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20 March 2018 19:31 (South Africa)
Opinionista Ivo Vegter

Oxfam on Inequality: Its own example proves it wrong

  • Ivo Vegter
    Ivo Vegter

    Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

Another year, another piece of inequality propaganda from Oxfam. This time, Siphokazi Mthathi, executive director of Oxfam South Africa, compounded the absurdity by calling capitalism a “crime against humanity”. As if there was ever any doubt whose side Oxfam is really on.

According to Siphokazi Mthathi, executive director of Oxfam South Africa – an organisation masquerading as a poverty-relief charity – capitalism is a “crime against humanity”. She was reportedly speaking on the sidelines of the release of Oxfam’s annual report bemoaning inequality, this year entitled “Reward Work, Not Wealth”.

Other Oxfam officials speak of an “inequality crisis” (there isn’t one) in an “ever more unequal world” (it isn’t), that can only be solved by “more tax justice” (it won’t).

It’s classic Marxist rhetoric, of course, to suggest that the owners of capital who invest in businesses do not deserve their profits because the workers actually create the wealth. At least Oxfam isn’t lying about where its political sympathies lie.

Oxfam relies on anecdotes, spurious comparisons, and even outright deceptions to support its position. For example, although its report title says “reward work”, it actually talks not about income inequality but about “wealth inequality”.

Since 1970, when people living in extreme poverty peaked at 60% of the global population, it has declined to about 10%. The poverty gap, which is the amount theoretically required to lift the extremely poor above the poverty line, is steadily declining. Poor countries are growing faster than rich countries.

All this suggests an improving picture, but Oxfam says otherwise. It claims that most of the world’s increase in wealth accrued to the rich, and that the poorest 50% of the world saw no increase in wealth at all. Its citation for that claim is the Credit Suisse Global Wealth Databook 2017, but that report measures not income, but assets and liabilities (and even then, not very well outside rich countries).

As a result, Oxfam’s report considers someone living in Europe with a decent job, free education, subsidised housing, free healthcare, but debt exceeding their assets, to be poorer than an unemployed person in Africa with no assets, no access to basic services, and no income at all. It’s perverse, but that is the level of deception to which Oxfam has to stoop to argue that capitalism is bad and wealth must be redistributed.

In fact, organisations such as Oxfam are probably the primary reasons why people in the rich world haven’t a clue about the true state of the world. Most think extreme poverty has increased. It has not. Ask them almost any question, and most say it is worse than it really is.

Oxfam describes “unearned wealth” by referring to inheritance, which it says accounts for a third of “extreme wealth”, as well as monopolies and crony connections to government, which it says accounts for another third. Tellingly, it is silent on whether it thinks the final third actually is earned.

Inheritance is practised in most societies, at all levels of wealth. There’s nothing “unearned” about inherited wealth: parents worked hard to earn it. It is their property, to use or dispose of as they see fit. Oxfam does not think so, and wants governments to confiscate much of this wealth.

As an example of a monopoly, Oxfam uses Carlos Slim, who owns Mexico’s largest telecommunications company, which once was a state-owned monopoly and remains the dominant company in the market. But that is entirely the government’s fault. You can’t blame capitalism or free markets for a monopoly that a government creates and protects.

The same goes for cronyism, which involves private interests that manipulate public policy for their own ends. This is the fault of politicians and government officials, who serve special interests instead of serving the public. Nowhere in its recommendations does Oxfam suggest stamping out corruption and cronyism. Instead, among a host of other socialist recommendations, Oxfam just wants those very same corrupt officials to tax their own dodgy cronies and redistribute those ill-gotten gains. It’s farcical, really.

Without a hint of irony, Oxfam’s press release announcing the report highlights the plight of textile workers in Vietnam. They, we are told, do not earn a living wage. But Vietnam is officially called the Socialist Republic of Vietnam, and it is a Marxist-Leninist one-party state. If its poor are suffering, that hardly seems like the fault of capitalism.

But are they indeed suffering? As a Marxist state upon unification in 1973, Vietnam remained poor and isolated. By the mid-1980s, it was in a full-scale, Venezuela-style economic crisis. In 1986, its Communist Party embarked on đổi mới, a programme of market-oriented reforms modelled on similar reforms in China. With the introduction of private enterprise and markets, however restricted, the country was transformed from a stagnant agrarian society into a vibrant, fast-growing economy, lifting tens of millions out of poverty.

