Rising YouTube star Gary Stephenson from Gary’s economics has recently made huge waves with his message that average people in countries like the UK will
collapse into poverty, desperate poverty. I’m talking about Charles Dickens. Oliver f*n Twist. That is the future of this country if we don’t deal with growing inequality
Gary main message is that inequality can explain essentially everything, ranging from
the weak recovery of 2008, cost of living crisis during covid, stock price rally in the mid 2010
to
the rise of the far right
if we don’t take action on it, it will get worse and worse and worse and worse.
Luckily, Gary says that
we can deal with it, it’s possible, tax the rich more tax wealth not work
But, is he actually correct? Can you trust Gary’s economics to tell you the truth? According to Gary, academic economists like me, well we are part of the problem because
we’ve created a system which obviously takes all the good economists and said we are going to fill your mouth with money if you shut the f*ck up..
Yeah… well Gary, this economist just so happens to do a series where I fact-check famous YouTubers talking about economics using data and academic research… and.. a lot of my viewers asked me to feature your channel today.. so, here we are. In this series, I try to stick to the main message only, which for Gary starts with
1 The UK’s inequality crisis
Or in Gary’s words, the UK is in an inequality crisis because,
inequality is increasing’. inequality is increasing rapidly
in this country 150 years ago, ordinary men and women lived in desperate poverty, that is going to happen again
There’s a worryingly accelerating nature to inequality. The bigger the inequality is, the higher the amount of transfer payments made from the poor to the rich, which means the higher the rate at which the rich dispossess the poor, which in turn means a higher rate of transfer payments. This is probably the thing that caught me and worried me the most about this. Mathematically, this is not self-containing.
To fact-check these statements, I went first searched for evidence Gary himself uses to back up his statements… but strangely enough, in his own videos Gary hardly ever uses any concrete data to back up his claims. This is no accident. Recently, on the Despolariza podcast Gary said that it’s because
I know the graphs are all bullshit. Host: from fairness foundation and from .. Gary: listen all of the graphs are bullshit.
Now, for context. In this discussion, the podcast host essentially says. Look, most data about this is produced
by non-profits such as the fairness foundation that are EXPLICITLY FIGHTING INEQUALITY.
So, when pressed a bit more, Gary said that the reason why he believes the graphs are still bullshit is that
We cannot accurately measure the wealth of the very rich. It’s very very difficult. You know, we have economists doing that. If you want, there’s an economist, French guy, Gabriel Zucman. He’s really good.
And, yeah, there is some truth to that. It’s well known that the super rich hide a lot of their wealth, especially in tax havens. But, actually, based on new tax haven data, Gabriel Zucman has estimated that this only accounts for about 2-3% of total UK household wealth because its really only the top 1% can afford to use tax haven services.
Joeri: So, yes wealth inequality data misses some wealth for sure. But, it’s actually not THAT much, at least not for the UK.
If we were studying Russia, where much more wealth is hidden offshore, then yes Gary would have a good point, we can’t trust the data. But, for the UK and other democracies, the data is probably pretty accurate.
So, to fact-check Gary’s claims about inequality, I relied on the database that Gabriel Zucman tends to use himself: The World Inequality Database. The economist that made this database explicitly designed it to find hidden wealth by combining a lot of different data sources such as tax data, private estimates and so forth.
As we can see here, Gary is right that UK wealth and income inequality have come down since the days of Charles Dickens. We can also see that inequality is now trending up again. The top 10% of British households now own more than 50% of total wealth. Meanwhile, they earn over 30% of its income.
So, yes Gary is right about the trend going back up. But, does this graph look like anything like a
collapse into poverty, desperate poverty. I’m talking about Charles Dickens. Oliver f*n Twist. That is the future of this country if we don’t deal with growing inequality
No. It’s not.
In fact, if we compare top 10% wealth across the world, we can see that Britain is colored yellow, meaning it is actually one of the most equal countries in the world.
Interestingly, if we look at income inequality, we can see Britain is dark yellow, meaning it is doing slightly worse. Still, as we can see Britain is one of the more equal nations on earth.
But, hold up Joeri… you sneaky economist… Gary is very clear on his channel. He does not talk about working millionaires. The top 10%. He talks about billionaires. The 1% or even 0.1%… What have they been up to?
Well, as you can see here, Britain’s 1% wealthiest own about 21% of its total wealth, that’s slightly higher than it was its lowest ever point. But, actually comparable to the 21% share they had in 1980. We can also see here that compared to South Africa, the US, and even the world average, Britain is really relatively quite equal, and —strikingly— the claim that
There’s a worryingly accelerating nature to inequality
doesn’t appear to be true at all.
So, when it comes to fact-checking Gary, he’s not off to a great start. Yes, inequality has been trending up for the last decades. That is worrying. No doubt about that. But, these graphs don’t really fit with Gary’s message of a
collapse into poverty, desperate poverty. I’m talking about Charles Dickens. Oliver f*n Twist. That is the future of this country if we don’t deal with growing inequality
Could it be that Gary says that
I know the graphs are all bullshit.
because they are far less dramatic than Gary’s message? I’m not sure. Let’s give him the benefit of the doubt. Because there is actually some compelling evidence to supports Gary’s other claims.
