Every year, Oxfam International releases a wealth inequality lament report, accompanied by a press release with some kind of salacious tagline. This year, they’ve gone with “Just 8 men own the same wealth as half the world“. And here’s the full 2017 report (released yesterday).

A quote from Winnie Byanyima, Executive Director of Oxfam International:

“It is obscene for so much wealth to be held in the hands of so few when 1 in 10 people survive on less than $2 a day.  Inequality is trapping hundreds of millions in poverty; it is fracturing our societies and undermining democracy.  

“Across the world, people are being left behind. Their wages are stagnating yet corporate bosses take home million dollar bonuses; their health and education services are cut while corporations and the super-rich dodge their taxes; their voices are ignored as governments sing to the tune of big business and a wealthy elite.”

And every year, I find myself questioning both the methodology and the outrage.

How Oxfam got that number

Oxfam does the following:

1. They take the wealth data published annually by Credit Suisse in their Global Wealth Report. You can find the most recent report here: Global Wealth Report 2016.
2. They take the total wealth of the bottom 50%.
3. They then add up the fortunes of the billionaires on the Forbes World Billionaires List, and they keep going down the list until they match the total wealth of the bottom 50%.
4. Then they write a headline.

This year, here are the billionaires who are being ‘obscene’:

1. Bill Gates (made his money with Microsoft)
2. Amancia Ortega (made his money with Zara)
3. Warren Buffett (made his money with Berkshire Hathaway)
4. Carlos Slim Helu (made his money from all his telecom businesses)
5. Jeff Bezos (made his money with Amazon)
6. Mark Zuckerberg (made his money with Facebook)
7. Larry Ellison (made his money with Oracle)
8. Michael Bloomberg (made his money with Bloomberg LP).

I may be wrong, but I think that all those guys are self-made billionaires. But that’s just an aside.

I think Oxfam’s real point is: how dare they be rich.

Some Problems With It

I have three main issues with Oxfam here:

1. Technically, I’m not sure that they’re using the Credit Suisse data correctly;
2. Philosophically, I can’t help but wonder if being wealthy is really so different from being intelligent or being beautiful; and
3. Practically, I’m just not sure that you can really do too much about it without causing most of that ‘wealth’ to disappear into thin air (which is, after all, where it came from).

I’m going to address those in reverse.

The Practical Problem

Here’s an existential question: what is all that wealth anyway? For the really rich (and those evil-ish 8 in particular), that wealth is almost entirely made up of share ownership.

How does Forbes value those shares?

It takes the number of shares, and multiplies it by a share price.

The trouble is: that is a valuation method that only really works when the number of shares owned is small enough to be sold without significantly moving the market.

But all that is quite hypothetical when you own 28% of Facebook like Mark Zuckerberg. If the Zuck disposed of his Facebook shares, I’m willing to bet that the Facebook share price would plunge. Because investors (which include the managers of the pension funds of the common man) would ask all kinds of questions like:

1. Why is Mark Zuckerberg selling his shares? There must be something that he knows that we don’t.
2. Will Facebook be the same without Mark Zuckerberg? It might lose all of its steam!
3. What if Mark Zuckerberg sets up a competitor, or goes to run Twitter instead?!

There are plenty of billionaires that drop out of the billionaires list when their primary stock holdings take a share price knock. This is not wealth that is necessarily fixed or stable – it’s quite volatile.

And given that volatility, how does one go about re-apportioning it to make it less ‘obscene’? If the government went about confiscating hypothetical wealth in the form of shares, equity markets as a whole would likely drop in value. At which point, the poor are no better off, and the rich would just stop listing their companies publicly – at which point, valuation becomes an exercise in speculation.

In short: the wealth that so revolts Oxfam is not really re-distributable.

The Philosophical Problem

We often look at wealth as though it’s something that ought to be shared equally between everyone – but does that really make sense? A thought experiment:

1. Take the 8 most famous people in the world;
2. Because most people are relatively unknown, with a few followers on twitter if at all, those 8 are likely more widely known than half of the world’s population combined.
3. But is that really so weird? Or is it simply that the bell curve of fame is bound to have outliers on both ends: the extremely famous, and the forgotten hermits who have gone completely off the grid…

And is wealth really so different? There are extreme outliers – but they are outliers. And their outlier-ness is mostly a function of our own (near) collective enthusiasm for their products. In much the same way as the fame of the 8 most famous individuals is a function of our (near) collective enthusiasm for their brand.

The Technical Problem

Then, I think that there is a technical issue with the data that Oxfam is using. Here is the wealth breakdown by decile and by region in that Credit Suisse data set:

Here is what that data set is saying:

1. About 15% of the world’s poorest people (the bottom decile) apparently live in North America in Europe.
2. But if you discount the poorest of the poor, then most of the poor live in Africa, India and the Asia-Pacific region.

That’s a bizarre anomaly – and it has to do with the fact that there is so much negative wealth in the developed world. Most people in Europe and North America have access to credit, and once their debt is subtracted from their asset base, they might end up looking a lot poorer than your living-on-less-than-$2-per-day beggar in India (who, without access to real credit, cannot have truly less than nothing).

So my question: is having negative wealth really ‘true’ poverty? I don’t think it’s fair to say that a person, living in a $9 million house with a $9.01 million mortgage (because of a temporary decline in housing prices), is somehow ‘more poor’ than an Indian beggar.

But that is the metric that Oxfam is using.

And even if you put this to the side, I think that there is a more intrinsic problem with the focus of their outrage. The Oxfam argument seems to be: we ought to tax the rich more to reduce poverty.

Awkwardly, as that above wealth breakdown shows:

1. Most of the bottom 50% live in Africa and India; while
2. Almost all of the top 1% live in North America and Europe.

Or let’s consider these:

Unfortunately, the really rich don’t live where all the really poor people do.

So… I’m not sure that there are any real global mechanisms to transfer wealth in the right direction?

But perhaps that’s just me.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.