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Richest 2% Own Half the World's Wealth
Posted by
kdawson
on Wed Dec 06, 2006 07:52 AM
from the disparity dept.
from the disparity dept.
kop writes "The richest 2% of adults in the world own more than half of all household wealth, according to a new study by a United Nations research institute. Most previous studies of economic disparity have looked at income, whereas this one looks at wealth — assets minus debts. The survey is based on data for the year 2000. Many figures, especially for developing countries, have had to be estimated. Nonetheless, the authors say it is the most comprehensive study of personal wealth ever undertaken." The study itself is available from the World Institute for Development Economics Research.
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Not just true for humans (Score:5, Funny)
Re:Not just true for humans (Score:4, Insightful)
Re:Not just true for humans (Score:5, Informative)
The top 1% pay about 30% of all taxes
The top 5% pay about 50% of all taxes
and the top 50% pay about 98% of all taxes
Tax breaks for the rich?! DUH only the rich can get 'em cause the botom 50% is getting the money.
Re:Not just true for humans (Score:5, Interesting)
Another interpretation of the statistics would be that the bottom 50% aren't paying much taxes because.... they don't have any money to pay taxes with. But I like your logic better. Allow me therefore to paraphrase:
Statistics show that the top 50% all die eventually.
Consequently, the bottom 50% obviously live forever!
This is A Conspiracy Against Rich People ®. THE GOVERNMENT MUST CUT TAXES FOR POOR, UNDERPRIVILEGED RICH PEOPLE!
Re:Not just true for humans (Score:5, Interesting)
The problem is that President Bush signed an across the board tax cut. Each bracket's taxes were lowered by the same percentage. Since 50% of the people were generally not paying any taxes at all anyway, they complained the tax cuts were for the "rich" and that lower income people (lower 50%) received no benefit at all.
Well, yes, the argument is true - people paying no taxes don't generally benefit from tax cuts, but I fail to see a valid complaint. In fact, after the tax cuts, because now even fewer people are paying any taxes at all, the "rich" are actually paying a higher percentage of the income tax burden than they were before.
An interesting analogy [polipundit.com] that I've always liked.
There's also the myth that the disparity of income is increasing between the rich and the poor. Well, if person "a" earns $1,000,000 and person "b" earns $50,000, then person "a" makes $950,000 more than "b". If they both increase their income by 10%, then "a" makes $1,100,000 and "b" makes $55,000. A difference of $1,045,000. OMG! The income disparity is increasing! But their relative buying power remains exactly the same!
People are not putting things in perspective when they complain about the disparity between the rich and poor. They don't even take into account that someone making $100,000 in San Fransisco has very little buying power compared to someone making $50k in Atlanta - and the guy in S.F. is paying disproportionately higher taxes because cost of living is not a factor in calculating taxes owed.
Wealth-based taxation sucks. (Score:5, Insightful)
Now I agree that it's rather bizarre that we don't just tax capital gains as income; actually it's bizarre that we don't just tax all income as income, and do away with all the little niggling special categories -- if it was someone else's money and now it's yours, that's income, tax it at the same rate.
People shouldn't be taxed on money that's sitting around and not doing anything, or on the principal value of property. If an investment makes money, then they should get taxed on it -- immediately in the case of dividends, or when they cash-out in the case of capital gains. But taxing "wealth" in the form of unrealized capital gains would result in people's retirement/college/savings funds just magically shrinking, year after year. It would basically be telling people: "use it or lose it."
That's not a smart road to go down, because when you discourage people from saving, you're just going to end up having to bail them out later, when they're 65 and broke because they didn't bother to save money for retirement. (I suppose you could pull a Logan's Run and kill them, but I'm going to make some assumptions here.) Rather than letting individuals run their own lives, you're heading down the road to a centrally planned economy, where because nobody can afford it on their own anymore, they have no choice but to depend on the government for everything.
Furthermore, you'd also discourage property ownership (which is one of the keys to social stability), and instead favor people who maintain a low "wealth" by constantly matching their stream of income to their stream of expenses, even when it's obviously not sustainable. Anyone who wants to could probably zero out their 'wealth' by just spending more on services and other items with little residual value. As long as they stay employed, they can maintain a high quality of life -- but the second that they have a gap in their income stream, because they don't have any savings, they fall flat. And then it's back to the government for a bailout.
