Stats and the question of justice

I really like the BBC! I often visit their news pages because they cover science and technology issues better than the New York Times. If you want to learn the latest achievement of NASA, ask the Brits… As another example of their broad-spectrum interests, a headline on their homepage asked, “Do world’s 85 richest people have same wealth as 3.5bn poorest?

It turns out that the BBC has a rumor-verification research team. It is called More or Less, “the BBC team that investigates numbers and statistics,” and this team “is often asked to check out claims that readers or listeners to the radio programme find hard to believe.”

This particular statistic was verified. The figure was tabulated by Ricardo Fuentes-Neva, who is head of research at the British charity Oxfam. BBC describes his methods, and then gets into the complexities and nuances of such extreme inequality. I found the most interesting question was this: The poorest half of the world’s population (3.5 billion people) has about $1.7 trillion in assets, as do the richest 85 individuals. If those richest 85 gave all their wealth away right now, the poorer half would only gain about $500 each.

The implication is that $500 per person would not help much and would not be a lasting help. The further implication is that our current state of extreme inequality is not inherently unethical because ‘the rich are not taking from the poor.’

I accept that the total wealth-assets of the world is not a fixed sum; therefore transfers of wealth are not part of a zero-sum game. Furthermore, violent communist regimes have actually shrunk their whole economies in the past by forcibly confiscating assets from wealthy people for redistribution. That kind of behavior certainly dampens the confidence of people who might have invested time, cash, skills, hope, and creativity into that economy. In a capitalist system, economic growth and the very value of the currency depend upon future-oriented attitudes of the population, expressed as “investor confidence” and “consumer confidence.”

But the class-warfare that has emerged since Thatcher and Reagan were elected is very different: rich people have been attacking the poorer majority for 35 years. From Reagan’s disparagement of ‘welfare queens’, to the Koch brother’s masked political contributions, to the billionaire Osama bin Laden’s attack on the United States, most humans now have to worry about how very rich people are becoming a direct threat to their livelihoods and a possible threat to their very survival. Robert Reich points out that the wealthiest 1% of Americans control 28% of the wealth of the country. Americans accept outcome-inequalities, and that if you work really hard at something socially valuable and productive, you should be paid more. But the massive accretion of wealth at the top has become unlinked from the personal hard work of CEOs and heir-investors. The last time the top 1% owned such a large proportion of the U.S. economy was just before the Crash of 1929 and the Great Depression.

When the level of inequality becomes socially and politically grotesque, it can have the same investment-dampening effect as a communist purge. If the game is rigged–if your home value falls and yet bankers get richer, if your pay is cut and yet the head of your company earns even more–then why should you try and build that economy? Why invest? In fact, shouldn’t you resort to stealing from your boss (faking overtime, padding expenses-requests) because your boss is so clearly stealing from you? Loss of hope, a rise of cynicism, a loss of confidence in the written and unwritten rules of economic practice all damage economic growth, because they reduce the willingness to invest resources in myriad ways.

Economics is about ‘incenting productive behavior.’ What motivates a broad swath of a population? What de-motivates them? In this sense, the “plutocrat pride” that is expressed in outrageous acts of private consumption actually hurt an economy overall. Larry Ellison has damaged the Oracle brand-name with his “America’s Cup.” As a long-run outcome, I hope we can use statistics to make such grotesque wealth-accumulation embarrassing, so that consumers recoil from companies which support such plutocrats and buy from companies that support their workers well.