Catering to the very wealthy is more profitable than anything else

An analysis from the FT this week argues (rightly!) that catering to the very wealthy is more profitable today than producing for the upper middle class.  As they put it, 

“A £3,000 Cartier bracelet, even if it’s entry-level for Cartier, is certainly more high-end than a £400 pair of sneakers from Gucci or Burberry." 

The article also reminds us that a Chanel flap bag today costs today more than 10,000 dollars. 

I found the article interesting for at least two reasons: (a) we have a growing market for the very wealthy that, at the same time, shapes the aspirations of everyone else in a futile race to nowhere; (b) we often forget how crazy it is to have an "entry-level" bracelet that costs several times then monthly minimum wage and a bag that costs like a car! 

Oxfam´s annual report on inequality, more interesting than ever

For a few years now, Oxfam uses the World Economic Forum meeting at Davos to publish its report on inequality.  The report combines intellectual rigour with really interesting information.  This year, the accent on the link between the wealthy and monopolistic companies constitutes a welcomed message.  The report states that:

 "A huge concentration of global corporate and monopoly power is exacerbating inequality economy-wide. Seven out of ten of the world’s biggest corporates have either a billionaire CEO or a billionaire as their principal shareholder. Through squeezing workers, dodging tax, privatizing the state and spurring climate breakdown, corporations are driving inequality and acting in the service of delivering ever-greater wealth to their rich owners. To end extreme inequality, governments must radically redistribute the power of billionaires and corporations back to ordinary people. A more equal world is possible if governments effectively regulate and reimagine the private sector."

This message is important at both the global level and in many regions.  At the global level, the wealthiest individuals are also part-owners of companies that benefit from government policies.  Think about Microsoft or Google.  At the regional level, we often found similar dynamics.  In the region I know more, the wealthiest families have interest in key sectors of the economy where the level of competition is low.  As such, it is clear that the fight against inequality requires active market regulation and proper corporate taxation.  

Coming back to blogging on inequality

 I cannot believe it has been more than two years since the last time I wrote a piece here.  Time goes very fast!  My (late) New Year's resolution is to write more often on inequality, providing examples of excessive wealth, reporting on new papers and books and offering some statistical insights.  Today I start with a graph that reflects the huge diversity in terms of inequality in today's world.  Using data from the World Inequality Database (which is based on a combination of tax data, household surveys and national account statistics), I compare the income share of the wealthiest 1% and that of the bottom 50%.

The share of the bottom 50% varies from more than 24% in countries like Slovenia or Norway to only 6% in Peru or Mexico.  Can you imagine?  An income share of just 6% for half of the country helps to explain high levels of poverty and social discontent.  As a mirror image, we have that the wealthiest 1% receives more than a quarter of total income in some countries.

This graph has so many implications for research and policy: it signals that in many countries income inequality is really about income concentration at the top; it questions the use of GDP per capita as a measure of how the "average citizen" lives and it highlights the diversity of capitalisms at least in terms of distribution.

Even more than all of this, the graph signals one it is important to write even more about inequality... as I will try to do from now on!