Of Cows and Milk: Does Wealth Inequality Matter?
According to a report from Oxfam, just 62 people own as much wealth as half the world's population.
It's a shocking number, meant to highlight growing economic inequality around the world. The report gathered plenty of media attention and was shared widely on social media, with most of the commentary surrounding the significance of a small group of billionaires owning as much wealth as all the world's poorest people. Here's Oxfam's chart about the rise in wealth at the top, and the drop in wealth at the bottom.
But to some economists, if the goal is to improve the lives of the poorest people, looking at the concentration of wealth of billionaires doesn't help much. Kevin Milligan is an economist at the Vancouver School of Economics at UBC. He says comparing wealth inequality ignores incomes, and is comparable to "cow inequality." He says wealth is like owning a cow, and income is like drinking milk.
There are a certain number of farmers who own all the cows in our society... and everyone else without cows. But that really doesn't tell us much about the economic well-being of people in our society. What matters is whether they have the milk, the income, not so much about whether they have a cow.- Kevin Milligan, Vancouver School of Economics
To Milligan, the widely shared headline which focused on just 62 billionaires getting more wealth, doesn't paint a significant picture of the state of poverty in the world.
Oxfam's report does compare income inequality, which Milligan considers more significant, but that data doesn't give as stark an image of a small group of billionaires, controlling ever more wealth.
Also given less attention in media coverage of the report, the very successful efforts to reduce extreme poverty around the world.
There have been absolute increases in gross domestic product – one of the main indicators of economic prosperity – in every region of the world over this period... Average incomes in poorer countries are catching up with those in richer ones, and inequality between nations is falling... The proportion of the world's population living in extreme poverty fell from 36 percent in 1990 to 16 percent in 2010- Oxfam, An Economy for the 1%
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