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.
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.
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?
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.
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.