This image was removed due to legal reasons.

Oxfam is out with a new report about the world's wealth. This is big news: it led the front page of the Guardian this morning, and there has been lots of similarly uncritical reception of the findings.


The problem is that this version of Oxfam's report is just as crap as the last version, which came out a year ago. Even worse, in fact, since it adds a bunch of silly extrapolations.

So, this is a recapitulation and update of a post I wrote at Reuters in the wake of the last report. (And, my first attempt at evergreen journalism!)


The meme is older than the 2014 report. It started, back in 2011, with the Waltons: six members of the family, we were repeatedly told, were worth as much as the bottom 30% of all Americans combined. In the Oxfam version, the world’s top 80, or top 67, or top 85 richest people have the same wealth as the bottom half of the global population. The latest report has a new twist: it adds up the total wealth of the top 1%, and tries to work out how that compares to the wealth of the bottom 99%.

How does Oxfam arrive at its conclusions? When it's just adding up a few dozen people at the very top, it's easy: they just start at the top of the Forbes billionaires list, and start counting. As for the rest of the data, it comes from Credit Suisse, which puts out an annual Global Wealth Databook. Oxfam then uses the Credit Suisse data to derive all the rest of its numbers: it does no real empirical work of its own.

This chart, for instance, comes entirely from Credit Suisse data:

This image was removed due to legal reasons.


Oxfam reads a lot into this chart. Indeed, its happy to take the datapoints from 2010 onwards and start extrapolating wildly:

This image was removed due to legal reasons.


But this is a little crazy. The lines on the Oxfam charts are thin, which gives the impression that the numbers are precise. But of course the numbers are anything but precise: the error bars on all these data points are huge, which means that the variation over the years could easily just be statistical noise.

Beyond that, the whole concept of adding up wealth is fundamentally extremely flawed. For instance, do you notice anything odd about this chart?


This image was removed due to legal reasons.

The weird thing is that triangle in the top left hand corner. If you look at the tables in the Credit Suisse datebook, China has zero people in the bottom 10% of the world population: everybody in China is in the top 90% of global wealth, and the vast majority of Chinese are in the top half of global wealth. India is on the list, though: if you’re looking for the poorest 10% of the world’s population, you’ll find 16.4% of them in India, and another 4.4% in Bangladesh. Pakistan has 2.6% of the world’s bottom 10%, while Nigeria has 3.9%.


But there’s one unlikely country which has a whopping 7.5% of the poorest of the poor — second only to India. That country? The United States.

How is it that the US can have 7.5% of the bottom decile, when it has only 0.21% of the second decile and 0.16% of the third? The answer: we’re talking about net worth, here: assets minus debts. And if you add up the net worth of the world’s bottom decile, it comes to minus a trillion dollars. The poorest people in the world, using the Credit Suisse methodology, aren’t in India or Pakistan or Bangladesh: they’re people like Jérôme Kerviel, who has a negative net worth of something in the region of $6 billion.


America, of course, is the spiritual home of the overindebted — people underwater on their mortgages, recent graduates with massive student loans, renters carrying five-figure car loans and credit-card obligations, uninsured people who just got out of hospital, you name it. If you’re looking for people with significant negative net worth, in a way it’s surprising that only 7.5% of the world’s bottom 10% are in the US.

And as you start adding all those people up — the people who dominate the bottom 10% of the wealth rankings — their negative wealth only grows in magnitude: you get further and further away from zero.


The result is that if you take the bottom 30% of the world’s population — the poorest 2 billion people in the world — their total aggregate net worth is not low, it’s not zero, it’s negative. To the tune of roughly half a trillion dollars. My niece, who just got her first 50 cents in pocket money, has more money than the poorest 2 billion people in the world combined.

Or at least she does if you really consider Jérôme Kerviel to be the poorest person in the world, and much poorer than anybody trying to get by on less than a dollar a day. All of whom would happily change places with, say, Eike Batista, even if the latter, thanks to his debts, has a negative net worth in the hundreds of millions of dollars.


There's no doubt that the trillions of dollars owned by the world's top 1% constitute an enormous amount of money: there is an astonishing amount of wealth inequality in the world, and it’s shocking that just 80 people are all it takes to get to $1.9 trillion. You could spread that money around the “bottom billion” and give them $1,900 each: enough to put them squarely in the fourth global wealth decile.

Oxfam claims that the $1.9 trillion owned by the world's top 80 people is equal to the amount of wealth held by the bottom 50% of the world's population. But look at just the top two-fifths of the 3.5 billion people referred to in the Oxfam stat. That’s 1.4 billion people; between them, they are worth some $2.2 trillion. And they’re a subset of the 3.5 billion people who between them are worth $1.9 trillion. As you add more people at the bottom of the wealth distribution, the Oxfam aggregate doesn't go up, it goes down.


The first lesson of this story, then, is that it’s very easy, and rather misleading, to construct any statistic along the lines of “the top X people have the same amount of wealth as the bottom Y people”.

The second lesson of this story is broader: that when you’re talking about poor people, aggregating wealth is a silly and ultimately pointless exercise. Some poor people have modest savings; some poor people are deeply in debt; some poor people have nothing at all. (Also, some rich people are deeply in debt, which helps to throw off the statistics.) By lumping them all together and aggregating all those positive and negative ledger balances, you arrive at a number which is inevitably going to be low, but which is also largely meaningless.


The Chinese tend to have large personal savings as a percentage of household income, but that doesn’t make them richer than Americans who have negative household savings — not in the way that we commonly understand the terms “rich” and “poor”. Wealth, and net worth, are useful metrics when you’re talking about the rich. But they tend to conceal more than they reveal when you’re talking about the poor.