Adonis Diaries

Posts Tagged ‘wealth inequality

Is SKIN In The GAME on Wealth Inequality?

A well functioning society isn’t one in which people are equal but one in which people have equal *probability*.  (Opportunity in all facilities offered to all?)
So measuring static inequality is severely flawed.
Take the United States. Less than 10% of the people in the 1982 list of richest 500 were there in 2012.
Compare to France where 60% on the rich list today have inherited their wealth.
And there are other more robust metrics: 56% of Americans will spent at least a year in the top 10%. Not in Europe.

So a good society is one in which people at the top have *skin in the game* hence can lose their money.
Wealth generation should not lead to protected position at the top.
Social mobility isn’t in elevating people, it requires the top to open a position.

So in Europe a civil servant from the “mandarin class” is safe for life as they extract rent from the system, while a good entrepreneur will run a chance of getting poor, leaving room for others.
PS- Let me explain to those who don’t get it. SITG means the rich needs to remain exposed to losing back his money rather than shielded.

PPS- 39% of Americans will spend a year in the top 5 % of the income distribution, 56 % will find themselves in the top 10%, and 73% percent will spend a year in the top 20 %.

Another endangered species? The Middle Class?

Is that Piketty’s prophecy comes true?

According to a new report, the richest 1% have got their mitts on almost half the world’s assets.

Think that’s the end of the story? Think again. This is only the beginning.

Thursday, Oct 23, 2014

New research reveals the superrich have grabbed half the world’s resources — and their wealth is only growing

The “Global Annual Wealth Report,” freshly released by investment giant Credit Suisse, analyzes the shocking trend of growing wealth inequality around the world.

What the researchers find is that global wealth has increased every year since 2008, and that personal wealth seems to be rising at the fastest rate ever recorded, much of it driven by strong equity markets.

But the benefits of this growth have largely been channeled to those who are already affluent.

While the restaurant workers in America struggled to achieve wages of $10 an hour for their labor, those invested in equities saw their wealth soar without lifting a finger. So it goes around the world.

The bottom half of the world’s people now own less than 1 percent of total wealth, and they’re struggling to hold onto even that minuscule portion.

On the other hand, the wealthiest 10 percent have accumulated a staggering 87 percent of global assets.

The top percentile has 48.2 percent of the world wealth. For now.

One of the scary things about the wealth of the super-rich is what French economist Thomas Piketty pointed out in his best-selling book, Capital in the 21st Century.

Once they’ve got a big chunk of wealth, their share will get bigger even if they sit by and do absolutely nothing.

Piketty sums up this economic reality in a simple and horrifying formula: r > g.

Basically, this means that when rate of return on wealth is greater than the overall rate of growth of the economy, as it has nearly always been throughout history, the rich will grow inevitably richer and the poor poorer unless there is some kind of intervention, like higher taxes on wealth, for example.

If r is less than g, the assets of the super-wealthy will erode, but if r is greater than g, you eventually get the explosion of gigantic inherited fortunes and dynasties.

This is happening now: If you look at the Forbes 400 list of the wealthiest people in America, you see a lot more inherited fortunes in the upper ranks than you did a couple of decades ago, when the policies that held inequality at bay began to get dismantled.

In today’s top 10, there are more scions of the Walton family than entrepreneurs like Bill Gates or Mark Zuckerberg. These people have essentially done nothing of value for society, and yet their undue influence shapes our political landscape with the wave of a wad of cash.

There have been moments in history when things were not so lopsided.

During the post-war period, inequality was contained because governments made sure their rich didn’t accumulate at such alarming rates by doing things like taxing their estates at a high rate. At the same time, they created policies to lift the incomes of the less well-off and allow them to have some basic security.

But that’s an exception in history. Most of the time, this kind of intervention did not happen, and so the rich kept gobbling more and accumulating more power to keep it that way until one of two things happened — a revolution or some kind of catastrophe or disruptive event, like a war, shook things up.

As the Credit Suisse report states:

“[Wealth inequality] has been the case throughout most of human history, with wealth ownership often equating with land holdings, and wealth more often acquired via inheritance or conquest rather than talent or hard work.

However, a combination of factors caused wealth inequality to trend downwards in high income countries during much of the 20th century, suggesting that a new era had emerged.

That downward trend now appears to have stalled, and possibly gone into reverse.”

That’s right. We’re on a turbo-charged ride back to the days of Downton Abbey.

Piketty warns that we’re in the early stages of reverting right back to periods of massive inequality, like 19th-century Britain or 18th-century France, where great dynastic fortunes ruled and everybody else fought for scraps.

(The new power of Germany, which didn’t accumulate capitalist wealth, was a handicapped for the capitalist nations of England and France that ignited the WWI in order to stop the increased trade exchange of Germany in world market)

What the statistics and formulas don’t show is the kind of human suffering that results from this kind of extreme inequality.

