The title of the graph misleading, but they plainly say underneath:
"The world’s 10 richest billionaires, according to Forbes, own $801 billion in combined wealth, a sum greater than the total goods and services most nations produce on an annual basis, according to the International Monetary Fund"
It's still a pretty staggering statistic. You really gotta ask, how wealthy does an individual have to be? It appears there is no limit, even beyond the wealth most people can even imagine.
Also these individuals' wealth did not derive from income.
Return on capital is also income. You should compare that with GDP. Also a better measure of gap between rich and poor since it says how big part of the GDP each group gets.
Why tax them? If they made their money fair and square, it's their's and their inheritors to keep.
Islam already solved this over 1400 year ago. Zakat laws are fair, and not egregious like some of the crazy taxation proposals we've been seeing thrown around, with no understanding how they will actually destroy the economy. Zakat has 0% income tax, 0% gains tax, 0% inheritance tax, and only taxes certain things at a very reasonable fixed rate (e.g. money that is 1 year old is "taxed" at 2.5% which is payable to charity among other things). This encourages people to work for wealth, and sustains the economy and society as has been proven historically.
A huge underlying issue that no one is willing to talk about is how the modern economic system is built on lending (with interest), a predatory and dangerous practice that has been prohibited thousands of year ago by Islam, Christianity, and Judaism. Fix the underlying problem (and anything that offshoots from it, such as stock shorting), and things will start to fall in place.
My criticism has always been around the use of wealth as the indicator. I believe it is chosen instead of income primarily because:
1. It's perhaps easier to determine than income (especially for the ultra-wealthy, who often have negative-income in certain years).
2. The wealth-gap is much greater than the income gap, so leads to more dramatic-sounding statements.
But really what we care about is income--especially when one considers that wealth is just unspent income. And income is actually what determines lifestyle.
If I had $10M, I could retire today, never work again in my life, and my income would be $0. However, I could easily spend $200k/year and have a great lifestyle, without reducing my wealth, inflation-wise. Some people say I could even spend as high as 4% of my wealth annually [0] - which I personally don't agree with.
Vice versa, if I had negative $200k wealth (student debt, etc), and an income of, say, $100k/year while living in the Bay area, I would probably remain "poor" and be constrained to a thrifty lifestyle for a long, long time.
But how did you attain that wealth? Wealth is unspent income. You could have two individuals who earn $1000. But if one saves $1 and the other saves $100, then the latter is 100x wealthier. But is he really have 100x the lifestyle? No, one spent $999 and the other $900. They are approximately equal.
Considering that most people don't save anything (even in wealthy countries) it's not difficult to have 10x the average wealth.
As a measure of lifestyle, to a degree. Although the anomalies are obvious: the upkeep costs of a lavishly appointed London mansion a multimillionaire owns are certainly lower than the rental on a much smaller flat (and probably a fair bit less than the property appreciates in value). And wealth is a source of power and claim on future spending. The average person spending $100k per annum does not have the capacity to decide nobody in his family need ever work again like Warren Buffett could, never mind his power to move markets.
I'd say what matters is whether you can afford something and all, and then to a lesser extent the quality of that good/service.
For example, most people in the US can at least afford a cheap used car, and can therefore go pretty much anywhere. Of course, it's nicer to have a Bentley, but a luxury car still sits in the same traffic and has to obey the same speed limits as everyone else. In the developing world however, the rich always have cars, but many normal people can not afford one at all.
Usufruct makes this a difficult & poor measure, also.
Even well-off (but far from wealthy) people - think contractors on say USD$200-500k / year - can architect their financial arrangements via a Pty Ltd / LLC to minimise on-paper income as well as expenditure.
Enjoying full use of an asset to which you, personally, have no ownership and no cost of maintenance, confounds assessments of this demographic all the way through to the private-jet crowd.
Presumably if you had $10M it wouldn't sit under your mattress but at a minimum would be in a bank generating interest. So you would in fact have income.
Consuming interest is a huge part of the problem. It's a predatory and destabilizing action that has been prohibited (and for good reason) by Islam, Christianity, and Judaism thousands of years ago. Please do not perpetuate the problem by consuming (or paying) interest. It's the least we can do.