Wealth-based tax schemes lead directly to heavy government dependency by the entire populace, and encourage personal finance schemes that aren't sustainable or productive in the long term. You might think that it's eliminating one form of classism, but instead you'd just replace it with the classism of a Politburo: a small number of bureaucrats managing all of society's savings and wealth. No thanks.
Re:Not just true for humans (Score:5, Informative)
Does that mean that 1% of the richest are not quite the same as 1% of the top tax payers? What happened to the progressive tax system?
It means exactly that. We tax based on INCOME, not WEALTH. If I have one TRILLION dollars in assets, but an income of only fifteen thousand a year, I pay no taxes. And that trillion is pretty much meaningless.
So Bill Gates doesn't pay taxes based on what his Microsoft stock is worth, but rather on what Microsoft pays him (plus what he gets for selling any stock over and above what Microsoft pays him). In his case, wealth and income are totally disjoint.
Once upon a time, the last time but a few (dozen) that we had a discussion that got around to taxes, I went to the IRS website to get their tax statistics. The "rich" (in terms of income, NOT wealth) pay a higher percentage of their income as taxes than the rest of us do. Not an astoundingly higher percentage, but higher. Which is as it should be - a flat tax is an inherently bad idea, just as an extremely progressive tax is a bad idea.
Re:Not just true for humans (Score:5, Interesting)
0.001 euro's and you get: You're in the TOP 68.98% richest people in the world!
Now try 0 euro and the result is: You're in the TOP 68.98% richest people in the world!
Amazing 31.02% procent of the world population has an income of less than nothing!
It's the same for negative numbers.
Re:Not just true for humans (Score:5, Informative)
You don't even need to read the article, but please at least RTFSummary:
". Most previous studies of economic disparity have looked at income, whereas this one looks at wealth -- assets minus debts. "
It's not income, it's wealth.
So apparently 31.02% of the population owe more than they have.
I don't know about any other countries, but I know that's fairly common in the US, even among middle-class people with good standards of living.
Re:Not just true for humans (Score:5, Insightful)
I have a job that puts me in the top percentile of people in the world, but to have that job I have to pay the top percentile of living expenses
Re:Not just true for humans (Score:5, Insightful)
I imagine if they had the money to afford those things then 3rd World taxes would be comparable to 1st World taxes but they don't because for a variety reasons they are much poorer.
There's nothing really stopping you going to live in the Congo or somewhere similar where you can spend your money on what you like. I bet you'd still spend a fair proportion of it on drainage, sewage treatment, security etc.
Re:Not just true for humans (Score:5, Insightful)
Re:Not just true for humans (Score:5, Interesting)
This 2% b.s. is a pretty meaningless statistic, all things considered. You only need to be making 44k a year to hit that.
Taxing unrealized cap gains = badness. (Score:5, Insightful)
So let's say I buy 100 shares of a stock at $1 a share; during the year, it increases in value to $100 a share. So my $100 investment is now worth $100,000. Aside from the dividends, I don't owe any taxes on the stock -- however, if I 'cash out,' and sell any of the shares, I'm immediately liable for capital gains taxes. It's not a free ride.
The IRS doesn't try to tax investments as they go up and down, because to do so would be ridiculously complicated (and, as other people have pointed out, would probably lead to people claiming negative tax liability on losses). Instead they look only at the value when you bought in to the investment, and when you cash out, and then tax the difference between the two.
E.g., if my 100 shares ran up to $100 a share but then sunk back to $50 before I could sell them, the capital gain I get taxed on is $49 a share, not $99. Taxing me on $99 wouldn't make any sense, because I never really had that much money, except theoretically.
So while Bill Gates has a lot of money in MSFT, it's only wealth insofar as Microsoft's stock is considered rather stable. If Microsoft were to tank tomorrow, much of that apparent wealth would evaporate. Any time he actually sells stock in order to use any of that wealth, he gets hit with taxes. So really, he has a constant 'potential tax liability' on his 'potential wealth' of about 28% -- because if he wanted to cash out tomorrow, that's what the IRS would be coming after him for. (Well, probably slightly less than 28%, I think the first few thousand bucks get taxed at a lower rate and it goes up from there to 28% which is the cap.)
