Posts Tagged ‘Davos’

Wealth inequality: The poor are not poor “because” the rich are rich

January 21, 2015

In the run-up to Davos, the headlines have been about 1% of the world’s population owning half the world’s wealth. (The Wealth “bible” is the Credit Suisse Wealth Report). The richest 80 people (0.1% of the 1%) have more wealth than the poorest half of the world’s population. Obama is talking about an additional tax on the wealthy. In his State of the Union address yesterday he declared that the economic crisis was over and about “spreading the wealth”. He prioritised the working families and the “middle class”. In Davos, 2,500 delegates arrived in 1,700 private jets.

Most people on the left of the political divide want more to be taken from the rich to be “given” to the poor. The Robin Hood syndrome. Note that when the intention is to “give to the poor” and not for “making the poor greater creators of wealth”, the driving force is mainly envy. It is when the desire to deprive the rich is more important than any desire to improve the lot of the poor. Concern is over-ridden by envy. Sometimes it seems to me that the real difference between left and right is that the left wants to spread the consumption of existing wealth (and hope that total wealth increases), while the right want to focus on creating wealth (and hope that it trickles down and gets equitably distributed).

But there is a fundamental fallacy in the view that the poor are poor because the rich are rich. There may well be some of the rich who are exploiting some of the poor and where the poor are not getting a just opportunity to be creators of wealth. There may well be members of the rich who create no wealth but remain rich because of inherited wealth. But by far the greatest majority of the rich are rich because they created more wealth than others. The real question is whether each individual gets an equitable opportunity to create wealth and then gets to retain an equitable portion of the wealth he has created. (It is a different matter but I still do not understand why it is the creation and the retention of wealth that attracts more penalties in the form of taxation than the destruction or consumption of wealth).

What constitutes wealth is a different matter, but no matter what definition is used, wealth is not something static. The “wealth of the world” is always changing. It is constantly being created and consumed and destroyed. The key point is not how much the rich have but whether the “poor” are increasing their creation of and their stock of wealth.

And the simple fact is that the “poorer half” of the world has been steadily increasing its wealth creation and its wealth retention. Between 2000 and 2014 the total stock of “wealth” in the world increased by over 250%!

Wealth Report Figure 1 Credit Suisse

Wealth Report Figure 1 Credit Suisse

It is during periods of growth that inequality reduces and this is very striking when comparing the 2000-2007 period with the 2007-2014 period.

Inequality trends for individual countries are explored in more detail in Table 2, with countries listed in order of the increase in inequality since 2000. The most striking feature is the contrast in experience before and after the financial crisis. In the period from 2000 to 2007, 12 countries saw a rise in inequality while 34 recorded a reduction. Between 2007 and 2014, the overall pattern reversed: wealth inequality rose in 35 countries and fell in only 11. The reason for this abrupt change is not well understood, but it is likely to be linked to the downward trend in the share of financial assets in the early years of this century, and the strong recovery in financial assets since 2007.

The “poor” have to leave the ranks of the poor. They are not poor because the rich are rich – but because they do not have the opportunities to create and retain wealth. And that will only come in growing economies and not by increasing public expenditure where the emphasis is on consuming existing wealth rather than creating new wealth.

Davos 2011 wraps up: Emerging markets generating the emerging buyers

January 30, 2011

Davos 2011 wraps up somewhat overshadowed by the ongoing revolution in Egypt.

Davos, home of the annual World Economic Forum meeting

Davos, home of the annual World Economic Forum meeting : image The Telegraph


But the WEF is turning out to be more than just a talking shop. This year there is no single dominating theme but a number of strong themes were apparent. The Euro is turning the corner, buyers from the emerging markets are on an acquisitions spree and bankers are being rehabilitated after they brought the world to its knees with their greed and profligacy.

There is a clear optimism but also a strong fear of being optimistic. Too many fingers have been burnt.

  1. Emerging market companies buy up the world
  2. Bankers regain power as Davos summit ends with a big fudge
  3. Davos summit leaves David Cameron and George Osborne feeling bruised
  4. Euro zone crisis seen turning corner
  5. At Davos, men outnumber women by over 5 to 1
  6. Sarkozy publicly slams JPMorgan chief at Davos forum


DAVOS 2011 kicks-off today: 35 heads of state, 2500 delegates

January 26, 2011


35 heads of state and over 2,500 delegates are expected to attend.

If the WEF’s guidelines are followed there will be at least one woman for every four men!!

The WEF Chinese delegation will total over 60 people this year and the Indian will again be significant with 130 delegates. India will be launching an India Inclusive campaign to stress the benefits of economic progress and the growth of a vibrant middle-class and average incomes, while minimising the political impact of increasing disparities in wealth, as the new entrepreneurs of India globalise their operations – Tata, Ambanis, Mittals, Mahindra, Bhartis, Godrejs are all names we are becoming increasingly familiar with on a world stage. Chinese participation is up fivefold in the last decade, Indian up fourfold.
The G20 is very well represented too. All countries have president/prime minister or ministerial representation here except Argentina, with the latter’s central banker as its representative.

At least one woman required to be brought for every 4 men! – WEF Davos

January 13, 2011
DAVOS/SWITZERLAND, 17JAN08 - Aerial Photo of D...

Hotel Steigenberger, Davos: Image via Wikipedia

The World Economic Forum is requiring its strategic partners to bring along at least one woman in every group of five.

I am not sure whether this is a blow for or against gender equality. Coming as it does from the World Economic Forum for the meeting in Davos to be held in 2 weeks, I suspect that it is primarily about having a good time rather than about gender equality!!

From The Guardian:

Each year, prime ministers, bankers, business tycoons and other movers and shakers of the global elite gather at the World Economic Forum (WEF) in the Swiss Alpine town of Davos. And each year, one key thing has been missing: women.

Now, in an attempt to improve the traditionally dismal gender balance at this month’s event, which starts a week next Tuesday, the WEF has for the first time imposed a minimum quota of women.

The forum’s “strategic partners” – a group of about 100 companies including Barclays, Goldman Sachs and Deutsche Bank – have been told they must bring along at least one woman in every group of five senior executives sent to the high-profile event. Strategic partners account for 500 of the 2,500 participants expected this year at a gathering where David Cameron will rub shoulders with the Russian president, Dmitry Medvedev, historian Niall Ferguson, UN secretary general Ban Ki-moon, at least one member of the Saudi royal family and countless business supremos and members of the academic elite.

“The World Economic Forum annual meeting engages the highest levels of leadership from a variety of sectors and participation figures are a reflection of the scarcity of women in this external pool,” said Saadia Zahidi, who heads the gender parity programme at the WEF and came up with the quota plan.

At Davos, the world’s most powerful men (and a few women) broker multimillion-pound deals behind the scenes of the conferences. The forum’s black-tie dinners, cocktail parties and other less formal encounters are the ultimate networking events and those present follow the old “contacts lead to contracts” motto.

But so far, relatively few women have benefited from this high-level schmoozing. Women made up only 9-15% of those present between 2001 and 2005.

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