There was much flapping on the Twittersphere last week when rapper Kanye West mentioned that he was $53 million in debt, and asked Facebook founder Mark Zuckerberg for a billion dollars to fund his future ideas. As you do. Whether this is of any interest or not will depend on your appetite for Mr West’s self-aggrandising fashion and music visions, but what it made me think of is how we talk about wealth.
It demonstrates a conundrum in how we measure inequality, because if we’re talking about wealth to be assets minus debts, then Kanye has negative wealth of $53 million. That makes him among the world’s poorest people. Despite his private jets and fur coats, he’s poorer than I am. Apparently.
This is the main criticism that is aimed at Oxfam when they talk about global inequality, and how the richest 1% own as much as the poorest half put together. Since it’s easier to borrow in richer countries, then many of us in the West technically have negative wealth. If you have an outstanding mortgage or a large student debt, that’s enough to pitch you towards the bottom deciles. And that means that when you line up all the world’s population according to wealth, those at the bottom aren’t necessarily the malnourished Sub-Saharan Africans that we imagine in our heads. Despite the images of private yachts that typically adorn articles on Oxfam’s statistic, you don’t have to be a billionaire to come in the top few percent either. I’m there myself.
To hear the critics of Oxfam’s work, you’d think they had cleverly discovered some fundamental flaw that renders the statistic worthless. But of course Oxfam are aware of how net worth works in statistical analysis, and factoring in highly indebted rich people barely changes the scope of the inequality.
If you want to measure inequality, you could choose to focus on income instead. But you’d run into exactly the same sorts of problems. You can have little or no income but plenty of wealth – if you are unemployed but own your home, for example, or if you’ve inherited a fortune and don’t have to work. Or you could try and understand inequality by measuring consumption, but we don’t have globally comparable figures for that.
Nobody is disputing that the world has massive inequalities. That’s a fact, and if you want to present it statistically you’re going to have to take your pick from one of three measures, all of which are imperfect.
Besides, Kanye West may prove the weakness of looking at net wealth, but he also demonstrates a reason why it’s not a bad measure to choose. As you’ll have noticed, West and his family don’t live in abject misery. Neither did he lose $53 million all in one go – people kept giving him more millions to play with, even at $10 or $20 million down. And that shows the importance of credit, which is a form of financial power. As our borrowing rates as a nation show, access to credit can be as good as wealth for many purposes.
As Vox conclude in their more balanced commentary on Oxfam’s statistic, factoring in debt leads to the same conclusions. “It points towards who has the ability to use wealth as a discretionary power resource.” Those at the upper end of the scale, with more wealth than debt, are free to use their surplus to influence politics and protect their position. Even to the point of, I don’t know, using their billions to run for president.
As I regularly say, financial inequalities lead to inequalities of power, political representation, and democratic voice. It’s one of the reasons why we can’t just brush dramatic statistics about inequality under the carpet – not if we value democracy. So we should beware of the ‘move along, nothing to see here‘ dismissals of inequality statistics, and ask what their agenda is. All statistical analysis of inequality is going to involve some compromises, but we mustn’t miss the wood for the trees: global inequality is extreme, and it is a problem that can’t be ignored.