The rich are not causing the poor
The rich are not causing the poor
Oxfam and the phrase “the rich are getting richer while the poor are getting poorer.”
Oxfam’s Inequality Report recently wrote that “the world's five richest men have more than doubled their fortunes since 2020… while nearly five billion people have been made poorer.”
Oxfam keeps reporting it like that, as do many media organizations, but those two things are not correlated. Five people got richer but that is not what caused 5 billion people to become poorer.
The five rich guys in question are four Americans—Elon Musk, Jeff Bezos, Larry Ellison, and Warren Buffet—and one French guy, Bernard Arnault. They got richer because their companies are the largest in the world and their economies experienced a major boom.
The 5 billion that got poorer are in Asia, Africa, and South America. They got poorer because of the pandemic, where aggressive shutdowns cut them off from their jobs and they weren’t able to get the vaccines they needed to get their economies back up and running quickly enough. Lengthy recessions cut the gains they had previously been making against poverty.
To pair a stat about rich guys in America and France with a stat about poor people in Asia, Africa, and South America is attempting to make a correlation that doesn’t exist. The rich Americans didn’t make money by taking money from poor Africans. They made their money because the American economy was strong—the rest lost money because their economies were not.
If poorer countries had stronger economies, we could just as easily have said “The world's five richest men have more than doubled their fortunes since 2020 while nearly five billion people also became richer.” Indeed, if we zoom out on those stats, looking at the last several years instead of only the last three, that’s exactly what happened.
To use the pandemic years to project increasing poverty in the future is nonsensical, even Oxfam doesn’t. As they admit in their (highly leading) next sentence: “If current trends continue, the world will have its first trillionaire within a decade but poverty won’t be eradicated for another 229 years.”
Wait—so the trends are showing that poverty is on its way to being fully eradicated in only two centuries? How could that be if people are getting poorer? If they are following “current trends” into the future shouldn’t people just keep getting poorer from here?
They are not. When Oxfam zooms out, using World Bank data to gauge our progress since 2015, we can see that the percentage of people living below $6.85/day has gone from 51.17 percent in 2015 to 45.90 percent in 2023. “Current trends” are pointing to declining poverty-even despite the pandemic! So much so that we’ll be able to completely eradicate poverty in only two centuries, something we’ve never been able to do for all of human history!
What remarkable human progress!
There can be no doubt that the pandemic set us back—we would have eradicated poverty even sooner if those economies had been able to keep growing at the pace they were previously growing at. But we experienced a massive, once-in-a-century pandemic, and that caused poverty to increase instead of decrease for the first time in decades. It’s going to take some time to recover from that, just as it would any other recession we might face along the way, but those economies are already recovering. Poverty is once again declining. All signs point to that it will keep declining until it is gone.
That someone will also be a trillionaire during that time is beside the point. Elon Musk is not taking money from people in Africa to get rich. He’s selling a lot of cars and satellites and increasing the value of his companies. As Johan Norberg puts it: “Profits are not something you take from others, but a small share you get to keep from the value you create for others.”
Now I think the reason why people latch onto one person’s wealth and another person’s poverty and try to put those two numbers together is because of “fairness.” It seems unfair that someone should be a trillionaire while most of the world is still poor. If we could just move those trillions from that one person to everyone else, we’d eradicate poverty right now!
But it doesn’t work like that, and that wouldn’t eradicate poverty. If Elon Musk gave all of his 245.5 billion to the 8 billion people on Earth, we’d all get $30. But nearly all that money is not his personal income—it’s equity in the companies he owns. According to Forbes (where Oxfam got its numbers), only $5 billion of his net worth is personal cash. If he wanted to give that all away, we’d each get only 62 cents.
The same math applies to the other rich guys.
If we want to eradicate poverty much faster, we shouldn’t take the money from the richest guys in America and give it to everyone in Africa, Asia, and South America. Instead, we should strengthen the markets in those places so that people there could create trillion-dollar companies too. The World Bank even came out with a whole report outlining how developing countries can do that: By sparking an investment boom in private enterprise that will cause their economies to grow rapidly.
To be clear, I do think we need to address inequality within the capitalist system. There is no reason why the guy at the top needs to be making 400 times the guy at the bottom. We absolutely need to fix distribution, and I outline my idea for that in my “alternative to ‘tax the rich’.” To sum up: I think we should tie the salary and equity of the top to the salary and equity of the bottom. The gap shouldn’t be this big.
But wealth is not the problem—poverty is—and we need to stop pairing them together as if wealth is the cause of poverty. It is not. Instead of thinking: “We need less Elon Musks and Jeff Bezoses and Larry Ellisons in the world,” we need to be thinking, “We need more Teslas and Amazons and Googles in the world.”
If Asia, Africa, and South America had the same ability to create trillion-dollar companies as the US and Europe do, then the poor would get much richer, just like the rich do.
They already are.
Thanks for reading!
P.S. Thank you
for sparking this debate in your comments section! You always give me so much to think about.
The more I think about this, the less I think the issue is the gap per se (though it does seem to have some bad consequences) as much as the methods/systems that help some people and companies amass outsized wealth restrict a lot of people's ability to achieve a dignified standard of living. (You could argue starting with the system of money itself, which has organized society in a way where sometimes it's impossible for someone to secure food / shelter etc without having to depend on a job that gives them access to currency in the first place)
Like Larry I appreciate your willingness to write about the nuance that is easy to overlook, in this case the simple fact of stats being used to support a thesis that should not be paired together. This takes a ton of work, and I appreciate your willingness to do it!