> But really what we care about is income--especially when one considers that wealth is just unspent income. And income is actually what determines lifestyle.
Wealth can borrowed against, in many cases to pursue opportunities to build more wealth such as investing or purchasing rental properties. Wealth enables people to make choices that would be too risky to make for people who depend on an income, such as starting a business. Wealth ensures financial security even if one does not have an income. Wealth buys access and influence. Wealth can be inherited.
In other words, wealth is not just money, like income is. Wealth is a form of power.
Yeah sure but the way the Fed decided to economic stimulus is basically money straight into your stocks. You don't have to do any productive work to earn money. That's one of the defining features of deflation.
These are good points and to add on, what do they mean when they say “wealth”? Cash? Equities? Real estate? Precious metals? Artwork? Super cars?
Some of those are easy to measure and others aren’t.
So going by your statement “wealth is just unspent income”, depending on what they consider as “wealth”, you could have person A invest all their disposable income and person B spend all their disposable income. Then in the end analysis person A is wealthy and person B is not despite having the same income.
Arguably it's consumption that is the most important metric. Not everyone earns income, but everyone consumes, from a trust-fund baby to a subsidence farmer.
Wealth is the correct metric to look at, because wealth generates the most unequal amounts of income, from unequal amounts of work, and even if not spent, is responsible for inequality perpetuating itself over multiple generations.
“Self-made”: if you come from a well-off (not necessarily “wealthy” family), you’re more likely to attend university, get a well-paying job, etc. If you come from a worse-off family you’re less likely to do those things. Upbringing and socioeconomic class are still a huge factor in how wealthy one ends up (even excluding inheritance entirely), showing that in the vast majority of cases people tend not to be self-made, but products of their environment.
I apologise for not having read the book, but that wasn’t the gist of my comment: my point was that wealth or income levels tend to run in families anyway just because of socioeconomic class and similar environmental factors. The book you mention would not help many people in the lower-class neighbourhoods around mine because people there don’t tend to read books on personal finance (perhaps because that is not valued in their social circles, which in turn are products of their environment).
The distinction between wealth and income in the book is not so helpful for comparing inequality I think. You can be well-off by having access to enough money: whether this is by having a lot in the bank and a small income, or a little in the bank and a large income, you are still far better of than having neither.
I contest the term “self-made” since in particular, socioeconomic status is transmitted from parents to children (there are many studies of this). Sure, there are exceptional self-made individuals. But in a world where the income bracket of a child can be fairly reliably predicted from their parents, is calling a large group of people “self-made” meaningful?
> would not help many people in the lower-class neighbourhoods
Pretty much nobody I've recommended the book to, and I recommend it a lot, ever reads it. The only one who has is following its recommendations and is well on his way to being a millionaire as a young man.
> I contest the term
That's pretty much denying that people have free will. For example, the public schools teach people to read. I recommend the book. The book is available for free. They don't read it. That's their choice, not fate.
BTW, I'm old. I've noticed a common correlation between peoples' attitudes and their wealth over the years. The ones who believe they are hapless victims of fate, never manage to get anywhere. The ones who see themselves as having choices are very likely to accumulate wealth.
Excellent logic. What next, paraplegics can become NBA champions, they are just not willing it hard enough?
Motivation is a pre-requisite, but far from the only one. I don't know anyone who accumulated significant wealth who was: 1) dumb 2) had significant health issues.
Being a sports champion means you must be better than anyone else. The rules are deliberately set up so only one can succeed. This is quite unlike free markets. You don't even have to be better than average to do quite well in the free market.
> dumb
Donald Trump? :-)
> significant health issues
People who's health is so bad they can't work have my sincere sympathies. But this is a pretty small percentage of the population. The overwhelming majority are of sound mind and body.
As individuals I think we should all strive to succeed, and employ any clever strategies we can find. However, the statistics around this suggest that it isn’t viable for everyone to do this.
Only if you believe the economy is zero-sum. But that wouldn't explain the overall rising wealth that's been going on in the US for over two centuries.
