Among all the articles I have written, I consider this is one of the most important if not the most important article for everybody especially politicians to read. The rich will get richer and the poor will get poorer.

Recently I wrote and posted 2 articles namely “UK is in a mess” and “Problems facing UK”. You can click the 2 links above to read them.

Front day 1 of her campaign, Liz Truss had been saying that she would cut taxes which the voters like to hear. That was why she was chosen to be PM. Currently there are so many problems facing UK and I doubt she has the faintest clue to solve all these problems. Since Rishi Sunak was the former finance minister, he should be in a better position to do the job.

Currently, workers in the postal service, port, railway and NHS are clamoring for more pay. If she cuts taxes, where can she find enough money to increase the pay for the workers? 

The rich will get richer and the poor will get poorer.

Cutting taxes is definitely not the right policy. All the people especially politicians must know that the rich will get richer and the poor will get poorer.

It's true, 1 percent of the people do control 82 percent of the wealth. And the top 1 percent will always control most of the wealth until the other 99 percent figure out how the 1 percent go about cultivating wealth.

There are several reasons for this development, including deindustrialization, the ICT revolution favouring certain types of jobs, fall in unionization, and globalization.

Breaking out of the poverty trap is difficult of course, but one of the key factors that have been observed in both rich and poor countries, is investment in education and other human capital. Unfortunately in many of the countries that have seen the greatest rise in inequality in the last few decades, the government's spending on human capital (health, education, etc) has declined very often for ideological reasons. So there is a way to resolve this issue, but the political will is often missing.

Why do rich people earn high returns?

Conventional wisdom suggests that richer individuals put more of their assets toward high risk investments, which can result in higher returns. Researchers find that wealthy people often earn a higher return even on more conservative investments. Richer individuals enjoy pure “returns to scale” to their wealth. Specifically, for given portfolio allocation, individuals who are wealthier are more likely to get higher risk-adjusted returns, possibly because they have access to exclusive investment opportunities or better wealth managers. Financial sophistication, financial information, and entrepreneurial talent are also important. These characteristics make the returns to wealth persistent over time. This research is the first to quantify this mechanism and show that it is likely to matter empirically.

Do high returns persist across generations?

The answer is a qualified yes. Wealth has a high degree of intergenerational correlation, but there are important differences in how returns to wealth accrue across generations. The children of the richest are likely to be very rich, but unlikely to get as high returns from this wealth as their parents did. This suggests that while money is perfectly inheritable, exceptional talent is not.