Actually taxing people on unrealized capital gains would be effectively a tax on savings. It would be a giant mess and have vast consequences -- basically it would mean that just having money sitting around in an investment would make it "shrink." It would lead to lack of savings and probably not hurt the very rich nearly as much as it would hurt the middle class. Not to mention that taxing unrealized capital gains would also involve taxing real property -- it would basically be a federal property tax. That's going to hurt homeowners everywhere; it's a total non-starter.
There are a lot of problems with the current tax code, but the fact that it doesn't go after unrealized capital gains is not one of them.
Pareto Distribution (Score:5, Insightful)
Re:Pareto Distribution (Score:4, Insightful)
As the man himself, Chris Rock put it, Michael Jordan is rich, the man who signs his pay cheque is wealthy.
All that will happen is more and more economic bubbles will burst, the rich will join the poor and the wealthy will be further separated.
The only real balancing acts comes at the end of a sword during a revolution. Well I guess in modern times we'll use guns, but the idea is the same. Wealthy people keep taking and taking, hording cash and assets, till the point where the rest of society will just plunder and steal. The real trick is how far can society be pushed until this actually happens (again).
Frankly, hording cash and assets is the worst thing wealthy people can do. Money only has value when it's being traded for something. Which is also a form of wealth distribution. Keeps the rest of us fed and warm at night.
If you look at an average income of say $25,000/yr for a low income person, then realize that the wealth accumulated by people like Gates could pay the yearly salary of ~1.7 million people, it kinda makes you think what exactly are they doing with this money anyways? (Yes, I know Gates has his charity, but there is only so much money a person needs...)
Tom
Re:Pareto Distribution (Score:5, Informative)
But surely it's not hidden in a mattress anywhere. It's out in the economy, making the economy work. The money *is* changing hands. Sure, it's making Rich Bastard wealthier, but it's making us wealthier, too. Maybe it's in a treasury bill, giving our government a loan and working capital to buy things and pay salaries. Or in a stock, which gives a company working capital to buy things and pay salaries.
What would happen to to the US government if all of its bonds and bills were suddenly called in and no one else bought? For that matter, what happens to a company? That money *has* to be there for our economy to work.
Re:Pareto Distribution (Score:5, Insightful)
Re:Pareto Distribution (Score:5, Insightful)
A rising tide lifts all boats.
Re:Pareto Distribution (Score:5, Funny)
Unless you are poor, black and live in New Orleans.
Re:Pareto Distribution (Score:5, Insightful)
It isn't quite that simple. It depends on whether you measure wealth in some sort of absolute or relative terms.
The gap between rich and poor may indeed be widening, but the poor are becoming wealthier as well. In absolute terms, therefore, the rich are getting richer, but the poor are getting richer as well. This can be measured in lots of ways. Life expectancy and infant mortality are usually pretty good indicators. India and China alone account for roughly 2 billion people who were barely scraping out an existence two generations ago, but who now have a much higher degree of food security, have access to a much higher level of health care, access to technology (i.e. the cell phone is rapidly becoming ubiquitous, even in rural areas).
For the system to be clearly unsustainable, one would need to believe that people would undermine a system that is delivering them a rising standard of living. It would seem unlikely that they would do so in any sort of broad, universal way.
Re:Pareto Distribution (Score:5, Interesting)
Rich People Have all the Money! (Score:5, Funny)
But... (Score:5, Insightful)
...just because an asset is owned by some over-rich guy, doesn't mean that it is unproductive. Tomorrow we could send Bill Gates the title deed to all farmland in the Midwest, and that land would still continue to grow wheat for everyone's Raisin Bran.
And even if we then sent Bill Gates the profits from all those boxes of Raisin Bran, Bill would only have a pile of cash. Cash is not an asset; it represents assets, which usually remain in production somewhere.
No matter how rich Bill Gates gets, he still consumes very little, perhaps a half-million dollars a year in food, real estate, clothing, maids, butlers, and the like. Everything else that he owns is (if he is an even half-wise investor) still producing something elsewhere.
Re:But... (Score:4, Interesting)
Housing has been rather screwy lately after the mad rush we had in '05. Like all things, the market eventually starts to correct itself. Gotta love supply and demand.