None of that is false. You just forgot to mention the overall rising inequality in the USA (over a shorter, more relevant, time period, ie not two centuries) whilst other, some might say more forward thinking countries, are levelling out.
I'm not concerned if other people have more dollars than I do. They are not accumulating wealth at my expense - they are creating wealth. As a byproduct of the wealth they produce, I have nice things like computers and the internet and can work at home and watch an incredible smorgasbord of stuff on TV and push a button and whatever I want gets dropped on my doorstep the next day. I can take MIT courses for free on youtube. Oh, and I get to talk with people all over the world on HN, for free.
Most of the boom is coming from the tech sector, as tech is revolutionizing productivity in all sorts of endeavors. They didn't steal the money from you or I.
I can even buy shares in those tech companies for $0 commission and get a cut of the wealth they create.
We're living in a golden age in the US. Even poor people have a computer in their pocket with instant access to the world's information. How cool is that?
I'm not in agreement with your description of 'creating wealth'. We (society) have had this computer in our pockets for a while, seems to be making things less equal, as per the report.
It (your clothes, car, food, phone) is at the expense of slave labor around the world.
I'm not pessimistic. Health, hunger, literacy, longevity, are on the up. But Wealth Inequality, the OP topic, is also on the up. To view things otherwise is turning your back on the plight of others. Such issues are not conquered, there is no final victory. Each generation must fight the same battles to maintain their voices and remain relevant.
You're framing things in terms of inequality. Here's another way - are you better off with a phone? If so, then things are better for you. If not, why did you buy it, and why don't you throw it away?
If you're better off, who cares if someone else is even better off? There's always going to be someone stronger, taller, handsomer, younger, wealthier, smarter, healthier than you. You'll just make yourself miserable worrying about it.
I don't spend my time worrying about Michael Phelps being a faster swimmer than me. I couldn't care less that Usain Bolt runs faster than me. My genes are not favorable for excelling in sport, and I simply don't care that other people have an advantage there.
P.S. my phone makes my life better every day. I could list all the ways, but it's pretty obvious. Its benefit to me is far, far more than what I paid for it. I don't want to go back to the 1970's and have no phone. It's free markets and inequality that made that phone.
Correct, the topic. You seem to view 'inequality' as you and I looking enviously up at Michael Phelps. You may be, but I am looking down at who we are leaving behind.
>If you're better off, who cares if someone else is even better off?<
The clear point is I am concerned that people are worse off.
But carry on telling me how that 1996 book means we can all be millionaires (if we would just buy it).
Not true. Nowhere. Ever. Many factors decide your course in life, including your own choices. One does not simply get to decide every choice. Parents may or may not be to 'blame' for any, some, or all of it.
This is true, and not the sales-speak adage 'it's all up to you'.
theoretically, the economy overall may not necessarily be zero-sum.
Many smaller games, of the size you are actually going to be playing in your life, are exactly zero-sum.
Limited number of startups in every batch of YC. zero sum.
Limited amount of seed funding available globally for startup. zero-sum.
Even fewer funding available for Series-B. zero-sum.
The economy grows substantially every year. How is that possible if it is zero-sum?
> are exactly zero-sum
Sports games, like baseball, are exactly zero-sum, because they are deliberately set up and enforced as win-lose. Free markets, on the other hand, are based on win-win.
> The economy grows substantially every year. How is that possible if it is zero-sum?
It is (approximately, in the developed world) zero-sum because outside of the most extreme poverty, experienced utility is a function much more of relative material position than of absolute position, so increases in inequality drives disutility while improvements in absolute position accompanying such increases do not significantly offset the disutility from inequality (and the reverse would be true with increasing equality even with declines in aggregate absolute position.)
> Fewer than 20 percent inherited 10 percent or more of their wealth.
That's a very misleading statistic; it takes less than 25 years and the long term average return if the S&P 500 to get a 10× multiple; so with that much time, an inheritance that represents only 10% of final wealth is quite easily the source (with just basic passive investment) of 100% of it. At 40 years from inheritance, it's over a 42× multiple, so an inheritance or less than 2.5% is the source of a whole fortune.