While the global elite zip around the world in private jets and watch their stock portfolios expand on computer screens from within their gated mansions, the bottom half stays awake at night trying to think of how to pay for medicine for a sick child.

The things that give life dignity and meaning, like a quality education, a decent job, and the security of knowing you have a roof over your head and a doctor to care for you when you are ill grow further and further out of reach.

Anxiety never leaves because one unforeseen mishap can push you down into poverty, and if you’re already there, you spend much of your time searching, often fruitlessly, for a way out.

But there’s a little bit of anxiety percolating at the top, too.

On the June cover of the conservative magazine American Spectator, a cartoon shows an incensed mob looking on as a monocled fatcat is led to a bloody guillotine — a scene evoking the Reign of Terror during the French Revolution. The caption reads, “The New Class Warfare: Thomas Piketty’s intellectual cover for confiscation.”

In the story that accompanies the image, James Pierson warns of revolution and a growing class of suffering people who want to punish the rich and take away their toys.

That would be one way to address things. Another would be the recognition that inequality is extremely destabilizing and dangerous, and that non-violent interventions are possible, as we saw in America with the New Deal.

Things like robust tax reform, unions, regulation, changes in corporate governance and CEO pay, affordable education, jobs programs, expansion of Social Security and universal healthcare.

Or we could just do things the old-fashioned way and wait for a disaster even bigger than the meltdown of 2007-’08. In that case, fasten your seatbelts. This ride could get very rough.

Davos Forum, Richest people…: “How to make our clan richer?”

The world’s wealthiest people aren’t known for travelling by bus, but if they fancied a change of scene then the richest 85 people on the globe – who between them control as much wealth as the poorest half of the global population put together – could squeeze onto a single double-decker.

The extent to which so much global wealth has become corralled by a virtual handful of the so-called ‘global elite’ is exposed in a new report from Oxfam on Monday.

The report warned that those richest 85 people across the globe share a combined wealth of £1tn (1,ooo billion) as much as the poorest 3.5 billion of the world’s population.

 published in theguardian.com, this January 20, 2014

Oxfam: 85 richest people as wealthy as poorest half of the world

As World Economic Forum starts in Davos, development charity claims growing inequality has been driven by ‘power grab’
The InterContinental Davos luxury hotel in the Swiss mountain resort of Davos

The InterContinental Davos luxury hotel in the Swiss mountain resort of Davos.
Oxfam report found people in countries around the world believe that the rich have too much influence over the direction their country is heading. Photograph: Arnd Wiegmann/REUTERS

Working for the Few - Oxfam report

Source: F. Alvaredo, A. B. Atkinson, T. Piketty and E. Saez, (2013) ‘The World Top Incomes Database’, http://topincomes.g-mond.parisschoolofeconomics.eu/

Only includes countries with data in 1980 and later than 2008. Photograph: Oxfam

The wealth of the 1% richest people in the world amounts to $110tn (£60.88tn), or 65 times as much as the poorest half of the world, added the development charity, which fears this concentration of economic resources is threatening political stability and driving up social tensions.

It’s a chilling reminder of the depths of wealth inequality as political leaders and top business people head to the snowy peaks of Davos for this week’s World Economic Forum.

Few, if any, will be arriving on anything as common as a bus, with private jets and helicopters pressed into service as many of the world’s most powerful people convene to discuss the state of the global economy over 4 hectic days of meetings, seminars and parties in the exclusive ski resort.

Winnie Byanyima, the Oxfam executive director who will attend the Davos meetings, said: “It is staggering that in the 21st Century, half of the world’s population – that’s three and a half billion people – own no more than a tiny elite whose numbers could all fit comfortably on a double-decker bus.”

Oxfam also argues that this is no accident either, saying growing inequality has been driven by a “power grab” by wealthy elites, who have co-opted the political process to rig the rules of the economic system in their favour.

In the report, entitled Working For The Few (summary here), Oxfam warned that the fight against poverty cannot be won until wealth inequality has been tackled.

“Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table,” Byanyima said.

Oxfam called on attendees at this week’s World Economic Forum to take a personal pledge to tackle the problem by refraining from dodging taxes or using their wealth to seek political favours.

As well as being morally dubious, economic inequality can also exacerbate other social problems such as gender inequality, Oxfam warned.

Davos itself is also struggling in this area, with the number of female delegates actually dropping from 17% in 2013 to 15% this year.

How richest use their wealth to capture opportunities

Polling for Oxfam’s report found people in countries around the world – including two-thirds of those questioned in Britain – believe that the rich have too much influence over the direction their country is heading.

