Britain Doesn't Have an Inequality Problem

and it's a testable claim which is really what today is about but before we get into it everything in this episode comes from a long-form article that neil published this week on noise cancelling all of the charts all of the sources they're all there for you to inspect i've linked it down below and it's completely free to read so you can go and check our working as we go through this Neil, to judge whether streeting's right, people first need to know what a wealth gap does when it's left alone.

Because it turns out the direction of travel normally is upwards.

If governments do absolutely nothing, what happens to the wealth gap over 40 years? If you

can imagine that, for example, that wealth was concentrated in property only, I use this just to demonstrate why in a property-owning democratic capitalist economy, over time, you should see increasing wealth inequality.

So imagine that in this economy, you've got a very rich person and a poor person.

The rich person owns a house that's worth a million pounds.

The poor person has a house worth 100,000 pounds.

You can see the gap day one.

But imagine going forward one year where you've got 3% house price inflation.

Let's keep the numbers easy, 10% house price inflation, okay? in this capitalist democracy.

At the end of the first year, the wealthy person now has a house that's worth 1.1 million, but the poorer person has now a house that's worth 110,000 pounds.

Now, the gap at the start of the process was 900,000 pounds, but at the end of year one, the richer household is 990,000 pounds richer than the poorer household.

Now, it's a very simplistic example, but you get what I'm saying.

The eighth wonder of the world, as I think Einstein called it, which is compound interest, works its magic in a capitalist property-owning democracy.

As property wealth increases in line with inflation, because it's a real asset, what you would expect in most modern democratic capitalist economies is that over time, wealth disparities increase.

Unless that is, of course, that you have policies in place which are designed to effectively redistribution policies, which are designed to mitigate for that underlying growth in inequality.

And that's what we've had in the UK

for the last 40 years.

So rising inequality is the default setting?

Yes.

Yeah, rising inequality would be the default setting if nothing happened.

The rich would just get more rich relative to the poor or the less wealthy in

that scenario.

And that's all because if you apply a fixed percentage increase to a bigger number, you get an even bigger number.

Yes, you get an even bigger number.