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Okay, with that being said let’s get back to Gary’s second core message:
Inequality drives everything
Concretely, Gary seems to believe that
you take the consumption power away from ordinary people who spend, you give it to rich people who save. Wages will fall and asset prices will increase.
when I was a trader, I was making a lot of money betting that inequality would devastate living standards and keep interest rates low and push house prices up and push stock prices up
Therefore, when it comes to the housing crisis, Gary says
the housing crisis is not a housing crisis the housing crisis is a crisis of asset affordability all asset prices have gone up enormously and that means you can’t afford them
you don’t deal with that by building more houses, you need to deal with that by stopping the inequality growth
is all of that true? Sadly, just as with his inequality explosion claims, Gary hardly ever backs up any of his claims with evidence in his own videos. That is a real shame. Because when I started looking into it I could find a lot of research that backs up many of his claims.
For example, there are some really good studies by economists from the IMF and World Bank which present evidence that rising inequality is makes economies grow more slowly because rich people spend less than poor people. Second, I found some really interesting studies that present evidence increasing wealth inequality can cause asset bubbles because rich people buy more stocks. Third, I found a study which finds evidence increased inequality may indeed have driven down interest rates in the US as US rich people tended to invest a lot in government bonds. Fourth, most studies I found evidence that increased inequality together with cultural factors can help explain the rise of far right parties, both in Nazi Germany, and today.
On top of that economists have found that rising inequality can be linked to more crime, worse health, and that it may make it more difficult for smart people from a poor background to make something of themselves. Inequality research even helped economists like Angus Deaton and Daren Acemoglu to win Nobel Prizes for their work.
So, no Gary, economists don’t ignore inequality. That being said, I do understand where Gary is coming from. When, it comes to talking about inequality in undergraduate economics classes, much can be improved. While some recent textbooks discuss inequality at length, older popular economics textbooks don’t talk about it at all.
But, besides education just being a bit slow to adapt, there’s also the reason that while there is evidence inequality has a role in driving almost everything…. it is probably not the ONLY thing that is significantly driving our economies as Gary seems to think.
For example, while Gary’s theory predicts that higher inequality would lead to lower interest rates and high government debt,
if we look globally we can clearly see this is not the whole story. For example, more unequal countries like South Africa and Brazil tend to have higher interest rates than more equal countries like the Japan and Denmark.
But, if we look at government debt, we can see that a relatively equal country like Denmark has very little, Japan has a lot, while South Africa and Brazil are somewhere in the middle.
However, when it comes to housing, Gary may be doing himself a disservice by not talking about the data.
Gary seems to think that the rich are buying up all the houses as an investment, driving up house prices. Rich people can only live in one house. What are they going to do with these investments? Either they’d rent them out, driving rent prices down. Or, you’d have lots of empty homes, sitting there doing nothing, like you had in the US housing bubble in 2006, or like you have in China today.
If we look at the data, we can see rents are not going down. But, as you can see here, there are actually a lot of truly empty homes in the UK. About 7% of homes are in Wales, which is depopulating. That’s likely not the fault of rich people. But, London also has a lot of empty homes,
Particularly if we zoom in on central London, we can see that about 20% of homes in Kensington and Westminster are empty, that is clearly the ultra wealthy hoarding property.
So, here’s I would say, Gary’s story is a mixed bag. He is right to point to inequality being important, especially in the London housing crisis. But, his various theories, about how inequality is the biggest driver of just about everything, ranging from interest rates to government debt, that just does not appear to be true.
So, then what about the issue that Gary campaigns for all the time
4 a wealth tax
You see, given Gary’s theory that wealth inequality is causing almost all of the UK’s economic problems it make sense he believes that
if we don’t change the tax system, we will see basically a collapse of society
But, now that we’ve seen wealth inequality did not explode and that while increased inequality is bad for the economy, it can’t explain all of the UK’s problems, such as its housing crisis.
What does this mean for Gary’s wealth tax idea?
Well, I found essentially two problems with it.
The first problem is that overall wealth, compared to income is relatively low. For example, in the UK total billionaire wealth was estimated to be around 182 billion pounds in 2024. That’s a lot of money. Taxing a bit more of that could help the UK government do great things! But, just for comparison, the UKK government borrows almost 150 billion pounds each year. So, Gary’s 2% wealth tax proposal… that’s pennies. If you’d set an 83% wealth tax for UK billionaires, you’d only be able to cover goverment borrowing for 1 single year!
The second problem with Gary’s optimistic wealth tax solution is the same that I said in my previous video reacting to Gary, ultra rich people are very mobile. Yes, we are not sure how many millionaires left the UK after taxes rose. But, there are various reports that quite a few rich people left Norway to flee its wealth tax. When France still had a wealth tax, many wealthy French people famously moved to London. Similarly, many people are now moving from the UK to Milan after it introduced a low income on the very wealthy. Almost all super wealthy F1 drivers live in Monaco, which is a tax haven. There is a lot of evidence that many rich people successfully dodge high taxes by moving to another country.
