Hard data shows 'great wealth divide' is not as big as you think
It is not the habit of this column to take issue with the work of other columnists. But sometimes exceptions have to be made. On Monday night a documentary, 'Ireland's Great Wealth Divide, by my colleague on these pages, David McWilliams, was broadcast on RTÉ 1.
It made a series of claims. Most generally, the show said that "we have moved from generous compassionate capitalism" to "a winner-takes-all capitalism". It stated that those at the bottom and in the middle are being deliberately excluded from doing better by those at the top and that "a massive transfer of wealth took place during the crash".
These are big claims. Before assessing them, consider perhaps the most curious aspect of the show: the evidence it used about wealth and the evidence it did not use.
Early this year the Central Statistics Office and number crunchers at the Central Bank published the first ever set of figures on how wealth is spread in Ireland. These figures provided a treasure trove of new insights into wealth distribution.
Monday's programme never mentioned these figures or even referred to them, despite the fact that they are the only hard data available on wealth equality. Instead, the programme used guestimates made by investment bankers. Those figures were published last year by Credit Suisse, a Swiss bank, in an annual study it does on wealth around the world.
If someone did a documentary on, say, unemployment in Ireland, would it not be somewhat strange if they used estimates of Irish joblessness made by Swiss bankers without any external scrutiny rather than the figures professional Irish statisticians compile in accordance with international standards?
If the more reliable and more up-to-date figures had been used, the story told on Monday night might have been very different. The actual statistics show that the spread of wealth is more equal in Ireland than the average across the Eurozone. That was certainly not the impression the programme gave.
What about the charges of huge transfers of wealth during the crash? Although the documentary didn't mention the bailing out of bank depositors and bondholders, that was indeed a huge transfer of wealth. When it all washes out, the figure that everyone - including the poorest - transferred to depositors and bondholders will amount to €30-35bn.
If that was a massive amount of wealth to be transferred, far more was destroyed.
The stats show that when all the assets of Irish households are added up (including cash in bank accounts, pension pots, property and the like) and all their debts subtracted, the net wealth of households collectively stood at a staggering €720bn when it peaked in the spring of 2007.
Then came the crash. Over the following five years, household net worth fell by €280bn.
That enormous destruction of wealth was mostly caused by the value of property collapsing, but also by other forms of wealth, such as bank shares, being destroyed or devalued.
Because it is the wealthy who have most property and who own most shares, they lost the most. The number crunchers at the Central Bank estimate that wealth inequality declined during the worst of the crash - the period from 2006 and 2011. This is in very stark contrast to the way the programme portrayed what happened.
If the charge that wealth inequality increased over the boom doesn't stack up, what about the claim that at some time in the past capitalism was compassionate and that it is now a racket for the super rich to keep everyone else down?
There is no doubt that in most developing countries, the tiny few at the very top have increased their share of the both the income and the wealth pies. This is a matter that should be highlighted and discussed, as 'Ireland's Great Wealth Divide' did. There is arguably an even greater issue with the way in which the super rich exercise their power over the political process, including in this country. Those who have great power and wealth should be subject to great scrutiny, and should expect to be subject to great scrutiny. That includes, by the by, the main shareholder in the group which owns this newspaper, Denis O'Brien.
But David's assertions about a "reality" of the "working middle classes being excluded" and that it is now more likely for those in the middle to fall to the bottom than rise to the top were opinions presented as facts.
In Ireland, we simply don't have good evidence on social mobility. As such, David's claims on this issue on Monday cannot be proven or disproven, but there is very good reason to question them.
Education is probably the most important factor in allowing people to move up the social escalator. While there is much that could be improved in the Irish system, and in non-academic training in particular, the proportion of the population that is educated to third level has been rising rapidly and continuously for many years. Today among the young it is one of the highest in the world. That widens equality of opportunities. If there was a deliberate attempt to queer the pitch against the majority, why is so much put into educating so many? As for the claim that capitalism was once compassionate, it seems more like dewy eyed nostalgia. Irish capitalism in the 1950s and 1980s has never been known for its compassion. If anything, more wealth has made today's capitalism more compassionate.
Each year in Ireland, social transfers amount to more than €27bn, spent via welfare payments, the health and education systems and on social housing. That is many multiples of the amount redistributed from the better off to the less well off as recently as the turn of the century, never mind in the more distant past.
None of this is to say that there is not massive inequality in who owns what, as the documentary correctly and quite rightly pointed out. Nor is it to say that the way wealth is spread is not an important issue for well-informed public debate.
But surely using the best available data is the best way to do that.
Making claims unsupported by fact and evidence is certainly not.