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Guardian Readers Still Don’t Understand Things, Do They?

So, I write a letter to The Guardian:

Imogen West-Knights (Journal, 6 February) informs us that it is, by definition, impossible to level up the needy without redistribution of wealth or opportunity from the wealthiest. Back when Adam Smith became a professor in 1751, GDP per capita in the UK was some $1,800 a year (by Angus Maddison’s inflation-adjusted numbers). Today it is around $39,000. Reality is telling us that the economy is not a zero-sum game.
Tim Worstall
Senior fellow, Adam Smith Institute

In response we get:

Tim Worstall of the Adam Smith Institute (Letters, 12 February) says: “Reality is telling us that the economy is not a zero-sum game”, as if that implies it is actually possible to “level up the needy” without redistribution of wealth. But GDP per capita tells us precisely nothing about wealth inequality within a country, and results in such a distorted picture in tax havens like Ireland that its central bank introduced another measure, modified gross national income, in 2017 to assess the country’s economy and indebtedness more accurately.

If 1% of the UK population in 1751 enjoyed most of its wealth, and 99% next to none, and those proportions are the same today, there remains a cogent argument for wealth redistribution as an engine of economic growth and wellbeing – as demonstrated by Piketty et al.
Dariel Francis
Tunbridge Wells, Kent

It’s entirely true that GDP tells us nothing about wealth inequality. GDP is a flow, wealth a stock for example. Further, GDP doesn’t measure distribution. These are both well known points.

As is Ireland’s use of GNI. It’s normally true that GDP and GNI will be closely aligned, Ireland being one place they’re not – all that tax dodging by multinationals. GNI also tells us nothing about the wealth distribution of course.

The second para rather makes my point for me. If the wealth distribution is equally uneven now as it was then but we’re all 20 times richer then it’s not necessary to redistribute wealth in order to make all richer, is it?

And also:

If Adam Smith isn’t turning in his grave, then Carl Friedrich Gauss, born 13 years before Smith’s death, certainly will be. Tim Worstall implies that the increase in the UK’s GDP per capita since Smith’s day refutes Imogen West-Knights’ assertion (The best way to ‘level up’ would be an above-inflation rise in benefits, Journal, 6 February) that it is impossible to level up without redistribution of wealth or opportunity.

It is clear from distribution theory (given a rigorous mathematical foundation by Gauss) that GDP and inequality can increase simultaneously, with inequality increasing either faster or slower than the GDP. The mathematics doesn’t prove that either Worstall or West-Knights is correct. Dependent on how our economy changes over time, it may be a zero-sum game or it may not, or it may fluctuate between the two. In order to assess what is happening, we must look at more than just the GDP per capita.
Glen Reid
Royal Wootton Bassett, Wiltshire

Err, no. If GDP per capita and inequality vary in their own way – are independent that is – then we’ve just proven that the economy is not a zero sum game, haven’t we?

Go back and note what that original claim is. That we can only improve life for the poorer through redistribution, a lessening of inequality. The insistence that it is possible to make all richer without redistribution, without reducing inequality, is all we need to know to prove that it’s not a zero sum game.

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Quentin Vole
Quentin Vole
1 year ago

Are these cretinous Guardian readers (but I repeat myself) seriously trying to argue against the point that almost everyone in the UK today is ‘wealthier’ (by any sensible measure) than almost everyone in the UK was in the 18th century?

Jim
Jim
1 year ago
Reply to  Quentin Vole

They all think the life of a subsistence peasant with a few livestock on the Common in 1700 was some sort of rural idyll, akin to Marie Antoinette playing at farming. They really have no idea what life was like back then. Horrible, shitty and short. You could take the lowest of the low in the UK today and their life would be better than Marie Antoinette’s herself.

Bernie G.
Bernie G.
1 year ago

“The best way to ‘level up’ would be an above-inflation rise in benefits.” Like many of my ilk, having left school aged 15, I have yet to receive one penny of these mythical ‘benefits’ you all go on about. I once broke a leg and the NHS patched it up; then there was that little bottle of milk I received at school; and after paying income tax/NI throughout my working life, for what it’s worth, I now receive a state pension (while continuing to reimburse the state a significantly higher amount in tax). Someone somewhere must be living high on… Read more »

Bernie G.
Bernie G.
1 year ago

“Here’s a character rarely mentioned in the contemporary political debate. He (he’s usually a man) lives in a suburb or small town. He wasn’t born with a silver-spoon, and he worked his way up, which wasn’t always fun. Now he owns his home and earns above-average income. He is scathing of big-city elites with posh accents who got easy lives handed to them. In short, he’s a middle-class anti-elitist … He’s largely ignored, while the conversation about populism revolves around an entirely different figure: the impoverished former factory worker in Sunderland … He isn’t keen on positive discrimination for women… Read more »

john77
john77
1 year ago
Reply to  Bernie G.

