The New York Times has an accounting problem. This morning the nation’s paper of record reports that the “World’s 8 richest have as much wealth as bottom half.” The stat is jaw dropping, eye popping, and dead wrong.
The New York Times relies on numbers provided by the group Oxfam to make the claim that wealth’s become increasingly concentrated. Just eight magnates have a net worth, they argue, of the world’s 3.6 billion poor.
Those numbers make for impressive headlines but poor statistical analysis. Fusion’s Felix Salmon does an audit to explain why.
When Oxfam carries out their global census, they give an undue amount of consideration to debt. They look at net worth, Salmon explains, adding up total assets before subtracting liabilities. “When your liabilities are bigger than your assets,” he writes, “that means you have negative net worth.”
“According to Oxfam’s methodology,” Salmon concludes, “the bottom 10 percent of the world’s population has a net worth of one trillion negative dollars — an almost inconceivably large sum.”
So if your eighth grader holds down a paper route and a $200 savings account he’s wealthier than a Wharton grad with a good job and some Stafford loan.
So the very poorest, according to the Oxfam study the NYT cites as fact, are those with large debt, and their negative wealth is added to the paltry wealth of the actually poor, making the “bottom half” of the world look far poorer than it is.
Of course the underlying assumptions here don’t make sense. Some debt is not only necessary, it’s responsible. Borrowing allows everyone from heads of household to captains of industry to grow. When you sign at the dotted line on a loan, you’re not becoming poorer. You’re taking a calculated risk. Everyone understands this.
That is, everyone except Oxfam and the New York Times.
Philip Wegmann is a commentary writer for the Washington Examiner.
