A Nobel Prize refutes Oxfam

Member of the Academic Council of Libertad y Progreso.
PhD in Administration from the Catholic University of La Plata and Professor of Economics at the Faculty of Law and Social Sciences of the UBA. His research has been collected internationally and he has published books and scientific and outreach articles. He has served as Rector of ESEADE and as a consultant for the University of Manchester, Konrad Adenauer Stiftung, OAS, IDB and G7Group, Inc. He has received awards and scholarships, including the Eisenhower Exchange Fellowship and the Freedom Project of the John Templeton Foundation.

Clarín – On the occasion of the annual meeting of the World Economic Forum (WEF), better known for the place where it is held (Davos), where political and business leaders from all over the world meet, and for the attention that this meeting generates in the media , the English organization OXFAM released a report entitled “The Virus of Inequality.”

There he affirms that, due to the pandemic, inequality has increased notably in the world and is going to increase even more. To clarify these questions, he answers questions received on his blog and when asked: How can you be sure that Covid-19 will lead to a huge growth in inequality in the world ?; they respond: “The IMF, the World Bank, and the Organization for Cooperation and Development (OECD) have all raised their growing concern because we will see a peak of inequality in all the countries of the world due to COVID.

These fears were also collected in a global survey of 295 economists from 79 countries, contracted by OXFAM, where 87% of those who responded said they expected an ‘increase’ in income inequality in their country as a result of the pandemic ”.

As on other occasions, the report has a global impact on the media and contributes to a growing concern that this is a prior phenomenon that is now accelerating.

It is true that the income of many ultra-millionaires has increased because a good part of their wealth is in stocks whose price has been artificially inflated by the monetary issuance policies of the main central banks of the planet. This is correctly pointed out by OXFAM, although it focuses its criticism on the rich and capitalism and not on the politicians who manipulate currencies.

However, his statement regarding inequality and COVID is, at least, to state what he wants to show in advance, because the data does not validate his statements.

Angus Deaton is Emeritus Professor of Economics and International Affairs at Princeton, and was awarded the Nobel Prize in Economics in 2015 for “his analysis of consumption, poverty and well-being.” He is an expert in statistics, precisely on issues related to poverty. He has not written now with the intention of refuting OXFAM, but that is what he does in two papers published these days.

The first one is titled “COVID-19 and Global Income Inequality” (NBER Working Paper 28392). This is what his summary says: “There is a widespread belief that the COViD-19 pandemic has increased global income inequality, reducing per capita income more in poor countries than in rich countries. This assumption is reasonable but it is false.

Rich countries have experienced more deaths per capita than poor countries; despite their better health systems, higher incomes, more capable governments, and better preparedness. The United States fared worse than some rich countries, but better than several others. The countries with the most deaths had the biggest drops in income.

Therefore, not only was there no trade-off between lives and income; fewer deaths meant more income. As a result, income fell the most in higher-income countries. Country by country, international income inequality has narrowed.

When countries are weighted by their population, international income inequality increased, not because the poor countries diverged from the rich ones, but because China – no longer a poor country – had fewer deaths and positive economic growth, away from the poor. Poor countries. That these discoveries are the result of the pandemic is confirmed by comparing the global inequality of the IMF forecasts in October 2019 and October 2020 ”.

The other paper “GDP, Well-being and Health: Ideas about the 2017 Round of the International Comparison Program”, (NBER Paper 28177), is co-authored with Paul Schreyer, an OECD economist, and the mentioned Program is also from that organization.

It is, at least, curious, that OXFAM says to base its conclusions on the IMF, the World Bank and the OECD. In this other paper, the authors review the progress of this program that seeks to develop a methodology to be able to compare GDP data from different countries.

There they state: “The IMF, in its report 4, October 2020, forecasts positive growth for China in 2020 of 1.9% compared to a fall of 4.3% for the United States and a fall of 9.8%. for the UK. The forecast for per capita income in Africa is a reduction of 2.6% compared to 5.8% for the ‘advanced’ countries, and 8.3% for the Euro area. These forecasts, if these numbers or similar ones are confirmed, will bring a sharp reduction in global inequality ”.

The well-known “fallacy of authority” holds that a statement is not necessarily correct because the person who makes it has authority on the matter. Not because Deaton has received the Nobel Prize for contributions on these topics, his claims will necessarily be correct, but at least they collapse the appeal to authority that OXFAM makes when referring to those same international organizations and a number of economists.

Assigning the blame for all the ills of the planet to capitalism and the rich and saying that everything goes from bad to worse catches on all those who look for a villain or a conspiracy behind everything that happens, but it is a very poor reflection of what is happening.