Home Economics I Don't Believe Poppy Noor Is Actually This Stupid

I Don’t Believe Poppy Noor Is Actually This Stupid

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In fact, I know Poppy Noor isn’t this stupid* but she’s clearly under the influence of people who don’t know this. Larry Elliott should perhaps have a word:

The data tells us the 15 best-paid CEOs in tech have a combined annual income of over $83bn – which is greater than the entire gross domestic product of hundreds of countries.

Ahh, no, we can tell where this is going to go wrong, can’t we? Wealth is wealth, income is income, the two are not the same thing. GDP is an income measure so we can’t compare wealth to GDP. Well, we can of course, because Thomas Piketty does so when he worries that wealth to GDP ratios are rising. But at least he is working out that they are different things.

Tech moguls are now so rich that it’s not unusual to see shocking comparisons that demonstrate exactly how egregious their salaries are. When Bezos was touted to soon become the world’s first trillionaire (he isn’t yet – but his net worth of $144bn puts him on track to become one by 2026), we learned he was richer than entire countries – and later also found out he was richer than combined countries (to take an example: Jamaica, Iceland, Tunisia and Estonia).

And there is the error. Comparing the wealth of Bezos to the income of varied countries. This doesn’t work. Her source (Business Insider, not quite the starting point for much decent economic analysis but there we go) does at least compare wealth to GDP. Poppy has gone over the edge and says that Bezos’ wealth, in stock, is akin to a country’s wealth as measured by GDP. But this is the thing that isn’t true, for GDP isn’t wealth.

We can check this fairly easily. Note that I’m not worrying too much about absolute accuracy here, chained measures, nominal, all that. The differences are sufficiently large that we don’t have to. UK GDP is about £500 billion a quarter:

Call that £2 trillion a year just among friends.

UK household wealth is about £15 trillion:

GDP is, as a simple matter of fact, all incomes in the country. That’s a definition. The wealth figure there isn’t entirely correctly described as the wealth of the country because we’ve not taken account of foreigners owning chunks of the place. But then we’ve also not adjusted for UK households owning bits of France etc – as it happens the two balance out closely enough that we can ignore them at this level of detail.

You will note that wealth is significantly higher than all incomes – recall, GDP is by definition all incomes.

So, when comparing between people and countries we cannot compare the wealth of the individual and the income of the country. We should compare between the income of the person and the income of the country – that’s GDP – or the wealth of the person and the wealth of the country.

Not doing what Poppy is, that is, which is comparing the wealth of the person and the income of the country.

This does in fact get worse too. Sure, Bezos is over in the American figures not these UK ones but the same applies. His wealth, his stock, is in that financial assets part of those household wealth figures. And that 16% change over those two years does not bleed through into income. That is, a change in the wealth of the households/country is not either GDP or income. Income is income and wealth is wealth.

Now that I know Bezos earns my entire salary in under a minute

Well, no. Bezos’ wealth changes enough to cover that – or has done just recently. But his income is his wages plus any dividends from Amazon (Hah! Even, snigger). About $88,000 a year in fact. Even if Bezos sells some stock – as he does regularly – that is merely a transformation of his wealth from one form to another. It still isn’t income. This bit is a little weird, yes, but it’s also true. We can tell this because his stack of cash would still turn up as part of the household wealth figures, it wouldn’t be a part of GDP – which, again recall, measures all incomes.

If we want to compare incomes then we can do so. But that means comparing incomes – income to GDP. If we want to compare wealth then we can do so but that means comparing wealth to wealth. Doing it any other way would be to deliberately confuse in order to produce propaganda. Or, alternatively, be so bamboozled by difficult numbers as to get the fundamentals wrong. And the thing is we all know Poppy Noor’s not that stupid. Perhaps she just needs a little more education to avoid the propaganda production line?

*Without looking up the details of the backstory it’s along the lines of orphan does A Levels while in homeless shelter/DSS bedsit and does well enough to get to Oxford. Certainly better performance than I managed with a rather more privileged background – I know she’s not this stupid.

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  1. Comparing wealth and income and then claiming it’s(*) unfair is a regular trope of the Guardian. Strangely enough, their motoring correspondents never complain that the distance from London to Edinburgh is nearly four times the top speed a typical family car.

    (*) For varying meanings of “it”.

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