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consumption

The income of the world’s poor is going up, but they’re $1 trillion poorer. What’s going on?

Duncan Green's picture

Oxfam number cruncher Deborah Hardoon tries to get her head round something weird – according to the stats, the poorest half of the world is getting poorer even though the incomes of these people are rising.

It has become something of a tradition that in January every year we take a look at the Forbes list of billionaires and the Credit Suisse Global Wealth databook and calculate how many billionaires it takes to have the same amount of wealth as the bottom 50% of the planet. Since we started doing these calculations, we have watched the wealth of the top grow at the same time as the wealth of the bottom 50% has fallen. The data tells us that the bottom 50% have approximately $1 trillion (that’s $1,000 billion) less wealth than they did 5 years ago, whilst the richest 62 have about $0.5 trillion more.

The extremely wealthy are able to accumulate more wealth in a day than a whole factory full of workers could earn in a year. On 21stApril, in a 24 hour period, Carlos Slim made more than $400 million. Thomas Piketty famously points out that the rate of return on capital is higher than the general growth rate, such that capital owners are at a distinct economic advantage.

Meanwhile those 3.6 billion people in the bottom 50% include people in debt, people with nothing and people with a net wealth of up to about $5,000. People with little, no, or negative wealth, especially in developing countries with poor social insurance mechanisms (four out of five people in the bottom 50% live in Africa or Asia – including China and India), will not only find it hard to respond to financial shocks – like a poor harvest or a medical bill, but will also find it much harder to invest in their families’ future. Having little wealth may be concerning, but having less and less wealth year to year is even more worrying.

Quote of the week: Angus Deaton

Sina Odugbemi's picture

Angus Deaton at a press conference at the Royal Swedish Academy of Sciences"Politics is a danger to good data; but without politics data are unlikely to be good, or at least not for long."

- Angus Deaton, a British-American economist. In 2015, he was awarded the Nobel Memorial Prize in Economic Sciences for his analysis of consumption, poverty, and welfare. The Nobel Prize website writes, "To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices. More than anyone else, Angus Deaton has enhanced this understanding. By linking detailed individual choices and aggregate outcomes, his research has helped transform the fields of microeconomics, macroeconomics, and development economics."

Quote of the week: Angus Deaton

Sina Odugbemi's picture

Angus Deaton at a press conference at the Royal Swedish Academy of Sciences"Statistics are far from politics-free; indeed, politics is encoded in their genes. This is ultimately a good thing."

- Angus Deaton, a British-American economist. In 2015, he was awarded the Nobel Memorial Prize in Economic Sciences for his analysis of consumption, poverty, and welfare. The Nobel Prize website writes, "To design economic policy that promotes welfare and reduces poverty, we must first understand individual consumption choices. More than anyone else, Angus Deaton has enhanced this understanding. By linking detailed individual choices and aggregate outcomes, his research has helped transform the fields of microeconomics, macroeconomics, and development economics."

Governance for a Crowded Planet: The Need to Leap and to Innovate – Part I

Verena Fritz's picture

In March, Jeffrey Sachs published his latest book Common Wealth: Economics for a Crowded Planet – an urgent plea for societies across the globe to reduce and better manage their impact on the earth’s ecosystems if we want to survive and prosper in an ever more crowded world.

As Sachs warns, continuing ‘business as usual’ will make life on our planet increasingly unsustainable. Air pollution and global warming present the biggest risks. But as humans have come to use almost any natural resource intensively, there are also major risks related to the availability of water and of fertile top-soil. At the same time, Sachs argues that we have the technical tools and the economic means to save the planet and to accommodate a rising global population – as well as increasing global wealth and rising consumption in today’s poorer countries.