Gary has always reacted to this argument by saying that
Taxing the rich will be very, very difficult. **It’s possible, these people are not magicians. These people are not Gandalf. **They can’t magic themselves ****out of the country and disappear all of the wealth out of the country. The wealth is here. It is the wealth of our countries
In other words, while Billionaires can move, they can’t move all of their wealth. The wealth remains in Britain. When it comes to property, this certainly applies. In fact, after seeing how many homes are empty in London, I think Gary could make a really convincing case that Britain needs a property wealth tax, rather than its current council and stamp duty taxes. If you tax property wealth in Britain, he is right that this cannot be moved easily. This could be great for the British economy as it may allow more nurses and teachers to live in London.
However, most assets the ultra rich hold are not property. When a wealth tax was discussed for the US, economists were quick to point out that about 4/5th of the assets of the ultra wealthy are financial assets such as government bonds that can easily be moved elsewhere. They can do this because countries like the UK have free capital flows. Similarly, when Norway introduced a wealth tax many of its entrepreneurs fled to Switzerland. Thanks to free trade agreements, countries can’t tax imports. So, this wealth isn’t tied to the country either, Norwegian entrepreneurs can take their company headquarters with them and just export to Norway.
These problems could explain why Gary recently talked about wealth tax complexity in the following terms:
‘I think really encapsulates the childish naivety that I talk about, is people turn around me and they say… Show me the tax policy then. Show me the tax policy.” You know, listen, I’m here in my kitchen, right? Which is real, like with a massive ** YouTube channel. Like, I’m pretty much, pretty obviously the world’s biggest campaigner for wealth taxes and I work *** hard, right? Do you think tax policies are usually made by YouTubers?’*
Where, yeah Gary is of course right. Tax systems are designed by economists. They are then implemented by politicians and lawyers, who often water them down… leaving in many loopholes.
On the bright side, if we look at the data, we can see that taxes do help decrease inequality. As you can see here, income inequality in the UK before taxes is almost as bad as it is in the US. But, after taxes, it is much better.
Despite that, yeah I agree with Gary that the current tax system is not fair. New research by US economist Zucman shows that US billionaires only pay and average tax rate of 24%. Thats much lower than what middle class people pay. Totally unfair. A fairly recent study in the UK found that if high income earners paid headline rates, they would have to pay 23 billion more than they currently do.
That’s a lot of money. No doubt about it. But, a solution to fix the UK… no. Sorry, that’s just 2% of total government income today.
So, where does that leave Gary? In other words,
Can you trust Gary’s economics?
To me it’s a mixed bag. Gary is right that rising inequality is a big problem. Gary is fighting for a fairer tax system, which is needed. Yet, there is so much good research about how bad inequality is, and Gary doesn’t use it. There are so many proposals about how to reform the tax system. But, Gary doesn’t appear to have read them. Instead, he makes a lot of exaggerated statements like how Britain will collapse because of skyrocketing inequality.
That is a shame. Because, to get a fairer tax system, Gary has said that
I think in particular we need what I I’m thinking of as academic cover which is economists people at think tanks people with academic credentials
And, to get that, I think he needs to be a bit less hyperbolic with his messaging and be more evidence based. This of course is easier said than done.
So far, Gary has built a massive following with a message that taps into very legitimate problems like the housing and cost of living crisis. He boasts about how great his predictions were about rising asset prices and falling living standards in the UK. I checked this and, yeah, so far they have been, not perfect, but pretty good. To be a successful trader, like Gary clearly was, that’s all you need —to be right more often than wrong about financial assets. This is how you make money. But, to convince researchers, your theory should not only predict the future a couple of times, your theory should also be able to explain why inequality is not increasing so fast anymore, why super unequal countries have low interest rates, low government debt, and why there are not that many empty homes in Britain.
If Gary can improve his theory to line up with all the evidence, such as how research has shown that ignoring inequality leads to a worse economy, more crime, worse health, and the rise of the far right. Then, I think Gary can succeed to make his case to people with academic credentials.
Heck, Gary, if you are watching… feel free to check out my sources in the description below.
By the way, I did reach out to Gary’s team multiple times to comment on this video. But, so far… he hasn’t responded. So, if you are a Gary fan, please ask him to come on, I’d love to have him on my podcast and go through the arguments presented in this video together with him.
But yeah, what do you think? Have I been fair to Gary? Or have I been to strict? Or too generous? let me know in the comments. And if you think peer-reviews like this are essential for the YouTube information ecosystem, consider supporting my channel on Patreon or by becoming a member.
Finally, no the rich didn’t pay me to make this video. Surfshark did sponsor it. So, if you are looking to buy a VPN please consider getting their via my link, if enough people do that, they are more likely to sponsor me in the future, enabling me to keep the channel going.