World's richest 85 have same wealth as 3.5 billion poorest

From ET by: | Senior Digital Editor, CNBC International

 
 
 
 

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The combined wealth of the world's richest 85 people is now equivalent to that owned by half of the world's population – or 3.5 billion of the poorest people – according to a new report from Oxfam.

In a report titled "Working for the Few" released Monday, the global aid and development organization detailed the extent of global economic inequality created by the rapidly increasing wealth of the richest, warning of the major risks it poses to "human progress."
According to the report, 210 people have become billionaires in the past year, joining a select group of 1,426 individuals with a combined net worth of $5.4 trillion.
(Read more: Holiday spending highlights US wealth gap)
It added that the wealth of the richest one percent of people in the world now amounts to $110 trillion, or 65 times the total wealth of the bottom half of the world's population.
"This massive concentration of economic resources in the hands of fewer people presents a significant threat to inclusive political and economic systems," the report said.
"Instead of moving forward together, people are increasingly separated by economic and political power, inevitably heightening social tensions and increasing the risk of societal breakdown," it added.
The report comes ahead of the World Economic Forum in Davos which kicks off later this week, and Oxfam is calling on the global political and business leaders attending the meeting to take steps to turn around the rapidly exacerbating inequality.
(Read more: Pope attacks mega-salaries and wealth gap in peace message)
Some recommendations include refraining from the dodging of taxes and avoid using economic wealth to seek political favors.
Income inequality reality check
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Oxfam said that based on its polls conducted across the world, it is believed that there are many laws and regulations designed to benefit the rich.
"A survey in six countries (Spain, Brazil, India, South Africa, the UK and the U.S.) showed that a majority of people believe that laws are skewed in favor of the rich," the report said.
Oxfam singled out India as an example, where the number of billionaires increased from less than 6 to 61 in the past decade, concentrating approximately $250 billion among a few dozen people in a country of 1.2 billion.
(Read more: The real facts about inequality)
"What is striking is the share of the country's wealth held by this elite minority, which has skyrocketed from 1.8 percent in 2003 to 26 percent in 2008," the report said.
Oxfam said that India's billionaires acquired their wealth in 'rent thick' sectors – industries where profits are dependent on access to scarce resources – "made available exclusively through government permissions and therefore susceptible to corruption by powerful actors, as opposed to creation of wealth."
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Reuters
The report that everybody's talking about this morning is Oxfam's opus on global inequality, which leads with an eye-popping statistic: The richest 85 people in the world own more wealth than the bottom half of the entire global population.
Yes, that equation works out to: 85 > 3,000,000,000.
Before we dig into the document, a programming note about wealth inequality. Wealth isn't income. Salary is income. But investments—stocks, houses, or equity in a business—build wealth. Wealth comes from the money you don't immediately spend. Since poor people spend more of their income immediately, and rich people save/invest more of their income immediately, it's predictable that wealth inequality be much worse than income inequality.
That said, the document is full of figures that will make your head explode if you are about income inequality. Here are five.
1) Seven in ten people live in countries where inequality has increased, and the United States is leading the wave. This graph from the report looks at national income (not wealth) accumulation to the top one percent, but it makes a clear point that inequality is rising everywhere, but nowhere more than the U.S.

2) The richest 1 percent saw its share of income rise in 24 out of 26 countries for which Oxfam collected data between 1980 and 2012. Again, the story here is the U.S. leading a global trend.

3) Related to the graph above: In the US, the wealthiest one percent "captured 95 percent of post-financial crisis growth since 2009," Oxfam reports. The bottom 90 percent actually lost wealth.
4) Every high-income G20 country is experiencing rising inequality except for South Korea. Meanwhile, numerous Latin American countries, including Brazil, Mexico, and Argentina, are seeing inequality levels decline thanks to a combination of income graph and high taxation and public spending.
5) The wealth of the one percent richest people in the world amounts to $110 trillion—15x more than the wealth held by the bottom 70 percent.
So, global wealth inequality is real. But so is global poverty reduction. Since 1970, the world poverty rate has declined by 80 percent.

The rise in wealth inequality isn't a measure of the poor getting poorer. It's a measure of the rich getting fantastically richer thanks to the cascading benefits of privilege and the tremendous growth in stock wealth in the last decade. (Even in the U.S., 75 percent of household wealth is held by the richest 5 percent.)
I'm confident that wealth inequality is a problem. But the chasm in investment wealth between rural Mozambique and Manhattan's financial district isn't necessarily the problem that the international development is or should be focused on. As Bill and Melinda Gates wrote in their annual letter, "the world is better than it has ever been." Cities like Mexico City, Nairobi, and Shanghai have been transformed in the last generation from dens of poverty to thriving international markets. In the letter, the Gates' make a big prediction:
By 2035, there will be almost no poor countries left in the world. Almost all countries will be what we now call lower-middle income or richerCountries will learn from their most productive neighbors and benefit from innovations like new vaccines, better seeds, and the digital revolutionTheir labor forces, buoyed by expanded education, will attract new investments.
I like the note both for what it says and what it doesn't say. The Gates' reject the idea that poor states are doomed to permanent poverty and they defend the record of foreign aid. But they also don't pretend that wealth redistributed from the West, alone, will end the cycle of poverty in parts of sub-Saharan Africa and Asia. It's not enough for poor countries to accept excess tax revenue from their "most productive neighbors." They'll have to "learn" from them, too.