If every individual in a population is definitely doomed to lose all their wealth, how could the collective wealth increase?

For infinite rounds in a finite population yes they will all lose their wealth. But if the population >> rounds this is not true.

I don't think population >> rounds is a general rule. It only works (most of the time) for this case because +50% and -40% are relatively close to each other.

If you change the rules to, say, +100% and -90%, they lose even when population > 20 * rounds. I'm sure there is a statistical formula that can be used to estimate the optimal number of rounds.