And, surprisingly, your statistic doesn't cover how many had “business” (whether genuine or as a tax dodge method of giving large gifts as “businesses expenses”) funneled to them to build their fortune directly from their wealthy family members, businesses controlled by wealthy family members, or people seeking to curry favor with wealthy family members. Which is how the pros do it.
The rhetoric I heard back then about it being impossible for ordinary people to accumulate wealth is exactly the same as I read in this thread. It was the same in the 80s and 70s, too.
You didn't, otherwise you wouldn't still be saying that inherited wealth isn't a problem.
Norway is equal because of high redistribution, actually. It's sad that you're so politically motivated to do apologetics for the rich that you'll refuse to learn some basic facts about a country that does it better than yours.
Wealth aligns more strongly with inequality because it is inherited. Income is to some part a product of your personal effort which acts as an equalizer. Inheritance very rarely is.
> Credit Suisse defines “wealth” as the value of a household’s financial assets plus real assets (principally housing), minus their debts.
This definition excludes a whole category of people: Those whose wealth is 0 (or even negative) but they are rich or at least living like rich people. If you own $10m in assets and have $10m in debt, your wealth is 0 but I'm pretty sure you are not poor. What's the percentage of such people in society? This should make inequality even worse.
Then you have a category of people who are not rich on paper but they have access to privileges (ie: government bureaucrats). As bad as inequality on these stats is, I think it's severely under-reported.
By now probably most people are aware of these facts to some degree (not with exact numbers but an inkling). The problem is what to do with that information. So, a question to the rest of HN what are you doing to reduce wealth and income inequality?
Me? I'm voting for parties that want to tax the rich+wealthy (people and enterprises) for money coming in and out of the country (or the EU).
Further, I try my hardest not to buy from the biggest offenders nor to use their products: Apple, Google, Nestle, Facebook, Amazon, McDonalds, Samsung, LG, etc. I try to buy local products and order from local, national or intra-EU companies. Second-hand or refurbished too.
And of course consumption in general is low: goods, energy, water are restricted to the necessary. There aren't many things in my dwelling that I don't need or don't use.
It's not always possible, but an attempt is being made.
I try to follow a similar path of buying local or at least from EU-based companies, organic where possible, and generally keep that in mind when buying something, plus try to look for second-hand whenever possible. Why would I buy a brand new amplifier and speakers or a brand-new bicycle, when the second-hand market is brimming with quality gear?
I also vote for the parties with the strongest climate and environmental policies, which is generally the most left-wing parties, so that also fits with my own views on most other things.
But like you, my consumption in general is very low, so even if "vote with your wallet" did work as advertised, it wouldn't be doing much at all, an absent vote is a much less powerful signal than an actively cast vote.
So I donate to worthy causes and try to argue my views online and encourage people to reduce the consumption, for what good that does.
We must turn this consumerism ship around, somehow.
I think there is times where comparing the ratio of economic stock vs. flow, i.e capital to wealth ratios, but yah the billionaire wealth to GDP comparisons just seem silly.
I get what they're trying to say, but it is the weakest way to argue their point.
There is attractiveness inequality, should we post graphs about that too?
It's not the inequality that's problematic and it'll always be there, it's what people do with it.
I'd say we have global stupidity and short sightedness with exceptions here and there and I'm not sure there was ever a time when this wasn't the case.
The obliviousness of the stupid people inhabiting this planet, gravely concerned with getting their bling on asap, no matter the cost to everyone and everything else, is what I'd most like to see gently exposed, comprehended and compensated for. This'll solve most problems for most people, including the stupid ones.
Stop asking if Peter has more than Paul, and instead focus on whether or not Paul has enough.
The individuals this article focuses on have almost all their wealth from options in their own companies - stocks they get by virtue of creating and running the company, which in turn skyrocket in value because they did a good job.
The money isn't being taken from anyone, except whoever wants to buy the shares.
You lose nothing if Musk's holdings grow by another 10% after Tesla sells lots of cars in China. Stop caring about it.
Incorrect. They are comparing wealth with GDP, which would equate to comparing wealth with income.