More on global wealth inequality, Davos and the Chinese princelings

by Michael Roberts

Much has been made of the headline from the recent Oxfam report on global wealth inequality (bp-working-for-few-political-capture-economic-inequality-200114-summ-en.) that revealed that the richest 85 people in the world are worth more than the poorest 3.5 billion.

 

The Oxfam data are actually taken from Credit Suisse’s 2013 global wealth report (global_wealth_report_2013.)  But again this report comes from the earlier study by UN economists Tony Shorrocks (a former university colleague of mine) and Jim Davies using the UN wealth database.  I reported on this study back in October (see post, (http://thenextrecession.wordpress.com/2013/10/10/global-wealth-inequality-10-own-86-1-own-41-half-own-just-1/).
It’s funny that it takes a report by  Oxfam, the anti-poverty charity, to cause a stir about data that have been available for months. Ezra Klein has pointed out some of the key facts in the Credit Suisse/UN study taken up by Oxfam (http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/22/10-startling-facts-about-global-wealth-inequality/?wprss=rss_ezra-klein&clsrd).

Klein notes that Switzerland leads in average wealth, with each adult worth, on average, $513,000. Australia is in second place, at $403,000. The US is in the $250,000-300,000 range.  But when you consider median wealth (the level that most people in a country are on), then Australia leads with $220,000, followed by Luxembourg, Belgium, France, Italy, the UK, and Japan. The US is way back on this measure, with a median wealth of just $45,000, so that most Americans are worth less than most Italians, Belgians and Japanese.

The reason for the difference between the mean average wealth level and the median average is the extent of inequality in the ownership of assets in a country.  And as the UN global study showed, after accounting for debts, assets of more than $4,000 put a person in the wealthiest half of world citizens. Assets of more than $75,000 put them in the top 10 percent. Assets of more than $753,000 put them in the top 1%.  That brings us to my original headline in my previous post, “Global wealth inequality: top 1% own 41%; top 10% own 86% and bottom half own just 1%”.

All this talk of inequality of wealth and growing inequalities of income before and after the Great Recession is getting the ‘great and good’ and the ‘masters of the universe’ worried.  At their annual gathering in the luxury ski resort of Davos, starting with the heads of the IMF and the OECD and going through leading bankers and CEOs of global multinational companies, there is always a mention of the dangers of extreme inequality in the world. And President Obama apparently plans to make inequality the theme of his annual address to Congress.  Our rulers are concerned that these inequalities could lead to political and social upheaval.

And there is continual talk about offshore evasion of tax and the hoarding of secret bank accounts by the super-rich, yet again revealed in the leaked reports about the ‘Chinese princelings’ among others. More than a dozen family members of China’s top political and military leaders are making use of offshore companies based in the British Virgin Islands, leaked financial documents reveal.  The brother-in-law of China’s current president, Xi Jinping, as well as the son and son-in-law of former premier Wen Jiabao are among the political relations making use of the offshore havens.

This is the latest revelation from “Offshore Secrets”, a two-year reporting effort led by the International Consortium of Investigative Journalists (ICIJ), which obtained more than 200 gigabytes of leaked financial data from two companies in the British Virgin Islands, and shared the information with the Guardian and other international news outlets. The documents also disclose the central role of major Western banks and accountancy firms, including PricewaterhouseCoopers, Credit Suisse (yes, them again!) and UBS in the offshore world, acting as middlemen in the establishing of companies. Between $1tn and $4tn in untraced assets have left China since 2000, according to estimates (http://www.icij.org/offshore/leaked-records-reveal-offshore-holdings-chinas-elite).

But nothing will be done – and not just in autocratic, one-party state China. The OECD, for example, has virtually dropped its original aim of coming up with an international agreement on dealing with these hidden assets and accounts. See Richard Murphy’s brilliant blog for this (http://www.taxresearch.org.uk/Blog/2014/01/21/is-the-oecd-about-to-cave-in-to-google-and-amazon/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+org%2FlWWh+%28Tax+Research+UK+2%29).

When just a few hundred people have more wealth (and with it) more political power than everybody else combined, you cannot expect our current politicians to do anything.