Sunday, January 20, 2013

Good faith: a disservice to the world's poor

The BBC reported recently that the "100 richest people in the world earned enough last year to end extreme poverty suffered by the poorest on the planet four times over" [1].

If true, this might well appall. But, even if true, it does beg a question or two.

The BBC article attributed the statement to Oxfam, without providing a more specific reference. The article went on to mention an Oxfam publication, "The Cost Of Inequality: How Wealth And Income Extremes Hurt Us All".

Now, this publication is publicy available [2], and it does indeed make at least a similar assertion, "The top 100 billionaires added $240 billion to their wealth in 2012- enough to end world poverty four times over".

Is the $240 billion enough to end world poverty four times over? Or is it the total wealth of the top 100 billionaires enough to end world poverty four times over?

More importantly, where do these numbers come from? There is a footnote.

Following the footnote, we are led to: " and
the top 100 billionaires added $241 billion to their income in 2012. Jeff Sachs has estimated that it would cost $175 billion a year for 2 years to end extreme poverty."

Now that appears to be two links to support the statement "the top 100 billionaires added $241 billion to their income in 2012".

All well and good.

But the second half of the headline assertion is not really referenced. All we have is a name: Jeff Sachs. We are not told where he demonstrated that it would "cost $175 billion a year for 2 years to end extreme poverty.".

We do not give up - we search the Internet for Jeff Sachs and $175 billion.

The Wall Street Journal states, "Jeffrey Sachs, the Columbia University economist, has estimated that the cost to end extreme poverty in the world is about $175 billion annually." [3] Note that the timespan is missing here.

Another source [4] states, "To end extreme poverty worldwide in 20 years, Jeffrey Sachs calculated that the total cost would be about $175 billion per year." This source suggests that Jeff Sachs asserted this in 2005, in a publication called The End of Poverty.

Note that we have now moved from $175 billion per year over two years to $175 billion per year over twenty years.

Two other sources [5] [6] appear to confirm the twenty year timeframe.

Is it two years or is it twenty years? It would make quite a difference.

175 x 2 = 350
175 x 20 = 3500
3500 - 350 = 3150

The difference would be more than three trillion dollars.

Let's go back to the Oxfam assertion. Now, $240 billion that the world's top 100 billionaires made last year is obviously not going to be enough to end world poverty, even if we take the two-year timeframe (as we need $350 billion for that). But perhaps they meant $240 billion each year. That would do it, but not four times over.

Perhaps they meant total wealth of the top 100 billionaires, and not just what they made last year.

Their first link claims, "The top 100 controlled an aggregate $1.9 trillion as calculated by the prices on world stock markets December 31, for an average of nearly $20 billion apiece."

That would seem to make the cut, for if we take the two year estimate to fix poverty, we need $350 billion, and multiplying that by a factor of four, we reach $1.4 trillion, which is less than the $1.9 trillion figure.

Even ignoring the fact that stock markets are volatile, and not even diving into the J Sachs model, surely there is enough ambiguity and probable error (2 v/s 20) here to wonder whether the BBC has been sleeping on the job, or has decided to take it on good faith.

[1] BBC on 19 Jan 2013

[2] Oxfam on 18 Jan 2013

[3] WSJ 14 Sep 2012




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