Op-ed: Fake news from Oxfam on inequality

Earlier this week, Oxfam released its latest findings on global wealth inequality, with widespread media coverage (such as the pictured front-page story in the Dominion Post).

The group’s analysis of inequality in New Zealand was glib and unhelpful.

Citing Credit Suisse’s Global Wealth Databook 2018, Oxfam claims that inequality is worsening – two wealthy New Zealanders were better off over the last year by over $1 billion, while the bottom 50 percent of New Zealanders were worse off by $1.3 billion.

On the surface that sounds deeply concerning, but it misses the substance of Credit Suisse’s report, which shows the Gini coefficient – a more comprehensive and internationally-recognised measure of wealth inequality – reduced in the last year from 72.3 to 70.8, indicating wealth inequality actually fell, despite Oxfam’s alarmist claims to the contrary.

Unfortunately, there are more fundamental problems with the analysis, beyond Oxfam’s use of ‘alternative facts’.

If you have just completed university and have a large student loan, Oxfam treats your wealth position as worse than an impoverished worker in the developing world, who despite having very few or no assets, may also have no debt or liabilities. Hence the impoverished worker has zero net wealth, while university graduates in New Zealand and the rest of developed world have ‘negative’ net wealth.

This leads to absurd conclusions in Oxfam’s analysis.

Introducing a student loan scheme in a developing country – opening up access to tertiary education – would show up as a worsening of social capital in Oxfam’s eyes. While the programme would improve the net wealth positions of many families in the long run, young people would temporarily take on debt while they receive an education and seek employment.

Wealth inequality is also only considered domestically, rather than internationally. Inequality  between developed countries and developing countries is collapsing, largely due to the expansion of free markets and free trade.

For example, while Oxfam found in 2017 that inequality was worsening in Vietnam, the percentage of the population living below the poverty line fell from 17.2 percent to 9.8 percent between 2012 and 2016. In the decade between 2007 and 2017, average monthly income grew from 2349.7 VND to 6357.4 VND – close to a tripling in take-home pay.

In other words, while there are more wealthy Vietnamese today than there were ten years ago, the gap in the standard of living between those who live in New Zealand and Australia, and those who live in Vietnam, China, and many other countries quickly ascending from deprivation, is falling.

The developing world understands why their lives are improving as well, even if Oxfam doesn’t.

Evidence from Pew Research’s 2015 Global Attitudes survey suggests 89 percent of Vietnamese believe the Trans-Pacific Partnership free trade agreement is good for their country, with only 2 percent believing the opposite. Sadly, Oxfam organised a petition against the Trans-Pacific Partnership in the same year – bowing to populism, instead of acknowledging the genuine transformative effects of free trade and economic growth on the lives of the most internationally vulnerable.

A final question: how can Oxfam continue to credibly claim tax-free charitable status, when so much of their work is strictly political?

Campaigning for wealth taxes, and other left-wing policies to ‘solve’ wealth inequality is not and should not be treated as charitable – particularly when the Oxfam’s research skews the facts to suit this agenda.

If the likes of the Sensible Sentencing Trust and Family First (or, for that matter, the Taxpayers’ Union) miss out on the tax benefits of charitable status, then Oxfam should too.

Joe Ascroft is an economist at the New Zealand Taxpayers’ Union.