Injecting a little capitalism into what was a cesspit of poverty and despair produced spectacular results. GDP growth soared, fluctuating between 5% and 8% for most years since 2000. GDP per capita grew from under $400 in 1985 to more than $1,800 today. Before đổi mới almost everyone was a peasant and even the ruling class was poor. Now there is a large, vibrant and growing middle class. Education outcomes are high, child mortality rates are down, life expectancy is up, stunting is way down, and basic service provision is growing fast. Almost everyone now uses electricity for lighting, up from 14% a quarter-century ago. But most important, all this growth has been fairly equitable: in 1993, more than half the population lived on less than $1.90 per day. Today, only 3% does.

Vietnam did not achieve this by taxing the rich and redistributing wealth to the poor, as Oxfam recommends. It achieved this by establishing market institutions.

Whichever way you look at it, citing the plight of Vietnamese textile workers as an example of the failures of capitalism is spectacularly self-defeating for Oxfam’s argument. Vietnam’s economic history demonstrates the exact opposite of what Oxfam claims.

Mthathi casually throws around the phrase “crime against humanity”. It seems absurd – and an insult to the victims of genocide and repression – to define any economic system as a crime against humanity. But if we must, consider that a crime against humanity is an act which intentionally inflicts suffering upon people.

By definition, the purest form of capitalism is a free market in which private individuals have full control over their private property, and are free to determine where to invest, what to produce or sell, and at which prices to exchange goods and services. One cannot, therefore, describe capitalism as an intentional act, inflicted upon people against their will. It isn’t an act at all. There is no plan. It is merely the aggregate of individual choices.

In a purely socialist system, by definition, all legal production and distribution decisions are made by the government and individuals rely on the state for everything from food to healthcare. The government determines output quotes and price levels. Socialism is intentional and enforced upon the public by law. It is planned, and there is no escape from the dictates of the planner. This is why socialist states are often authoritarian one-party ones in which people have little personal freedom.

So, by definition, capitalism cannot be a crime against humanity, whereas socialism can. Now, the question remains whether capitalism or socialism causes great suffering.

The answer is obvious, of course. We’ve seen in a previous column that socialist governments commit crimes against their own people. The intentional death toll of socialism is far greater than that of capitalism. Economically, the consequences are also disastrous. Venezuela adopted a socialist programme to address inequality, and proceeded to collapse catastrophically. Starvation, riots, and the political opposition getting shot: that’s “great suffering”.

And no, the Scandinavian countries are not socialist. They’re rich countries that built their prosperity on free market capitalism, and while they have chosen to spend their wealth on generous social services, they still rank high on the Fraser Institute’s Economic Freedom of the World Index, and they do not demonstrate a correlation between low inequality and prosperity.

Socialism’s failures are well documented, but the economic evidence also disproves Oxfam’s dystopian view of capitalism. As the following charts show, the data proves that economic freedom produces higher growth, higher income per capita, lower poverty rates, higher life expectancy, higher share of income earned by the poorest 10%, better political and civil rights, more gender equality, and greater happiness.

This leaves us with the inescapable conclusion that if any economic system deserves the title “crime against humanity”, it is not capitalism, but socialism. Of all economic systems, free market capitalism has been by far the greatest boon to human civilisation, including the poor.

The most interesting fact in the above charts may be that in the least free (i.e. socialist) countries, the poorest 10% of the population not only earn far, far less than in the most free (i.e. capitalist) countries, but they even earn a lower share of total income. Premised on the idea of greater material equality, socialist countries are not only much poorer, but also turn out to be more unequal than the most free capitalist countries. Oh, the irony.

As I’ve written before, Oxfam goes on about inequality because the news on poverty rates and the living conditions of the poor is relentlessly good, thanks to economic freedom. But it isn’t even right about inequality. The world isn’t becoming “ever more unequal”. Market institutions actually reduce income inequality, as a result of which world inequality has been on the decline since 1980.

The late statistician Hans Rosling visually demonstrated the worldwide change in income distribution betweem 1963 and 2013. At first, there really was a big income divide between the rich and poor, but that has changed. Not only have the poor become richer, which is a fact Oxfam conveniently ignores, but the distribution has changed from what Rosling calls a “camel”, with two humps, to a “dromedary”, with one.

From one end to the other, Oxfam’s anti-capitalist rhetoric is riddled with flaws, fallacies, myths and deceptions. Its own data and examples undermine its argument. Why anyone listens to these wannabe revolutionaries – who themselves earn fat-cat salaries – is a mystery to me. Following Oxfam’s policy recommendations will make the world a worse place for everyone, including the poor. Now that, surely, is evil. DM

  • Ivo Vegter
    Ivo Vegter

    Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

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