Simon Kuper is so ignorant that he does not even know what he is talking about. Sunderland’s shipyards – thriving in my youth and early adulthood without subsidies – were not factories.

Bernie G.
Bernie G.
1 year ago
Reply to  john77

I’m afraid it was poetic licence on my part rather than Kuper’s ignorance. I misquoted him, in that he wrote about the “Comfortably off populist voter being the main force behind Trump, Brexit and Italy’s Lega. Yet he’s largely ignored, while the conversation about populism revolves around an entirely different figure: the impoverished former factory worker. Pundits are forever explaining why poor Sunderland voted for Brexit, but rarely why wealthy Bournemouth did. In most developed countries, populism is less a working-class revolt than a middle-class civil war.”

jgh
jgh
1 year ago
Reply to  Bernie G.

“He isn’t keen on positive discrimination for women or people of colour, or on high taxes.”
Or people who can’t write literately.

Enni1
Enni1
1 year ago

Umm – what level of economic growth would be needed to raise today’s ‘poor’ out of ‘poverty’ while at the same time raising everyone else’s ‘wealth’ at the same rate? Nice idea, but quicker and simpler to redistribute, no?

bloke in spain
bloke in spain
1 year ago
Reply to  Enni1

Literally impossible. “Poverty’s” defined as a proportion of median income so if everybody gets richer, the same proportion are in poverty. You could be as rich as Creosote but if your income is below that proportion, you’re in poverty.

Jim
Jim
1 year ago
Reply to  bloke in spain

Precisely. The Left have defined ‘poverty’ as owning a VW when everyone else owns a Porsche. Or owning a Porsche when everyone else owns a Bugatti. By this definition there will always be poverty regardless of whether the poorest in society eat steak or Pot Noodle. It is literally impossible to ‘reduce poverty’ when you define it in this way, other than to reduce everyone’s income down to the same level. Then you’ve ‘abolished poverty’ despite the poor being no richer, and lots of people being poorer. Its the economics of insanity.

Enni1
Enni1
1 year ago
Reply to  Tim Worstall

Not really, no. You could improve economic growth and general well-being now, by placing some of the underused,/inactive capital wealth held by the 1% into the hands of the poor to spend. (There’s no need ‘to reduce everyone’s income down to the same level’). It’s a difference of political opinion. Doesn’t make her point invalid. Or the others’ ‘cretinous’.

Spike
Spike
1 year ago
Reply to  Enni1

Enni1 essentially states that there is a lot of seed corn and we are hungry! Yes, it would “improve…general well-being now” if we ate it rather than plant it. Certainly not improve economic growth, if only because it would give both the recipient and the owner disincentive to work hard. The assertion that some capital is “underused or inactive” is spin on the part of him who wants to seize it, and “the 1%” is stock disparagement of the victims on account of their small number.

Enni1
Enni1
1 year ago
Reply to  Spike

Goodoh, we’re onto some more interesting questions now. Granted Tim it’s not ‘impossible’ to improve the lot of the poor without redistribution, it just looks like indefinitely postponed ‘jam tomorrow’ (Even ditching the median income definition). How would you define unproductive capital? If you think there is such a thing? I’m saying there’s seed corn holed up in Swiss bank accounts which could be recycled into productive investment if redistributed to the poorest. Even if they did spend it on beer and horses. AB Innbev and Ms Coates are better at wealth creation than many. And you can redistribute income… Read more »

Enni1
Enni1
1 year ago
Reply to  Tim Worstall

Yes, it’s a really encouraging statistic, looked at globally.
And no, appreciate that even gold bars and precious stones can act as collateral for productive lending.
But returning to the more limited scope of the article (which we’re probably both bored with by now), would you argue there’s no benefit to be had from greater income redistribution, specifically higher benefit levels, within UK?

Jim
Jim
1 year ago

“And the Swiss banks. You thinking about Scrooge McDuck or summat? That the banks just sit there with all the cash in the vaults? Instead of lending it out to people who do things with it?”

Thats the eternal Leftist view, that because billionaire X ‘has’ one billion pounds, and isn’t actually spending it all, that money is somehow removed from circulation within the economy, like gold bars hidden under his bed.

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