Not only is the ever-growing wealth of the super-rich not trickling down, it is creating ever-growing instability in a future not worth having
A generation of “opinion formers” has assured us that the rich are none of our business. If others become extremely wealthy, it is self-defeating to criticise them. We should recognise that “a rising tide lifts all boats”, as John F Kennedy said. “Wealth creators” help others into work. Everyone’s living standards rise. Everyone wins.
On this reading, no one should condemn the behaviour of the head of Westminster school, Dr MS Spurr. So determined was Spurr to spur on the class interests of pupils at his £10,450-a-term academy that he was prepared to invite parents to bid for work-experience placements for their children with Coutts bank, “shopping queen” Mary Portas and the Mail on Sunday.
When we read that Charles Shaker, a fabulously rich financial adviser, spent £330,000 last week on a single round of Armand de Brignac champagne at Monaco’s Billionaire Club, we should not start dusting down the tumbrils. Shaker’s riches will “trickle down” to the lowly, like wine slopping out of a glass.
Or so they once said. They are less keen on pointing out that the old certainties no longer apply. As my colleague Dan Boffey reports on the Observer‘s news pages, this recession is different. Not just because of globalisation or technological change but because of the decisions of leaders who have been so captured by the financial elite that they no longer put the interests of the broad mass of people first.
Since 2010, 38,000 more high-fliers have moved into the £150,000-£500,000 wage band. Six thousand more have pocketed between £500,000 and £1m. And 8,000 more have received salaries of more than £1m. Britain can now boast that it has more people in the £1m-plus bracket than at any time since records began. Good luck to them, one might have said, if their wealth were trickling down. But barely a drop is falling. The rising tide, which once promised to lift all boats, has ebbed – and left the majority stranded.
For the bulk of the population, wages stopped rising in 2003. The economy has grown – or at least it grew until 2008 – productivity has risen, and food, fuel and house price inflation have roared ahead. But wages have sunk. Sensible economists predict that an ordinary family will be living on 15% less in 2020 than in 2008. It’s worse in America. The top 1% of earners took home 93% of the growth in incomes in 2010, while those in the middle had lower household incomes, adjusted for inflation, than they did in 1996.
The Anglo-American model works for the few, not the many. We have yet to come to terms with how strange as well as unjust it has become.
In most recessions, societies become more equal. Unemployment may rise and wages stagnate. But the gap between the top and the rest narrows as those with the most to lose lose the most. In our time, the gap is widening, and I am tired of hearing lectures on how we can do nothing about it from supporters of the status quo, who have been wrong about everything for years.
The rise of the plutocracy is not the inevitable result of irresistible global forces. Politicians and central bankers have decided of their own free will to create a world in which the majority is left behind. I’ll pass over the catastrophe of the eurozone – what is there left to say about it, after all? – and concentrate on Britain.
George Osborne looked at the 50p tax rate, which dampened income inequality in the 2010/11 tax year, and abolished it. The Conservatives and Liberal Democrats chose to impose an austerity programme that hurt those who relied on public services the most. Everyone acknowledges that austerity has failed. Everyone, that is, except our masters, who press on like men possessed.
The coalition says that a loose monetary policy compensates for a tight fiscal policy. But, with a depressing inevitability, its quantitative easing programme, in which the Bank of England creates money to buy bonds from commercial banks, compensates the rich above all others. The flood of cheap money has produced more bubbles than a Jacuzzi and made the already asset-rich richer still. If the Bank of England and, indeed, the Federal Reserve wanted to help the middle and working classes, they would provide jobs and incomes by printing money to fund infrastructure and home-building programmes. As it is, history will record that when the crash came, they chose to help those who needed help the least.
The unstoppable march of the wealthy has two consequences we should talk about more. When rich parents can buy internships for their children at school auctions, the elite becomes closed to outsiders. Chrystia Freeland, an observant chronicler of the plutocracy, said last week that the political power of the top 1% will grow as inequality increases and its reactionary views will become ever more influential.
A video of a billionaire hedge fund manager named Paul Tudor Jones telling students at the University of Virginia that women did not have what it takes to make it on Wall Street provoked her scorn. “As soon as that baby’s lips touched that girl’s bosom, forget it,” Tudor Jones said. “Every single investment idea… is going to be overwhelmed by the most beautiful experience which a man will never share about a mode of connection between that mother and that baby.” Because they lack the female “mode of connection”, men will bag the bonuses, he continued. Babies ensured that “you will never see as many great women investors or traders as men. Period, end of story”.
The real charge against a future dominated by the super-rich, however, is not that it will be as asinine as Tudor Jones or that it will be cruel and immoral – although it will be all those things – but that it won’t work.
Joseph Stiglitz and others have been arguing to the point of exhaustion that the working and middle classes are more likely to spend to keep the economy moving and hence to produce jobs for the abandoned young. More wealth for the wealthy generates more frequent and more severe booms and busts. This is not a future worth having but it is the future we are getting. The experience of the west since the crash has taught us that the rich are always with us. The novel question for today is: can the rest of society afford them?