Thursday , January 21 2021
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What everybody knows sometimes just ain’t true

Summary:
We have a ringing call to action in The Observer:Inequality. Everyone agrees it’s bad. Everyone agrees that the pandemic and lockdowns have exacerbated inequality. And everyone agrees that something must be done to reduce it.The thing is, about these things that everyone knows, is that what everyone knows sometimes just ain’t true.As far as we do know - we’ve not the full and accurate figures for this fiscal year, 2021, as yet - inequality today is lower than it was in 2008. We also know why this is so. Inequality does reduce in recessions. The richer among us gain more of their incomes from profits than the poorer among us. Profits are the part of national income that really crater in recessions. Further, the income of the truly poor is largely determined by the benefits system. Something

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We have a ringing call to action in The Observer:

Inequality. Everyone agrees it’s bad. Everyone agrees that the pandemic and lockdowns have exacerbated inequality. And everyone agrees that something must be done to reduce it.

The thing is, about these things that everyone knows, is that what everyone knows sometimes just ain’t true.

As far as we do know - we’ve not the full and accurate figures for this fiscal year, 2021, as yet - inequality today is lower than it was in 2008. We also know why this is so. Inequality does reduce in recessions.

The richer among us gain more of their incomes from profits than the poorer among us. Profits are the part of national income that really crater in recessions. Further, the income of the truly poor is largely determined by the benefits system. Something that doesn’t reduce payments in a recession. Thus the gap between the richer and the poorer reduces in recessions - inequality falls.

From that we can make a prediction about inequality in this year. It will have fallen again.

We’re entirely willing to agree that poverty - measured as not having much stuff, rather than the relative poverty measure of having less than others - might well have increased over the same period. But inequality and poverty are different things.

Given that inequality has fallen - as best we know of can infer at present - then the rest of that demand becomes a little difficult really, doesn’t it? For if what everyone knows is wrong about the increase then possibly everyone’s wrong about the necessity of decreasing it?

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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