Oh, very well done to The Guardian here

So they’ve got one bloke blathering on about how the rich get everything and the economics of the last 30 years hasn’t worked.

The richest 85 people in the world have as much wealth as the poorest 3.5 billion – or half the world’s entire population – put together. This is the stark headline of a report from Oxfam ahead of the World Economic Forum at Davos. Is there a reason why the world’s powerful, gathering at the exclusive resort to sip cognac and eat blinis, should care? Well, yes.

If one subscribes to the charitable view that neoliberal philosophy was simply naive or misguided in thinking that “trickle down” would work infinitely, then evidence that it doesn’t, should be cause for concern. It is a fundamental building block of supply-side economic theory – the tool of choice these past few decades for those in charge to make adjustments. The realisation that governments have been pulling at economic levers which, for some time, have been attached to nothing, should be a wake-up call to the deepest sleepers.

Then in the same issue of the same paper they’ve got another bloke pointing out what has happened with the economics of the past 30 years:

But what does middle class mean in the developing world? About 3 billion people earn less than two dollars a day, but figures for the rest are hazy. Now, fresh research by the International Labour Organisation (ILO) economists shows in detail what’s been happening to the workforce of the global south during 25 years of globalisation: it is becoming more stratified – with the rapid growth of what they term “the developing middle class” – a group on between $4 and $13 a day. This group has grown from 600 million to 1.4 billion; if you include around 300 million on above $13 a day, that’s now 41% of the workforce, and on target to be over 50% by 2017. But in world terms they’re not really middle class at all. That $13 a day upper limit corresponds roughly to the poverty line in the US in 2005. So what’s going on?

That is this globalisation shit really does work and the incomes do indeed trickle down.

But our first man, the paper itself, the commenters, all seem to be entirely ignorant of the implications of the second piece.

23 comments on “Oh, very well done to The Guardian here

  1. I don’t really think they are ignorant of the implications of the second piece, I think the implications of the second piece do not fit into their ideological worldview and are therefore ignored.

  2. Do they have to keep using these dollars a day equivalents?.
    a) Because if folk in those countries were indeed being paid in those dollars they’d likely be a lot better off than being paid in the local rubbish.
    b) Because without any guide to what those dollars buy where they’re spent, the figure’s meaningless. Even in the EU, the difference between what a €uro will buy in UK & say Romania is startling. Like the difference between a decent meal & what you’d need to pay to park whilst eating it.
    c) Couldn’t a UK paper hack the trivial matter of converting to the same currency as on it’s price tag? Having to start with a $/£ conversion doesn’t exactly aid clarity.

    Tim adds: This is already done. The numbers are certainly PPP adjusted (so take account of local price levels) and are in chained dollars: so we’re using the $ as it was in 1992 or 2000 (can’t remember which one they’re using here). So, we can indeed compare across both countries and time. That’s the point of these numbers in fact, to be able to do so.

  3. OK. Fair ’nuff Tim. I’m more used to working with real money, real prices in real time, for obvious real reasons. But, as i’ll no doubt balls up the research, what’s the chained dollar, PPP adjusted for say the UK for both income groups to get a base line?
    It does have a whiff if that pay equality thing in the UK & we know the trouble we get in between SE ‘n Oop North.
    I’ve got input to one developing country’s price/earnings structure & $13/p/d wouldn’t hack middle class. On the other hand, being middle class there is a whole world different to being middle class tax fodder in Finchley. But with added drive by shootings & the odd kidnapping. Which is another way of saying, is the ‘social wage’ taken into consideration.

    Tim adds: E£xactly? I dunno.

    But here’s a list of median wages across a number of countries on the same basis.

    http://super-economy.blogspot.cz/2010/04/median-earnings-higher-in-us-than-in.html

    With all the adjustments, that $22k in annual median income in that list for the UK equates to about £21k in current UK income. Ish, ish, of course, but a reasonable guide. So, divide by 365 to get daily income: $60 a day or so is dead centre of UK incomes.

  4. Hi BiS

    If you’re interested in the whole dollar a day thing (and all the related issues) I can recommend Angus Deaton’s The Great Escape. A lovely readable book on economics and development.

