Oxfam wealth statistics are dishonest and meaningless

The latest incarnation of the Oxfam Global Wealth Statistics report repeats the same mistakes as its previous editions, its authors unrepentant in their profound methodological inconsistencies. The organization seems to have given up on fighting poverty in favour of denouncing inequality, and in the process, given up on rigour as well.

The report’s claim that the richest 62 individuals in the world have the same amount of wealth as the bottom 3.6 billion people is based on misleading calculations, engineered to generate shocking results.

Its calculations, subtracting debts from assets, use an unreliable measure of wealth, rendering their results meaningless. The report implies that a large portion of the world’s poorest are people with high debt levels living in wealthy countries. The 2014 edition committed the same error, pointed out by Reuters’ financial blogger Felix Salmon, yet this didn’t stop Oxfam from using the same methodology in 2015, and once again earlier this week. What is truly shocking is how reports from a once-venerable institution could be published with such bold conceptual errors not once, but three years running.

As the London-based Institute of Economic Affairs remarks, Oxfam’s analysis suggests that if you’re a recent ivy-league post-graduate with some college debt, you are poorer than a farmer in some of the world’s poorest countries. This is not the way people think about poverty, nor how they think about the rich.

According to Care International, a net revenue of $41,780 is sufficient to put you in the global 1 per cent. This means that, in Quebec, a gross revenue of $55,000 is sufficient to put you in that select group. In Ontario, $50,000 is enough. Even if Oxfam’s methodology were correct, which we know it isn’t, it’s not clear why it would be wrong for those making over 50 or 55 grand a year to own about as much as the rest of the world. Nor does Oxfam tell us what would be an acceptable threshold, short of an absolute egalitarian dystopia.

Moreover, grand statements about inequalities make for nice headlines, but they are poorly suited to addressing the issue of global development. Western countries didn’t go from the horse-drawn carriage to modern automobiles, and increase their standards of living by a factor of 16 over the last 200 years, by screaming bloody inequality. There is a debate to be had on policies for helping countries develop, but it should be based on the scholarly literature concerning institutional arrangements, property rights, markets, and corruption in the developing world, rather than on the green-eyed monster.

Among Oxfam’s “priority” recommendations is to “end the era of tax havens.” Yet the ability of capital to move to more hospitable regions, thereby limiting the worst fiscal excesses, has nothing to with absolute poverty. Oxfam’s policy recommendations are completely focused on the rich, with wealth accumulation in its crosshairs, and largely unconcerned about the plight of the poor themselves.

But why has the debate, and Oxfam’s mission, slipped from fighting poverty to denouncing inequalities? It probably has to do with the fact that the great fight against poverty is being won. Capitalism is generating prosperity in the developing world at an unprecedented rate. Economic freedom and free-market entrepreneurship are strongly associated with prosperity and poverty alleviation around the world. This affects not only the number of people living in poverty, but also the depth of poverty. The World Bank announced last year that the global poverty rate was set to fall below the 10% threshold for the first time in human history. Inequalities are completely irrelevant in explaining this great fact.

Inequality is a new shtick in the world of development, which Oxfam was quick to jump on. But just as global poverty’s previous panaceas of foreign aid and debt relief — unlike economic freedom and entrepreneurship — failed to yield any progress, obsessing about inequality is sure to be a dead-end. Like those failed attempts, trying to apply a subject that is widely popular in the West to developing countries’ reality reveals a messianic attitude reminiscent of old colonial mistakes.

Through its recourse to a dishonest methodology that’s been called out time and again, Oxfam is unwittingly proving that the global inequality agenda is an intellectual failure. If it were concerned at all about the poor, it would celebrate freer markets and global capitalism, and discuss the institutional roadblocks to their adoption in the developing world. Instead, it belittles those advancements by focusing on envy rather than economic well-being.

Mathieu Bédard est économiste à l'Institut économique de Montréal. Il signe ce texte à titre personnel.