It’s Good to Be in the 1% … of 1% of 1% of 1%

“A nickel ain’t worth a dime anymore” – Yogi Berra

The LA Times had an article out yesterday discussing how the richest 85 people in the world own roughly the same amount of wealth as the bottom half of the worlds 7 billion plus people. That’s roughly 0.000001% of the population.

Before we get to the article, it is worth noting that in a free market one might reasonably expect productive capacities, ingenuity, drive, and even thrift to follow some form of power-law distribution (y=ax^b). Would it be the case in a free market that the top 85 folks have the same total wealth as the bottom 3,569,500,000? Probably not, but there is some power relationship that would likely hold, one would not expect even distribution of wealth.

By the way, those 85 folks are worth about $1.7 trillion according to the article. Obviously that wealth isn’t distributed evenly, but if it were that would be about $20 billion each.

The article does make a number of odd extrapolations using this data. First there is the typical expression of shock that wealth should be “unevenly” distributed. This argument tends to be made based on the scale of differences, but not based on some moral definition of what the distribution should be. I’m not going to say that I have an answer to that one either – but “everybody has the same” probably isn’t right (not everybody works with the same intentionality, and to make everybody the same is to subvert freedom … the one thing in which I think we should all be the same). At the very least they do hint at the potential for political instability – which is a fair point (again, not a point they made, but they danced around it in places).

Then there was this odd blurb: “The findings undermine democracy and make it more difficult to fight poverty.” Here I really have to scratch my head. First, the world is not governed by democracy. To lay world-wide inequalities at the feet of democracy is a bit out of place. It’s like claiming that rising and falling ocean tides fly in the face of every song ever written by the Little River Band. (You know you’re singing it in your head right now … “Take it easy on me; it should be easy to see; I’m getting lost in the crowd; hear me crying out loud”…)

Next we get to the rub. “How did it get this way?” – well, if the article and report are to be believed it’s “falling taxes for the rich and increased use of tax havens.” I’m not sure where to begin (but I will note that the group producing the report favors progressive taxation). I suppose the implication is that the wealth would be even more concentrated in the hands of the few if we had tax equality (everybody pays the same percentage of their production). Good thing we have the altruistic government to keep us from the evils of freedom and equality.

Of course, it should be rather painfully obvious that people worth $20,000,000,000 didn’t get that way by drawing a large paycheck and skirting the progressive tax system. The mega-wealthy don’t make money the same way. They make money when central bankers print money to inflate asset prices (who owns the assets?) transferring wealth from the bottom 3.5 billion to the top 85. You can probably guess that the article didn’t mention this mode of wealth transfer from poor to rich. Perhaps they don’t really care about the suffering of the poor, just their ability to preach social utopianism as the “better than thou” elites. But I digress.

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