but whether by their wealth they have made others poorer. This question is not straightforward, for it might include the question as to whether people would have been richer if rules other than those under which they made their fortunes had been different. But in its present form, Oxfam’s propaganda is an incitement to envy, one of the seven deadly sins.

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