Jake's View

World is growing richer and poor are slowly benefiting

Comments on wealth polarity often fail to acknowledge that people are living longer, healthier lives and many nations’ fortunes are improving

PUBLISHED : Wednesday, 21 January, 2015, 6:30pm
UPDATED : Monday, 16 November, 2015, 4:47pm

More than half the world's wealth will be owned by just one per cent of the population by next year as global inequality skyrockets, the anti-poverty charity Oxfam said yesterday.

SCMP, Reuters, January 20

How good it would be to see a return of the Oxfam I once knew and admired, of village level, muddy-kneed poverty relief work rather than this political advocacy lobby it has become.

But, no, Oxfam is off this week to the world's most pretentious hot air talk shop, the World Economic Forum, an annual get-together of name-droppers in Davos, Switzerland.

There it will lecture others like itself on the need for governments to do something about the way the world is going from bad to worse. These others will then all nod when not absorbed in puffing themselves up about the bigger names they are sitting next to.

Here is an alternative view from Microsoft founder Bill Gates, not a man I much admired when he built his wealth on lifting other people's ideas in software, but who I now think more of for his subsequent work in international poverty relief:

"By almost any measure, the world is better than it has ever been. People are living longer, healthier lives. Many nations that were aid recipients are now self-sufficient. You might think that such striking progress would be widely celebrated, but in fact, Melinda and I are struck by how many people think the world is getting worse."

Yes, Bill, you will find them in Davos again this week, including Oxfam, more is the pity.

The immediate problem I see with Oxfam's findings on the extent of wealth polarity is the sources - Forbes magazine and Credit Suisse, entities that stand to gain more from extolling wealth than from statistical rigour in studying it.

I remember once being interviewed by a woman given the task of rating Hong Kong's billionaires for Forbes. She asked how much I thought developer Lee Shau-kee was worth. "Flip a coin," I said. "He hasn't told me."

She flipped a coin, I think, or at least came up with a guess that no one would find objectionable. It is my view that all these billionaire rankings pitch their guesses well to the high side of the possible range.

A notable example is Saudi Arabia's Prince Alwaleed bin Talal, a man with a name for aggressively demanding bigger figures in billionaire rankings. He was high up Oxfam's list.

Also noteworthy on the list are Warren Buffett and George Soros, both of whom have devoted a sizeable proportion of their wealth to charity. Do we now count that money in the one per cent's half or in the other half? And how much blame for hogging all the money do we pin on Warren Buffett, a notably abstemious man whose everyday living costs are no greater than yours or mine and who instead puts his money to work in investments from which hundreds of millions of people benefit?

I am prepared to believe that wealth polarity has grown in recent years but I do not have a high regard for Oxfam's sources. I also suspect that the extent of the polarity is overstated and I think any measurement is fraught with questions of definition. In Hong Kong, for instance, a third of the population lives in public rental housing at an average rent of only HK$1,200 a month, far below the private market, and has full public hospital care available at only HK$100 a visit.

Both of these benefits have a sizeable capital value over the lifetime of the beneficiary. Are they treated as the financial assets they are in Oxfam's measures of worldwide wealth? I very much doubt it.

I am also not prepared to accept the Pikettynomics contention that the owners of capital are solely to blame for wealth polarity. The fault lies easily as much with ham-fisted government interventions that create economic distortions custom made for financial vultures to exploit. Don't blame the vulture for eating if you are the one who feeds it.

Overall, however, Bill Gates' point is still the important one. Whatever may be happening on a relative scale, in absolute terms the world is growing richer and the poor are slowly being lifted out of poverty.