Political

1% of the world’s population own half the world’s wealth? It’s a useless statistic

Usually for headline summaries, net figures are much better than gross figures. To understand the jobs market, for example, the net change in the number of jobs is a much more useful headline than the number of jobs created on its own or the number of jobs lost on its own.

Sure, often you need to know both those further statistics to then understand what is causing the headline, but if you want a simple summary, just talking about one without the other is apt.

That’s why, at first glance, the statistic recently doing the rounds (and particularly highlighted by Oxfam) that 1% of the world’s population own half the world’s wealth is a good one, because it’s a measure of net wealth.

At first glance, only. Because at second glance you see oddities such as the one Vox pointed out that* on the measure of net wealth more of the world’s least wealthy people live in the US than in India. Or that when Bill Clinton left the White House in 2000 he was one of the poorest people in the world.

The reason? Debts. Clinton was in any sensible use of the English language one of the richest and best-off people in the world in 2000, but his debts meant that his net wealth plunged well below zero and into the bottom decile of the world.

More generally, the richer you are, the more you can borrow and so the smaller your net wealth may well be. Access to borrowing is heavily skewed and so is gross wealth – and they’re both skewed towards the same people and places. Add the two together then, and you get net wealth figures which are so full of idiosyncrasies as not to be enlightening.

There is, however, one useful policy conclusion: the need to make access to borrowing more equitable. Within the UK, for example, small and medium-size firms often find it far too hard to raise capital. That may make the net wealth of their owners look better, but genuine equality of opportunity would be improved by making it easier for them to access capital – which is which Vince Cable’s initiatives in this field are so important.

 

* The whole Vox article is well worth read. If you didn’t click the link when reading my sentence above, I’d highly recommend you do now.

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