A Look at the Bottom 71%

For several years there has been much media attention paid to the subject of the growing gap between rich and poor in this country (and the world) with particularly intense focus placed on what has become popularly known as "The One Percenters!"  But the subject of yesterday's Bloomberg column by Barry Ritholtz seeks to put some perspective on this by suggesting that a far more telling story is revealed by studying the bottom 71% instead of the top 1%.  Since it is always my objective to present different perspectives on issues, today I present "A Look at the Bottom 71%."

First, anyone who ever had Econ 101 knows that the gap between rich and poor isn't nearly as important as the trend in poverty itself.  While certainly no one will contest that the rich have gotten richer, isn't the far more critical question whether the poor have actually gotten poorer?  And if they haven't, if in fact their lot in life has actually improved, doesn't this open up a whole new conversation?

That is what yesterday's column seeks to explore by showing data compiled by the Pew Research Council between 2000 and 2011 showing that, as of 2011, global poverty has been cut in half.  (The data is not yet in but since the world economy has been in an upswing the last four years, it's quite likely poverty has decreased even more since.)  But a 50% decrease in global poverty is still quite an astounding statistic.

The Pew study shows four things quite clearly.  #1:  The vast majority of the world's population -- 71% to be exact -- lives in poverty or near poverty; #2: but at 71%, this is still a vast improvement over just 15 years ago;  #3: the middle class has never been nearly as dominant as has been assumed and, rather than dying off, has actually nearly doubled in the last 15 years (the middle class has increased by almost exactly the same percentage as poverty has decreased.  Coincidence?)  #4:  and finally, contrary to popular belief, the data shows that rather than most of the world's wealth being overwhelmingly concentrated with the wealthy, that the distribution of the remaining 29% is almost equally divided between the middle class, the upper middle class, and the wealthy.  In fact, on a global basis during the past 15 years, the percentage of those entering the wealthy class has barely budged.

Thus, Ritholtz argues that perhaps a far more instructive approach to economic policy lies in studying the bottom 71% instead of the top 1%.  Of course, Ritholtz is quick to caution that none of this means that we can start being complacent.  We should not be putting away our checkbooks, we should not stop donating to charity and helping the poor.  Quite the contrary.  The Pew study seems to strongly suggest that something is going right out there, that our collective economic policies and campaigns against poverty seem to be working and in a rather dramatic fashion.

There is still a long path ahead but even the most hardened capitalist has to see the wisdom that moving people from poverty to the middle class cannot possible be anything but good for Wall Street.  So if we're not going to help the poor just because it's the right thing to do, let's at least do it just because it's good business.

A Look at the Bottom 71% | The Big Picture

A Look at the Bottom 71%

by Barry Ritholtz - July 24th, 2015, 12:00pm

We seem to really enjoy contemplating the money and lifestyles of the top 0.01 percent. The wealthiest Americans garner immense mind-share in the imaginations of the rest of the populace. We incessantly track the incomes of hedge-fund managers and other finance stars, the heirs to the Wal-Mart fortune and other $100 billion families. Don’t forget the Bloomberg Billionaires Index and the Forbes 400 and the wealthiest New Yorkers.

We are in short fascinated with other people’s wealth.

What about the rest of the income strata? As it turns out, there is a fascinating story there as well. It may not be as glitzy and luxe as the Billionaires Index, but it is a tale of gradual improvement. So says a recent data analysis on the Global Middle Class by the Pew Research Center.

Continues here: How Wealthy Is Everyone Who Isn’t Rich?