What I'd like to see is a comparison (Score:5, Interesting)
It is possibly very hard to create such comparison given that probably the definition of wealth changed, the definition of feudal times is loose, the overall human population was much less and the world used to be much more fragmented back then. I think that 500 years is a nice round number, so a comparison between 1500 and 2000 could be made with some difficulty. Hard, but I don't think it's impossible.
Currently my gut feeling tells me that the "wealth" used to be even more centralized in those times, but we probably made some progress in social equality since then. I'd be interested to see in the amount of progress though.
Re:What I'd like to see is a comparison (Score:4, Insightful)
Re:What I'd like to see is a comparison (Score:5, Insightful)
Really? By what measure? More people own their own homes. Unemployment is lower. Even lower income families have things that would have been considered utter luxuries 50 years ago (multiple televisions, cell phones, cable, cheap antibiotics, cheap fresh food of every imaginable kind, etc). What does "social equity" mean to you - that someone who is successful should not have a flatscreen TV until everyone does? Or that incredibly wealthy pro basketball players shouldn't be allowed to spend their cash until everyone can spend the same amount of cash?
Re:What I'd like to see is a comparison (Score:4, Interesting)
And, to top it all off, he has the right -- nay, the sacred duty -- to report you to the Holy Inquisition for heresy or just not being a good Christian, and woe to you if you actually criticize him. Situations were pretty much identical in, say, China under the Mandarins and during most of the history of the Moslem countries.
Needless to say, the Middle Ages were not exactly equalitarian: thank the enlightnment for making things change, a little. So comparing, say, feudal Europe with modern-day Canada really is comparing Apples and Oranges.
You're wrong about China (Score:5, Informative)
Another thing in China helped redistribute wealth. While in most places the eldest son inherited everything, in China, the property was divided equally amongst all the sons. This meant that "rich" families often became "ordinary" over a few generations unless they can produce one or two men of great ability every generation or so. In fact, this custom was deliberated introduced by the Chinese emperors to reduce the chance of feudalism.
What's worse (Score:4, Insightful)
More tax cuts for the rich!!!
Re:What's worse (Score:5, Interesting)
What's better for a group of a million people?
Each of them get +$5, or one of them gets $5 million?
If the "one" is an entrepreneur or small businessman, he can likely parlay that $5 million into a significant investment to grow his business, and probably result in at least 5-6 PERMANENT jobs with an annual salary/value of $30k-$40k per year. That additional workforce could allow him to grow his business further, possibly snowballing into more jobs, more business, etc. This ALSO means more tax revenue for the local government, more $ for schools, playgrounds, streets, fire depts, etc.
This is called growth, and it's a good thing for a community.
Does it help everyone equally? NO, and that's why it's so offensive to the leftish
Is it possible that the $5 mill goes to some indolent rich person who wastes it? Sure (and this is pretty much what the
If it's legal (Score:4, Insightful)
Still, as long as the issue is `do I cough up for a PS3 or is the Wii good enough` and not `why do millions of people die from easily and cheaply preventable/treatable diseases/issues such as malnutrition, malaria and sleeping sickness` I don't see things changing.
You still think the `war on terror` is important? Perhaps if the number of deaths on 9/11 we repeated in every country, every day, otherwise no - statistically, not really. And yet, look at the ratio of money spent on that futile little endeavor to money spent on issues that affect millions daily.
How's it feel to be rich (on a global scale)? (Score:5, Insightful)
How unfair! (Score:5, Interesting)
Seriously, the wealthy of the world can be divided into kleptocrats, heirs, and entrepreneurs. As far as I'm concerned, you can shoot the former. Certainly not the second, though you may debate the merits of inheritance tax (which I'm personally against). Mess with the third at the peril of your nations well being.
Like (Score:5, Funny)
Prof. Farnsworth: "I can. But that's because I'm not a penniless hippy!"
We just need to change the way we see things (Score:5, Insightful)
In my own life, I have learned to divest myself of debt financing and to save and survive with more focus on needs and less on wants. I definitely pay a lot less attention to pop culture marketting. Having grown up very poor as a child does make the adjustment easier and somewhat more natural for me, but I am definitely not an unhappy person.
Among the things that no longer hold any direct personal value for me are things like diamonds, gold or other things that do not directly enrich my life in any meaningful way. In short, I value the practical and all but ignore the impractical, useless shiny things in life. I doubt I'll see the world's culture shift in this direction within my lifetime, but if we were to simply stop valuing many of the things we currently value, much of the world's wealth would simply lose value.