Byanyima explained:

“In developed and developing countries alike we are increasingly living in a world where the lowest tax rates, the best health and education and the opportunity to influence are being given not just to the rich but also to their children.

“Without a concerted effort to tackle inequality, the cascade of privilege and of disadvantage will continue down the generations. We will soon live in a world where equality of opportunity is just a dream. In too many countries economic growth already amounts to little more than a ‘winner takes all’ windfall for the richest.”

Working for the Few - Oxfam report

Source: F. Alvaredo, A. B. Atkinson, T. Piketty and E. Saez, (2013) ‘The World Top Incomes Database’, http://topincomes.g-mond.parisschoolofeconomics.eu/ Only includes countries with data in 1980 and later than 2008. Photograph: Oxfam

The Oxfam report found that over the past few decades, the rich have successfully wielded political influence to skew policies in their favour on issues ranging from financial deregulation, tax havens, anti-competitive business practices to lower tax rates on high incomes and cuts in public services for the majority.

Since the late 1970s, tax rates for the richest have fallen in 29 out of 30 countries for which data are available, said the report.

This “capture of opportunities” by the rich at the expense of the poor and middle classes has led to a situation where 70% of the world’s population live in countries where inequality has increased since the 1980s and 1% of families own 46% of global wealth – almost £70tn.

Opinion polls in Spain, Brazil, India, South Africa, the US, UK and Netherlands found that a majority in each country believe that wealthy people exert too much influence.

Concern was strongest in Spain, followed by Brazil and India and least marked in the Netherlands.

In the UK, some 67% agreed that “the rich have too much influence over where this country is headed” – 37% saying that they agreed “strongly” with the statement – against just 10% who disagreed, 2% of them strongly.

The WEF’s own Global Risks report recently identified widening income disparities as one of the biggest threats to the world community.

Oxfam is calling on those gathered at WEF to pledge:

1. to support progressive taxation and not dodge their own taxes;

2. refrain from using their wealth to seek political favours that undermine the democratic will of their fellow citizens;

3. make public all investments in companies and trusts for which they are the ultimate beneficial owners;

4. challenge governments to use tax revenue to provide universal healthcare, education and social protection;

5. demand a living wage in all companies they own or control; and

6. challenge other members of the economic elite to join them in these pledges.

(Pledge my ass call)

• Research Now questioned 1,166 adults in the UK for Oxfam between October 1 and 14 2013.

Filthy rich: 0.03% of Lebanese adults own 50% of the country’s wealth
Published this October 18, 2013

At least 48 percent of Lebanon’s privately-held wealth is concentrated in the hands of some 8,900 citizens — just 0.3 percent of the adult population — according to calculations based on a new report.

The nation’s staggering wealth inequality is detailed in Credit Suisse’s Global Wealth Databook 2013, released last week.

The distorted wealth figures help to push the country’s Gini coefficient, a measure of inequality, to 86.3 percent — the fourth highest globally behind Russia, Ukraine and Kazakhstan (see chart, below left).*

While Credit Suisse did not directly publish how much wealth is in Lebanese millionaires’ hands, Executive was able to estimate a lower bound based on the report and Forbes magazine’s list of billionaires.

Lebanese worth more than $1 million own at least 48 percent of the country’s wealth (see chart above).

This figure, however, is a minimum estimate. It also implies that the rest of the country owns less than 52 percent of private wealth, valued at some $91 billion.

The richest Lebanese are six billionaires, all from the Mikati and Hariri families.

According to Forbes, their combined worth is $14 billion — some 15% of all private wealth.

Wealth inequality (higher Gini coefficient = less equal): Russia, Lebanon, US, Egypt, Saudi, Israel, UAE, France,

The concentration of cash in a few hands skews other figures as well.

According to the report, a Lebanese adult’s wealth averages $30,868. However, the median wealth is just $6,076 — meaning, counter intuitively, that half of Lebanese adults own less than a fifth the average wealth.

(In Beirut, renting any small apartment is up to $1,ooo per month)

Furthermore, a full two-thirds own less than $10,000, while most of the rest (almost 30%) are worth less than $100,000.

Unfortunately, while these figures provide a rough guide to the nation’s wealth distribution, the numbers cannot be trusted completely.

Credit Suisse rates the quality of Lebanon’s data as “poor”, as all other kinds of data: Transparency is terribly lacking, at least for the Lebanese common citizens.

* Executive excluded Denmark, whose Gini coefficient was reported the highest overall at 107.7 percent, due to a lack of confidence in the figure. Credit Suisse’s 2012 report assigned the nation a Gini coefficient of 70.1% per.
Note 1: Figures do not add to 100 due to rounding
Note 2: Mind you that the 18 officially recognized religious sects own more than 25% of the land. (mine note)
Source: Credit Suisse, Forbes, Executive calculations

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