  5. Is £21k a year really considered middle class in the UK (even if the bottom edge thereof)? Fuck. This is in danger of convincing me of the whole “rich getting richer, poor getting poorer, middle class going backwards slowly” discourse that’s supposed to be bollocks.

  6. I note the ‘trickle down’ myth passed off as truth.

    It was a throw away line many years ago by a US comedian.

    No economist, neoliberal, old fashioned liberal or Conservative ever talked about trickle – down as any kind of panacea to enrich the lower orders by enriching the upper ranks and letting the excess dribble over the sides onto the Masses.

    It is the usual Leftie straw man assigned to wicked Right wing thinking so the virtuous folk on the Left can show how morally and ideologically bad those nasty Righties and their richie cronies and selfish economics are.

  7. @ John B

    And yet, I did OK last year and as a result we are extending the house and I have just bought myself a new car.

    The builders currently smashing down walls on the other side of the house, and the salesman, secretary and owner of the car dealership… hasn’t some of my extra dosh trickled down to them?

  8. The leftie argument, as far as I can see, is that moderately-rich people do spend money but exceptionally-rich people generally don’t; Mr Buffett fairly famously neither extends his car nor replaces his house at all, let alone a hundred thousand times as often as you do.

  9. Mmmm… Thanx Tim. (& Ken)
    You’ve gone a long way to answering the question posed by the very final para of your post. Without knowing the methodology, it’s not easy to get much meaning out of the figures bandied about in the second quote. First writer didn’t. But no doubt a Guardian new-economics sage, so what do you expect? 98% of commentators won’t either. Your’s truly didn’t 🙂 Our correspondent from Krautland’s spluttering over UK middle class earnings.

    I do think this is where the voices of reason lose out. Polly Twatbee, given the same material, would have made up a Mr Diwani & a couple little Diwanis to illustrate the prosperity of the developing world’s new middle class, with an iPad thrown in for good measure And worked in Babu his faithful skivvy & how much better her life is not living in an oil drum on the city’s ring road. Maybe seasoned the piece with a few figures for light relief. We know Polly. Probably wouldn’t even relate to the subject.
    But the left do know how to wholesale bullshit at retail prices. Maybe it’s being mostly arts grads. They dress things up in little stories. The narrative approach. Read the first quote.
    It works.

  10. I’m spluttering because the median earnings over Herr are about double that, and many of those guys would consider themselves staunch comrades. Which makes me think we aren’t looking at the same thing at all, which is the usual problem with statistics.

  11. Let’s assume at least a weak version of “trickle-down”, as per Interested.

    So for it to be plausible, your economies must be connected. Russian oligarch wealth in London can buy Italian super-yachts. Interested can buy building and car sales services close to home (or the car by phone or internet), with the building materials probably made in the UK or close by and the car made anywhere in the world.

    But it is actually quite difficult to trickle-down to disconnected economies. And why, in this globalised world might an economy be disconnected? The protectionism, green miles, buy-local and FairTrade beloved of the metropolitan chattering left.

  12. I’d like to see the PPP figures across countries net of taxes i.e. real disposable income. I mean, €200 a day in France might compare to 5400 baht in Thailand (given the 1.65× PPP multiplier from Wiki and EUR/THB of 44.6 from Mathematica), but if Hollande is wogging 60% of that 200 and Bhumibol’s only filching 35% then what you can actually consume* is more complex than the raw figures would suggest. How much, say, do you need to be earning, gross, in the UK to have £100 free and clear in your pocket at the end of the day?

    * this being, as Tim reminds us, the definition of wealth.

  13. Surely 2 billion of these 3.5 billion poorest people are children and thus have (with a few exceptions) zero assets.

    The fact that Bill Gates with $60bn is worth the same as 100s of millions of school kids seems somewhat meaningless.

  14. But Tom, although Mr Buffett doesn’t spend his wealth, he doesn’t just enjoy his wealth by swimming in gold coins like Scrooge McDuck. He goes out and invests it, i.e. puts money into other people’s hands.