You act as if this is some sort of problem (Score:5, Insightful)
The real reason that it seems to be getting more and more exaggerated is because the overall wealth/economy of the nation has continued to grow. This means that more people are able to afford to survive, to get health care, to be in a place where they can fill out these census instead of working their arses off or just trying to stay warm. Think back to the 1900s, or even late 1800s. People that were just scraping by would often not even survive. But really that's all besides the point.
Who cares if we have ridiculously rich people? What does it matter? It doesn't stop you from achieving your goals, you have to work to get there and earn your way the same. Just because there are enormously wealthy people doesn't mean you're prevented from acquiring wealth yourself. in fact, it makes you all the more likely to be able to get rich. These people if they want to stay wealthy, or grow their funds, must use it in some way. Maybe just earning interest in a bank, maybe investing in startup companies. Either way that money becomes a tool banks/companies can use to generate more wealth, and you can get in on that.
Quit being so classist. Just because others have done well doesn't mean you can't, but you surely can't if all you do is gripe about how you deserve more money without doing anything to earn it.
Integrating the DC Component of Wealth (Score:5, Informative)
"The rich get richer" is basically a result of something sometimes called the "risk free asset" by modern portfolio theory [wikipedia.org] aka "risk free rate of return" -- generally the interest rate the government pays to borrow money. In classical economics its called "economic rent" or "Ricardian rent" (after the classical economist Ricardo). It results from systemic growth in the economy -- growth that increases the value of assets that do not increase with increasing demand, such as land. If you shove more people onto the Earth, you get higher land prices but you don't get more land. (BTW: This is the real reason guys like Gates, Bush and Kennedy are for immigration liberalization.) In a natural setting, this corrects itself through die-offs and/or fighting over the land -- or whatever the monopoly at issue happens to be (it could be a monopoly on, say, the right to make copies of an operating system that everyone happens to have standardized on, which is what made the present day's richest man). Governments protect wealth holders from this natural redistribution by taxing things to pay for police, courts, military, and other things that protect nonsubsistence property rights. When this service is paid for by taxing things other than those property rights, you have a subsidy of nonsubsistence property rights.
If you don't tax away all monopoly profits and redistribute it evenly to everyone, then you end up with a class of people who have an incentive to load up the economy with more people, whether through immigration or birth rates, in order to increase the demand for their property. This class can be the private owners of the monopolized rental properties or it can be public officials that reserve to themselves and their special interests the economic rent derived from taxation.
Think of it as signal processing where you don't subtract out the DC component of the signal before integrating. You end up overflowing your accumulators and losing the information you were trying to extract.
The only exception you might make is for intellectual property representing genuine invention of technological utility, and subsistence property rights since people will generally fight to the death to retain their subsistence.
That's why "the money quote" from my white paper says:
Re:Communism or Socialism (Score:5, Insightful)
Re:They deserve it (Score:4, Insightful)
Are they poor because they don't understand how money works, or do they not understand how money works because they are poor, and so have little access to MBA degrees and financial newspapers, and are forced to spend the majority of their income on living expenses (hence having little to save for long term schemes), and take lotteries because their 'nothing to lose' situation creates a risk-taker utility function, and have jobs that are unreliable and so will likely not give them a predictable future income - hence also forcing them to take loans?
The economic statistics we have suggest the latter - while income inequality is rising, social mobility is falling. Quite simply, a large number of people are poor because they are stuck in the low income trap inherited over several generations.
Re:They deserve it (Score:5, Insightful)
It was worth the karma loss.
Re:They deserve it (Score:5, Insightful)
A very rich man is asked by a journalist how he made his first million dollar. The rich man answered that he started off with just a few pennies, put them in a phone box and made a phone call: "Dad, can you lend me a million dollar, please?".
Re:The rich are disproportionately heavily taxed (Score:5, Insightful)
The richest 2% pay considerably more than 2% of taxes, however. They are disproportionately heavily taxed. I believe in the US, for example, the richest 1% bear 18% of the total tax burden.
Do they have more than 18% of the income (including capital gains, interest etc) and/or own more than 18% of the assets?
