The stereotype of the “Welfare Queen” actually applies more to the behaviour of Billionaires than to The Poors, according to two recent studies. It’s ironic that these two articles would come across the transom on the same day, but it’s a funny old world we live in.
The first article, from Canadian citizen journalism site Digital Journal, pointed me to the Billionaire Census, a survey of the world’s super-rich by Wealth-X and UBS. They’ve made a nifty little vimeo, so check it out. You can also download the full report as a PDF by creating an account on the site and logging in.
The punchline is: billionaires don’t spend money.
We knew there was a reason they were billionaires!
But seriously, this is yet another reason trickle down theory doesn’t work: given enough money to cover the basics, the majority of people wouldn’t continue to spend at the same rate. Poor people and middle class people in Vancouver pay 50% of their take-home pay on housing; billionaires in Vancouver do not. As their wealth grows, they don’t feel the need to continually upgrade housing into the stratosphere. The most expensive apartment in New York is $150,000,000, ten percent of a billionaire’s worth. Do you know anyone who only spends ten percent of their net worth on a house? No, you don’t.
The average billionaire, according to the study, keeps $600 million in cash.
The economic repercussions of this wealth-hoarding include ever-more-concentrated wealth or what the Occupy movement called “income inequality.” It leads to geometrically-progressing “net worth inequality” and whether or not it leads to class war I suspect we will find out in the next few years.
The second link, by contrast, is another glorious ethical rant by Hamilton Nolan of Gawker. I managed not to ask him to marry me in the comments this time, but it was close. It usually is.
Poor People Do Not Just Blow Any Money They Get is pretty self-explanatory, and dead-on. And more hyphenates too, just wait till I get going!
It’s come to my attention that many of our readers believe that if you give anything more than a modest sum of money to a poor person, that person will just go out and waste the money on impulse purchases. Allow me to point out that this is false.
He then goes on to point it out, repeatedly, using link after link to hammer home the well-documented fact that no, poor people who get money do not just blow it. They may spend a fair bit of it shoring up the old shelter, upgrading the transportation from a bus pass to a practical sedan, and buying shoes that actually fit, and this may appear to be “waste” when looked at as a percentage of the money they managed to obtain. “Look, they spent it all!” is the cry. Well, if I came into $10,000 I’d probably spend it all too, because I need things like several thousand dollars of dental work so my diet can include things that don’t come out of blenders, things like rent and security deposit, things like an actual sofa to sit on instead of old dining chairs, things like a new computer so I can do my job. And that won’t leave a lot of change once it’s all said and done.
HamNo points out the specific example of charity GiveDirectly, which gives donations directly to individuals in Africa. The study found that people actually spent the money quite practically, on average.
Households who received transfers experienced on average a 33 percent increase in incomes coming from sources such as livestock and non-agricultural businesses and increased the value of their household assets by 53 percent, largely in the forms of livestock and improvements to their homes. The money also reduced the number of days children went without food by 42 percent.
According to economist Jeremy Shapiro, one of the study’s authors, “These findings are significant because they question the assumptions many aid programs are based on – that the poor might spend cash on things like alcohol or tobacco, or that they don’t have opportunities to help themselves. We find that if you just give the poor cash, they use it to build assets, buy food and make investments in their livelihoods.”
Rather than sit on it like billionaires. Maybe we’ll be lucky and trickle UP will work, because it looks like the poor people are more willing to put money into the economy than the rich ones.
Featured Image The Divide Between Rich and Poor by David Blackwell on Flickr