Thursday, January 18, 2018

The Davos-Oxfam Symbiotic Dance Begins Next Week - by Gary North

Every January, the elite gather in Davos, Switzerland to do business deals and listen to boring lectures by people who don't have either money or power. It's called the World Economic Forum.
Every year, the Left-wing foundation, Oxfam, simultaneously publishes its latest finding, which never changes much, that 1% of the world's population owns half of the wealth.
These are public relations operations. The WEF's message: "We've got it, and you don't." Oxfam's message: "They've got it, and we don't." They are made for each other. They are joined at the hip.
The World Economic Forum is Duffy's Tavern for the rich and powerful: "Where the elite meet to eat."
Why do they go to the expense of gathering at Davos every year? Because no one wants to be left out. As they said on radio ads for rock and roll performances in my teenage years, "Be there, or be square." Showing up means that you were invited. If you were not invited, you are not regarded as being in the elite . . . at least not this year.
In 2011, Ross Sorkin reported on what it cost to attend. First, there was the annual membership fee: 50,000 Swiss francs. In 2011, that was $52,000. But this was for commoners. If you wanted to get access to the private meetings, which the deal-doers presumably attend, you had to ante up $137,000 a year. Then there was the cost of a ticket into the Davos meeting: $19,000. Added up, the annual fee for insiders was $156,000.
Then there was the cost of a room. The budget rate was $500 a night.
You had to get there. First-class fare to Zurich was $11,000 in 2011.
You needed a chauffeur and expensive car. Add another $10,000.
Then there are the other meetings throughout the year. They get no publicity. But insiders feel the peer pressure to attend. "Be there, or be square."
That is a lot of money to get bored listening to speeches by upper-middle-class college professors.
The economic reality is this: the value of lost time for deal-doers is far greater than the out-of-pocket, tax-deductible business expenses. These people really are the elite. Either an attendee must get a deal over the year, or else his membership and attendance are for show. "I've got it. You don't."
Oxfam's marketers figured out years ago that the WEF's Davos meeting is an ideal way to get free publicity for Oxfam in the world press. It also gives the fund-raisers an opportunity to feature these stories in their attempts to raise more money. "See? We're getting worldwide attention." This is true. They are. So, every year, Oxfam publishes a report intended to shock the economically uninformed. I have reported on Oxfam's marketing strategy for several years.
The economically uninformed are unaware of Pareto's 20/80 law. Pareto was a Swiss economist who, in 1897, published a book summarizing his discovery that wealth in European countries was distributed on a 20/80 basis. About 20% of the population owned about 80% of the wealth. Subsequent studies have reported a similar distribution. This is so widely known among economic historians that distributions that vary greatly from 20/80 are regarded as suspect.
The Pareto distribution is a power law. This produces the following:
20% of the population owns 80% of the wealth.
4% (20% of 20%) of the population owns 64% (80% of 80%) of the wealth.
0.8% (20% of 4%) of the population owns 51% (80% of 64%) of the wealth
Thus, 1% of the population will own more than 51% of the wealth.
This law seems to apply across national borders.
Every year, Oxfam reports breathlessly that 1% of the population owns 50% of the world's wealth.
I think the statistics are flawed. Pareto's law indicates that this should be greater than 50%. I reported on this in 2016: Pareto's Law vs. Power-Seeking Reformers.
I also reported on this in 2014: Envy Never Sleeps: Attacking the Rich.
I await Oxfam's latest report. Let's see if the richest 1% have increased their wealth above 50%.
Oxfam never supplies a detailed program to persuade national governments to surrender their sovereignty over taxation to the United Nations, so that the UN can impose steeply graduated taxes on the rich in order to attain greater economic equality. This assumes that civil government can significantly alter Pareto's distribution. This much is clear: if there is no world government, then nothing is going to change.
My prediction: this 20/80 wealth distribution is not going to change.
The WEF exists so that those with real money and real power can display this to each other, and also a way for the WEF to extract big money from well-heeled wanna-be's who are trying to buy their way in. Basically, it's a grown-ups' version of the Little Orphan Annie Secret Decoder Ring. The marketing concept is the same, but the price is higher than a label from a jar of Ovaltine.
My hat is off to Klaus Schwab, a German economist who dreamed up this high-income, legally nonprofit Duffy's Tavern operation in 1971. This was serious entrepreneurship.
My hat is also off to the faceless marketer at Oxfam who figured out a way to cash in annually on Schwab's operation.
As George Washington Plunkitt announced over a century ago, "I seen my opportunities, and I took 'em."