Re:The rich are disproportionately heavily taxed (Score:5, Insightful)
If not, on what ethical basis do we justify taking from them what they or their parents have earned and spending it on ourselves?
Re:The rich are disproportionately heavily taxed (Score:5, Insightful)
Re:The rich are disproportionately heavily taxed (Score:5, Informative)
Do they use more than 18% of the expenditure of State?
If not, on what ethical basis do we justify taking from them what they or their parents have earned and spending it on ourselves?
Because the rich have more stake in the state keeping the status quo intact (i.e. enforcing property rights, repelling foreigh takeover) than the poor. Not to mention many often receive indirect benefits in the form of subisidies, etc. from the government.
Re:The rich are disproportionately heavily taxed (Score:5, Insightful)
Do they use more than 18% of the expenditure of State?
If not, on what ethical basis do we justify taking from them what they or their parents have earned and spending it on ourselves?
You're conflating an ethical issue with an economical issue. Just because a capitalist economy has happened to distribute wealth in such and such a manner does not imply that those who received the wealth that they did are somehow ethically justified in spending that wealth. For example, it may well be the case that the economy dictates that your average celebrity or pro-athlete earns 1000 times as much as they need to survive. This is a far cry from saying that these people are somehow morally entitled to spend all of this money in any way they so please, when people are dying every day because the economy gave them a smaller piece of the pie (in a typical Ottawa winter one homeless person dies of the cold per day, for example.) To sum up, just because money is distributed in a particular way does not mean you are ethically entitled to spending it. Ethical questions are an entirely different matter from the particular circumstances that arise from our economy.
Let me note that I can't really fault you for believing this, because it is incredibly commonplace to hear that kind of sentiment. But I am interested in knowing why it is that so many people believe that economic circumstances should dictate what is morally correct. In any other domain it is absurdly obvious that what is ethical is determined by considering the pain and pleasure of the people involved, or by considering other aspects of the human condition, or by adhering to certain ethical maxims. And yet, when the domain of discourse is money, people suddenly forget this -they implicitly introduce the premise that what is ethical is entirely governed by the economy. This sort of assertion would be laughable if made out loud, and yet it is the implicit foundation the very sentiment you expressed in your post.
Re:The rich are disproportionately heavily taxed (Score:5, Insightful)
I'd like to believe that, sir, I really would. Except I know that free markets are not really as free as we'd like to believe. By and large, the extremely rich maintain and increase their wealth through a number of mechanisms. They have connections. They know politicians, and other heads of industry. They enact protectionist laws. The reason lawyers and doctors make so much money is that they have erected barriers to entry to their professions. To practice law, one must attend an expensive law school before being allowed to take the bar. Along with the needless complexity of the court system dictates that leagal endeavors will be very expensive. The medical profession is very similar. While I don't dispute that quality surgery is likely to be expensive, day to day medical care should not be. Doctors, however, stand as the gateway between the people and most medications. I suffer from excema. About once a year, I need a new tube of cream to treat the occasional outbreak. The tube costs $4.15, but I have to pay for a $200 doctor visit before I can get one.
And of course, the rich generally begin life with a great deal of wealth. They have access to better nutrition and schools. They inherit the business connections of their fathers. They attain positions of power not through merit, but as an accident of birth. Which also implies that my own child is just that much more unlikely to attain those positions of power. There are a lot of policy changes that can be made to rectifiy this sort of situation. Eliminate protectionist laws. Reinstate the estate tax. Actually, just treat it as any other taxable gift, because that's what an inheritance is: A gift you make when you die. Eliminate incentives for the poor to remain poor. There are far too many of them to list here. Just a few ideas anyway. I don't mind the rich getting rich on their own merit. But for every James Sinegal (Costco founder) out there, there are 100 asshats riding on daddy's (or grandpa's) coattails.
Wealth != Darwinism Sucess (Score:5, Insightful)
The definition of "fitness" is your ability to reproduce. Welfare mothers, NBA stars with 14 kids, are more fit than CEOs worth millions/billions with one,two, or especially no children, regardless of income.
Earning a degree from college does not make you more "fit". Having children makes you more fit.
Having an IQ of 150+ does not make you more "fit". Being "smart" enough to take birthcontrol to prevent unwanted pregnancies probably makes you more "unfit".