    If you want a short-term uptick in consumption then cash transfers to the poor will do the trick; indeed it was Gordon Brown’s stock in trade. However as a nation we also require long-term investments, which means saving not spending.

  15. Shinsei – exactly. Add in those living paycheck to paycheck with no savings and no equity (therefore no wealth)…..
    Easily reach billions of people with zero or almost zero wealth. Adding zeros really doesn’t make much sense.

    Now if they were to compare those with wealth against others with wealth…..

  16. So let’s confuse money with wealth and trot out the fixed size pie theory and pretend that it’s all the fault of the rich white men hogging all the money and completely ignore the fact the those poor people in poor countries are free to generate their own wealth by getting rid of the thieves, bureacrats and politicians who stand in the way of them trading freely amongst themselves.

    And while we’re on the subject, let’s start getting rid of the thieves, bureaucrats and politicians who are getting in the way of our ability to generate wealth.

    And let;s begin this process by voting against every Lib/Lab/Con candidate at the euro elections. Vote them all out. And if what gets in are no better then rinse and repeat.

  17. @Tom Womack

    ‘The leftie argument, as far as I can see, is that moderately-rich people do spend money but exceptionally-rich people generally don’t; Mr Buffett fairly famously neither extends his car nor replaces his house at all, let alone a hundred thousand times as often as you do.’

    Yes, that is their argument, Tom, but exceptionally rich people don’t tend to eat their money, or burn it, or stick it in holes in the ground; they invest it.

  18. @ Andrew M – ah, you beat me to it.

    @SE – I’ll bet Buffet invests in a lot of funds which are in China, India, Brazil, Indonesia etc etc. (I know I do.) Plus we all give money via taxes stolen and dished out by our grandstanding politicos.

    That said, my point really is that wealth very obviously does trickle down (though it also floods up, and then trickles down again) – it’s part of the dramatic rise in world living standards.

    Sure, it won’t happen overnight, but over-century it will – and quicker, too, if we can keep our various politicians’ noses out.

  19. Are we talking about two different things here. Supply side economics on the one hand and international trade liberalisation on the other. I don’t think anyone can argue that the liberalisation of international trade has been the greatest global development success. Free trade works.
    But supply side economics is not necessarily the same thing as liberalising free trade. I am pretty confident that China is benefiting from Free Trade, the extent to which they have engaged in supply side economics is pretty unclear given the massive amount of State intervention in their economy.
    It might be the case that both comments are correct but are actually about different things. Although I don’t agree that supply side economics has been a failure, incentives work. I suspect that the author is actually complaining about wealth inequality which is probably more the result of a failure of the taxation system to redistribute wealth effectively. After all the Scandinavian economies are examples where supply side economics has worked but you have a highly redistributing tax system which reduces inequality. As Tim pointed out earlier you need to have economic growth first then redistributive tax and welfare systems can follow.
    Of course I shouldn’t be surprised by a Guardian jouno writing about something which they simply don’t understand. 

    Tim adds: “wealth inequality which is probably more the result of a failure of the taxation system to redistribute wealth effectively. After all the Scandinavian economies are examples where supply side economics has worked but you have a highly redistributing tax system which reduces inequality.”

    Tim adds: Well, yes. Except the Scandis actually have higher wealth inequality than the UK, than many other countries in fact. And also lower capital (but higher income) taxes.

    The connection between wealth inequality and income inequality is not quite as clear as some seem to think.

  20. @John Malpas ‘If everybody had the same income – would that really be a good thing?’

    I assume that’s a rhetorical question, but lots of people do suggest it would be. Obviously, it would last as long as it took one bright, committed person to notice that good A was in short supply, to buy as much of it as he could afford with his identiwage, and sell it at a slight profit to his co-earners.

    This would be a good thing because those willing to pay a bit more for his time and efforts would also be able to use the time they had saved to do something they valued more than searching for good A.

  21. The number of lunatics calling for global government and worldwide socialism in the comment section of that article turns my stomach…

    Those who cant do constantly trying to restrict those who can.

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